At best, trading these currencies is a zero-sum game where you take money from others without providing any intrinsic worth to humanity. At worst is a pyramid scheme plain and simple.
Person A sells their coin to Person B for $1,000. A is $1,000 richer and B is $1,000 poorer.
B sells the bitcoin to C for $2,000. A is still $1k richer, B is $1k richer, and C is $2k in the hole.
C sells to D for $3k. A, B, and C are all $1k richer, but D is out $3k.
At no point in the chain is any actual value created or destroyed; it merely changes hands. So even though the price keeps going up, the total value across all participants never goes up. The sum of the gains and losses of all participants is $0.
(Note that I'm using "$" to represent a generic indicator of value. Feel free to substitute € or ¥ or gold or shares of Facebook stock or whatever.)
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There are two simplifying assumptions above, both of which make Bitcoin not exactly zero sum.
Good news first. Bitcoin can and does create some value in the same way that other currencies do: by facilitating mutually beneficial exchanges of goods and services. Commercial use appears to only be a tiny fraction of all Bitcoin transactions (and an even smaller fraction that wouldn't have been facilitated anyway using some other means of exchange), but it does happen so credit where credit's due.
The bad news, though, is that all of the above requires electricity. A lot of electricity, as it turns out. Both the initial mining and every transaction thereafter require someone, somewhere to burn some amount of power in order to generate proof of work. Since proof of work is explicitly designed to be useless, all that spent power is essentially deadweight loss.
I haven't seen any good numbers on the first recently (and I would love to have my assumptions proven wrong), but given the ginormous estimates of electricity consumed by the second I have a hard time believing the network as a whole isn't substantially worse than zero sum.
It's pretty strange to see people so consumed with it. It reminds me of beanie babies, and my horrible step-grandmother who would send me in to buy them once she had hit her limit. She was an awful speculator and probably has a worthless collection today for all the money she spent on ebay back then. She'd drive to Vegas to buy them, neighboring towns, all over the place. Totally consumed by speculation gambling. It sickens a person to see someone so...lost in that temptation. I'm not sure how else to put it.
Agreed, I've yet to see an ICO that seemed legit.
When you say that the net value is negative even if the network itself has some positive benefit, what is the negative component there? The only negative component of all that electricity usage is externalities, which apply equally to each unit of energy regardless of what it is used for. Pricing externalities into the cost of electricity is obviously something I approve of, but that’s a separate issue, and I doubt the externalities of electricity usage are anywhere near the magnitude of the positive impact of bitcoin.
Incidentally, this is (as far as I understand) where most of the transaction fees ultimately end up. They're paid out to the miner who actually commits a transaction. Mining's a relatively competitive field so people aren't going to be able to charge much of a premium. The miners then have to turn around and use those fees to cover their costs, which in practice means their hardware costs and their electrical bills.
But I'd be likely to agree with you. While blockchain technology /does/ have a future and will enable forms of socio-economic organization that were previously impossible, it's not there yet, and at the moment we're mostly passing tulips off to the greater fool.
And increasing opioid supplies, increases the ability of the market to efficiently parlay money into an altered mental state. Doesn't mean it's a net positive for society.
The "liquidity" argument is such a terrible and simplistic justification for so many things.
If you're trying to stand on some kind of anti-opiate moral ground for why cryptocurrency is evil it's a poor hill to die on.
At least tulips have some intrinsic value, I.e. They can be quite pretty!
I beg to differ. Not all crypto projects are like that. For example Omise Go is a promising project that stands to make a difference to many people who have no access to banking services.
They have solid financials, already processing over $500m transactions per day with $110m investment.
They are making a completely decentralized open value exchange DEX based on the block chain. Any developer/provider will be able to build apps on top of it.
Any person with a phone will have instant access to essentially a bank account with no need to hand over social security and ID.
So basically giving 2 billion people who have no way to interact with financial systems a way to join in with global commerce.
> It’s not creating any value, any gains are at the expense of someone else.
Except, not in the case of Omise Go. You may earn a dividend simply by possessing the token.
By staking Omise Go tokens you will have the option to validate transactions (proof of stake) for which you will get paid.
Also note, with PoS there is no electricity burden on the system like Proof of Work with mining.