Bitcoin is 'a giant pyramid scheme,' says Pinboard founder [video] | Hacker News Reader

Bitcoin is 'a giant pyramid scheme,' says Pinboard founder [video]

youtube.com

It is not a ponzi scheme because there is no centralized entity paying off later investors with earlier ones, but I would still not invest in it. Way better investments out there. Something can be a bad investment without being a ponzi scheme.

Mince words all you want. It's a scam.

Words matter.

>words can mean anything i want them to mean

It's a naturally occurring, negative-sum pyramid scheme. All money extracted is coming from subsequent entrants to the scheme.

I wouldn’t say negative sum inherently. At least not any more than fiat is negative sum because you need to maintain a military to keep it around.

The purpose of a military is not solely to provide continuity for a currency, it is to provide security for the interests and inhabitants of a nation.

Also, regardless of any morality issues, having a military _creates value_ in a way that Bitcoin cannot. The employees of a military are paid, they spend their wages in the country's economy, they must be supplied with equipment which must be manufactured, those manufacturers & soldiers pay taxes, the enhanced security of a nation makes it less risky for investment and business growth etc etc.

The purpose of a military in part to provide continuity for a currency.

The employees of a military are paid... by taxpayers, who are the ones creating value.

Currencies can continue quite happily without notable military power in the absence of outside threats, whilst an absence of military in the presence of invaders tends to hinder taxpayers' ability to create value regardless of what currency they were paid in before the invasion.

Arguing that military exists for the purpose of protecting currency is akin to arguing that cryptographers exists for the purpose of protecting currency. Technically, that is one of the things they do [for cryptocurrencies and banks alike], but it'd be fairly ridiculous to claim that making cryptographers more useful was some sort of negative side effect of currency comparable to Bitcoin's energy use.

If you take for granted that a classic military force (threatening, and sometimes engaged in a war of aggression) is always necessary, then a way to suppress one of its mission is useless.

If you read some pretty authorized authors about it, let's say Smedley D. Butler ( https://en.wikipedia.org/wiki/War_Is_a_Racket ), then having one and only one mission for the army (self-defense) may be a better way.

Pyramid != ponzi. And just because it's a distributed scheme with no central orchestrator doesnt mean it's not the same from the investors standpoint.

Right, I think Ponzi is a more accurate potential criticism of crypto

I keep reading that Tether is the ponzi in the ponzi-scheme.

That central entity is called Tether.

Thing is....it is until it isn't. The idea of a fully decentralized currency outside of the power of any Federal Reserve is incredibly exciting, it's no wonder the current PTB are attacking crypto with every angle they can think of. OTOH, the current high fluctuation in crypto prices make it worthless as a currency since nobody wants to be the guy that would have been a millionaire had he not paid bitcoin for a pizza 3 years ago.

The upshot of this whole situation is that many people outside of tech circles are now buying crypto as a form of lotto ticket, except when the dust settles, a bunch of people will be holding crypto that they want to use. It's possible the current gold rush will help crypto go mainstream.

>> no wonder the current PTB are attacking crypto with every angle they can think of

Whoa there mate, that's pure hyperbole - straight up FUD.

If the government wanted to they could outlaw possession of cryptos - that would be attacking it. They have instead just wanted to levy taxes on it the same as all other 'investments' so their action very different to what you said. Can't bother to read the rest when your premise is just deceptive.

Well, on a factual basis, he's wrong; it is not a pyramid scheme. (My one sentence summary is that it is the world's most wasteful casino.)

I like Maciej, but making factually incorrect claims is not helpful.

Looking at the situation with Tether makes me completely comfortable in the claim that the whole thing is a pyramid scheme.

Rather than pyramid scheme, maybe history's biggest pump-and-dump scheme: an asset with dubious value (some bytes in a decentralized database) that's so staggeringly inefficient to run that the transaction fees are astronomical and speeds are glacial, and that nobody uses for any real purpose besides speculation - pumped by a million and one influencers and "coin news" sites parroting empty bullish propaganda in hopes the price of their portfolio keeps going up.

I was originally fascinated by crypto, but the more I've come to understand it the more I suspect the world has lost its mind.

