Bitcoin is a Ponzi
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With a decentralized digital asset there is no sole person or company that profits from just lying to you about where your Dollar goes in exchange for digitals. Sure, miners and exchanges make profits based on fees when Bitcoin is created or sold, respectively — but they are only being rewarded for their legitimate efforts required to maintain and sell a digital currency. They do not pretend making your money work for you by some magical scheme.
This whole confusion stems from a rather vague understanding of what the subjective theory of value means: Goods and services provided by humans have no intrinsic value but become precious simply there being demand by other humans. Gold can become worthless if nobody wants or needs it anymore. A stupid trading card may cost thousands of dollars costing pennies to make but is sought after by enough collectors. Edit: Yes, Bitcoins are just numbers stored in a computer memory around the world but so is software. And software ain’t cheap.
While Bitcoin‘s value might be grossly overestimated due to rampant speculation but even then, these speculators are no victims in an investment fraud but they truly believe that Bitcoin will become much more useful in the future. They may be wrong but, currently, nobody knows. Only the future will show.
Edit: Typos.
Ponzi schemes don't have to run by single individuals, but perhaps by multi-person organizations like the mafia. The mob was the reason the RICO laws came to be.
And undoubtedly, the mafia organizations would collaborate to break up their crime into regions. Mafia group A would take the West, etc. Since they're a criminal organization, anti-trust laws were meaningless. There wasn't a requirement that the different mob bosses had to compete with each other.
See: https://en.wikipedia.org/wiki/Apalachin_meeting
not quite suing, but it was a diplomatic way of resolving disputes and preventing them.
There are different waves of investors from the true believers who mined because the idea was powerful to the mt gox crowd, coinbase newbies, wall street / hedge fund crowd. Each group has a different reason. The latest groups are looking to make money and the earlier adopters have moved to a less popular more ideological coins with advantages over bitcoin.
Mafia no.. something else yes.
The big example of this would be the 2008 banking crisis where CDO's were bought and sold by multiple banks, but ended up being worth less than the pieces of paper they were printed on -- even though the banking industry should have known this were the case.
Once it was known, they sought to protect themselves first -- "Too big to fail", TARP were common terms of the time.
No. They instead take your money, buy coal, and burn it. Nothing is left.
As you say, Ponzi schemers take money for themselves and keep it. Most of what Madoff stole was recovered, for instance.
Whereas virtually 100% of all money invested into crypto has been burned by miners. This is pretty easy to model.
So there’s nothing left to recover if new money collapses. Bitcoin is worse than a typical ponzi in this respect.
> But if one wants to know whether bitcoin is a good investment, or just an old type of investment fraud with a new coat of paint, the legal definition is irrelevant. One must use a quacks-like-a-duck definition, that describes the mechanism through which fools and money are separated and the reasons why it is a fraud.
It's the world's first decentralized Ponzi scheme, where each participant cell need not understand the whole picture to achieve the end result. It's a financial cancer.
However, I wish governments would ban regulated institutions from throwing peoples real money into non-governmental/undemocratic cryptocurrency.
If banks/govts want to get in on the action, they should perhaps start their own cryptocurrency/blockchain.
Yes, unless it causes harm to the broader economy.
I explained this in a different reply lower down, but when enough people participate it can destabilize the entire financial system in the country. And if it takes down the USD, globally. Pardon the pasta, but in 1997, the entire economy of Albania collapsed because everyone started participating in Ponzi schemes. They even jailed their finance minister for trying to stop it, and it led to a civil war. The IMF had to air drop in big bags of money to bail the country out. [1] This is what is at stake.
[edit] > At their peak, the nominal value of the pyramid schemes' liabilities amounted to almost half of the country's GDP. Many Albanians—about two-thirds of the population—invested in them. When the schemes collapsed, there was uncontained rioting, the government fell, and the country descended into anarchy and a near civil war in which some 2,000 people were killed. [1]
[1] https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.ht...
What I meant was the governments at the minimum stop banks and financial institutions from legitimizing these.
Interesting, I never thought of it that way, and it makes sense.
Since money is not created or destroyed the balance sheet on inflows and outflows of BTC to dollars must be zero at all times. And some x% (which is variable) of it is transferred to miners which is the so-called "transaction" cost.
I guess there must be a point at which the bubble bursts, and that's when a run on BTC happens. At which point it should go swiftly down as the value of BTC has been taken out by the miners.
Something about anti btcers I don't get you'll wax how smart you are and how everyone else is dumb. Just put your money where your mouth is.
(1) Shorting has a completely different risk profile than going long. If you're short, you can lose an infinite amount of money. If you're long, the most you can lose is what you put in. Unless you're familiar with what it means to take a short position in traditional markets, for the love of God don't do it in crypto.
(2) The market can remain irrational longer than you can remain solvent, and Herbalife has been chugging along since 1980 - in spite of the widely publicized 5-year-long short Bill Ackman took. Even if the shorts are right, timing it is extremely hard, and chances are you'll lose your shirt before then.
(3) Most exchanges that permit short positions are criminal enterprises, all the major non-US ones are under investigation. Binance is under investigation by every major world financial authority including the Cayman Islands. They'll require you post collateral in crypto as well, which adds yet another layer of counter-party risk. Even if you're right, and you time it right, a collapse would likely wipe out Binance (or your collateral) - or it wouldn't and they just wouldn't pay you out, SFYL.
(4) All exchanges have a huge interest in seeing the game continue, and are more than likely colluding to keep the price up.
Most of us bears believe that Bitcoin exchanges are crooked Mob casinos - entirely in isolation of the fundamental Ponzi nature of the underlying asset. What you're suggesting amounts to telling someone who believes the casino is crooked to bet on red instead of black. The only way to win is not to play.
[edit] Yes, you can short CME futures (with massive 200% collateral requirements), yes I've done it, yes I've made money, not you shouldn't. Nobody should.
1.) there are a multitude of ways to you can do this on a decentralized exchange DYDX as well. Or a Mercantile exchange like BITMEX.
2.) Funny you should bring up Bill Akman he publicized his short position, and another investor took a counter bet to him. That investor so happened to do it out of (speculated) spite. So not really a good example but since we're here Herbalife was investigated and not found to be an MLM, although I'll grant you that the SEC came RIGHT up to the line in calling them an MLM scheme.
3.) I'll move past the criminal enterprise portion as that's for courts to decide. With respect to binance specifically there are multiple ways to go short I'll post the straight forward versions. Cash settled perpetual