> I suspect the world has lost its mind.

Not a recent phenomenon.

“Guy had an opinion”

"Guy states the obvious"

Yeah, this isn't really news. Maciej isn't a bullshitter, we would already assume that this would be his opinion. I would like to see him get a lot of employment as a tech pundit, though. Most tv tech pundits actually make the public stupider than they were before, and he would be a nice change.

The algorithm to remove heated discussions from the frontpage works well actually. This post was quickly removed from it.

The fact that it is highly speculative and driven by speculation does not mean there is no value there. I believe the tech world will move to decentralization, and crypto currency will fuel this transition. If it is never used to buy a hot dog on the street that doesn’t mean it has no value. Building applications that put control into the users’ hands will become more important, and this is what cryptocurrencies are about. Yes, it is not delivering on the value it promises, but I believe it will. Invest at your own risk because it will take a while to get there and there will be many many ups and downs.

If Pinboard accounts had a market resale price, they wouldn’t be too different as earlier purchases drove up the price for future purchases, by design. However, Maciej operates Pinboard on a “proof of no developer work” scheme which is vastly more energy efficient.

(Joke!)

Complains about price of using crypto. There are many cryptos that don't have high fees like bitcoin. For example BCH. I pay for my drinks with BCH and the fee is negligible.

Bitcoin fees are negligible on lightning network.

All social constructs are made up. Fiat cash doesn't have any value, gold doesn't have any value, bitcoin doesn't have any value, UNLESS the socially agreed upon norm for any of them is that it does. It's the same for any social construct - there are no countries, or borders, or monarchs or rulers, it's all just made up and agreed upon.

Until you trip on a heavy dose of psychedelics and watch all the pillars of your identity melt away, and society with it. To a point where language becomes nonsense and death an illusion

That's exactly how I came to the above realisation.

With a sufficiently broad definition of "pyramid scheme", everything is a pyramid scheme.

Power, ideology, or capital naturally organizes with some sort of gradient, and as more participants that enter into a system, it bolsters the authority of the system itself.

If you don't like power, ideology, or capital, pursue love and peace. Or my advice is to try all of the above.

Producing offspring is a pyramid scheme.

Well, it does have blocks pulled into place by chains, so to speak ...

Why is it useful to burn energy mining? Because it mints a Bitcoin!

Why is Bitcoin of value? Because we burned energy mining it!

This circular argument is the supposed value proposition of Bitcoin.

Value is always and everywhere a subjective phenomenon.

No it isn't. And I say that as a bitcoin proponent.

Thats not how marginal utility works or true inelastic demand.

Not exactly true. Fiat currency, in part, gets its value by the fact the governments can throw you in jail for not paying taxes with it. Sure, not going to jail could be a subjective preference, but pragmatically speaking, that's a big, objective value proposition for most people.

There's no "could be" here. Not wanting to go to jail is a subjective preference.

That most people prefer the same thing, does not make value objective.

If it did, Bitcoin would also have "objective value" from its scarcity, difficulty of confiscation, ease of move between borders, and many other properties which are preferred by most.

Nope the value proposition is that multiple untrusted parties can agree on how much energy they’ve burned and form a consensus based on that.

That statement is simply the plural form of the same circular argument.

Not really. In my version the energy wastage is a means to an end. Not the end in itself. In particular, energy usage is not coupled to value. It is “collateral” damage. You could in theory replace it with some other proof of work ...

No, you are attacking strawmen.

value is "decentralized store of value". if you don't believe in that ok but then you maybe think that banks magically exist without using any energy.

maciej has good intentions but he's usually wrong. Gold must be a pyramid as well then, which is not wrong for a sufficiently narrow definition.

Well, gold has actual value as it has actual usages beyond jewellery/status-symbol.

Bitcoin not so much.

it doesn't though. The reasons why it's kept as store of value are historic, and its real world usage is a side show that can't really justify its speculative value. It represents something that globally people believe in. Most of the gold is not held physically.

NFTs are status symbols, but i haven't seen bitcoin worn as jewellery yet. In any case, if people could use bitcoin to paint their house, its value wouldn't go up

Gold's value, however, is not derived from its industrial and other such uses. If it was, the price of gold would be somewhere in the $200/oz range. Gold is valuable because of its historical role as a monetary metal. So while gold has a sort of industrial "backstop" that would set a price floor, absolutely no one is buying or owning gold with the expectation that it might lose 90% of its value.

What is Pinboard and what does it have to do with Bitcoin?

It's really simple. Buy when everyone is fearful, sell when the euphoria and the crypto hype squad is everywhere.

Since this person fails to understand this in the crypto markets and many others who fell for the run up to 60K and it retraced backwards are the same ones crying 'scam' in 2018.

Learn to ignore the hype and sit at the bottoms when no one is taking interest like in March 2020.

So, judging by this guy's Wikipedia page (https://en.wikipedia.org/wiki/Maciej_Ceg%C5%82owski), it's somewhat obvious he's a stooge. But I don't think his point is terrible - in fact, I rather agree with its general strokes. Maybe that says something about me?

Want me to get you a job application? The stooge life is pretty sweet.

And the dollar isn’t?

One is backed by aircraft carriers and the force of law, the other is backed by math and an egregious amount of energy usage.

Don’t see how it precludes the ‘having value’ part of things.

No, the dollar isn't a pyramid scheme. People don't invest in dollars expecting to get a positive return.

No, but people invest in dollar-denominated assets that, should the USD become worth less, would cause a corresponding decrease in the value of said assets.

What? Yes they do. Why do you think people from other countries try anyway possible to get in USD and USD investments?

Indeed.

And you get a massive return for investing in dollars, if your own currency has say hyper-inflation.

"I exchange my local currency for a USD and in a year when I want to buy something I can exchange it back for twice as much local of currency"

Not massively different to investing in BTC today, in the hope that you can convert it back for more of your local currency when you want to spend it.

You get a massive return in local currency from holding onto virtually any asset other than local currency or local currency denominated debt if your own currency has hyperinflation.

People overseas want dollars because dollars are extremely easy to transact with and many companies [especially outside their country] accept only dollars, not because a price graph and a tweet from Elon Musk have convinced them that dollars will be even more popular next year. The actual mechanism that ensures many of these companies will continue to accept dollars next year is financial obligation, not hype.

Why USD when you can hold an asset?

Maybe if you live in a place where liquid assets are hard to come by I could see using USD instead

> in USD and USD investments

What's a USD investment?

People want USD because of it's transactional value (i.e. they want to trade with it), not to use it as a store of value

First, a USD-denominated investment is not the same thing as an investment in USD. Second, I am from "other countries" and no one around here is investing in USD. Can you point me to a specific example of people from other countries who are investing in USD? Thank you!

Some most certainly do, at least in the more-positive-than-the-alternative sense.

Of course not to the same extent as in crypto currencies, but still.

This comment could be a picture in the dictionary next to "reductionist".

And the future tax receipts of the USA.

No the first is backed by stability. The dollar is still a currency. It's not turned into an investment opportunity.

The dollar is backed by semi rational opinions of the GDP of the nation(s) printing the dollars. The relative values of currencies shift, normally slowly, because normally economies don't tank overnight.

Bitcoin is not backed by anything. Thus it has wild swings.

> backed by semi rational opinions of the GDP of the nation(s) printing the dollars.

About that...

https://www.currentmarketvaluation.com/models/buffett-indica...

https://fred.stlouisfed.org/series/M1SL

It is backed by cost of electrical consumption. Its just that 90% of its value is speculation. But it absolutely does have "real value" and is backed by material reality.

In a way, bitcoin is like super-fiat. It doesn't even have the power of the state to back it. Where fiat was backed by nothing but the guarantees of an armed government, bitcoin is backed by literally nothing. It's funny then when some imply that bitcoin is somehow a return to pre-fiat money.

I would say the aircraft carrier seems a better inversion than a bunch of burning overclocked GPUs.

People buy Bitcoin expecting that holding onto it for a few years will vastly increase their purchasing power. "lambo", "to the moon", etc. People are starry eyed over the 1000x return they could have made if they bought years earlier, and are hoping there's still some of that juice left to squeeze. Maybe not 1000x but 100x or 50x or 10x. Just search "bitcoin price target" and browse the dreams and napkin calculations of "assuming Bitcoin's market cap grows to match all gold" or "all M2" or "the euro" or whatever your favorite goal is, "...then 1 BTC == 1 zillion dollars and I can retire".

For investors to get that growth they desire, they need exponentially more new money to come into the system. If I buy 1 BTC at $40k, to double my money I need to sell it at $80k.

Maybe I sell it to one rich guy, maybe to two people on my level each buying 0.5 BTC at $40k, or maybe to 1000 poor people each buying .001 BTC at $80. But somehow $80k needs to come into Bitcoin.

Eventually you run out of people in the world with more money to buy in. And since the Bitcoins themselves aren't useful, the person who bought the top is SOL. The whole utility was "get more money out than you put in" and there's no bigger buyer left to make that possible, so now what is it good for? That's why people compare it to a pyramid scheme because pyramid schemes have an identical problem, with everybody making money until there simply aren't any more rubes left to buy in.

The dollar, even though it's still just scraps of paper and shared make-believe, doesn't have this scaling problem. People aren't holding onto their dollars expecting them to double in value. It's a currency, i.e. a handy abstraction layer over bartering, not an investment. I use the dollar because it beats trading my software development labor for chicken eggs from my boss's side-gig farm and then trading those for apples and gasoline and mortgage payments and electricity. I don't expect to get more out than I put in.

Stable currencies make sense and work. Double-your-money schemes run out of steam. It's that simple.

-- edit --

I will give Bitcoin credit though for being the first decentralized pyramid. It doesn't die, so if you miss the peak in one cycle, you can always hope that a few years later it'll come back in style and reel in a bigger crowd before collapsing again.

A pyramid scheme implies there's future payments to be expected if one were to aggressively recruit people into the scheme. A Ponzi scheme implies there's a central orchestrator extracting value out of the scheme and keeping it functioning just well enough to maximize personal profits before it all crumbles down.

There's no such central authority with Bitcoin and there aren't further expectations of payment either- value fluctuates but you're always going to have the same amount of coin unless you personally do anything about it. If Bitcoin is a pyramid scheme, then every penny stock is also a pyramid scheme.

I do wish these kind of posts that appeal to the lowest common denominator were less prevalent on Hacker News, as they're particularly found whenever there are big price swings so it's nakedly obvious what they're truly about.

The problem with Bitcoin and many other cryptocurrencies is that they are not actually used that much, at least not in western countries with good stable access to banks and credit cards and so on.

But this is not the entire world, it's not even the majority of the world. It is a pyramid scheme in the sense that those who invested first will gain the most but at the same time that is true for basically any technology.

If you "got in" early on the web and started creating websites for example the likelyhood that you will be successful increases with time. You learn what works and what doesn't, you get ahead of everyone else.

Just to be born earlier could make you rich, just buy a good domain name and sit on it. People like me born later wouldn't stand a chance. People who created websites early that solves really obvious stuff is hard to compete against just because they were early in a new tech.

I have huge respect for the pinboard guy but I am not really sure saying "Bitcoin is a pyramid scheme" is going to help anyone.

It's true that by buying bitcoin you're basically rewarding someone for having been there before you. So maybe you need to ask yourself if you want to do that. Do I want to reward some moron who has contributed nothing to society just because he was there before me? That's the question everybody should be asking.

> That's the question everybody should be asking.

Yes I agree, but at the same time it is also true that you could be that guy.

If Bitcoin turns out to actually be used in the wild in the long term, for asset storage or otherwise, you will be the one missing out.

Basically, Bitcoin and other crypto investment right now is all about FOMO. If it's gonna be important for many people in the future the valuation that it has now is nothing and could easily double many times.

I have just a tiny amount in bitcoin and eth to be frank. I am not sure I believe in the crypto space or not and so far I have missed a great opportunity because I was being too negative.

Honestly, stock investments is basically the same thing. If you invest early, you may get a big reward but the risk is greater that it won't amount to anything. The same is true for crypto.

This could be even more aptly applied to real estate though, no?

Generally, no, it couldn't, unless you're buying a house for the only purpose of selling it later for a profit.

Reply on news.ycombinator.com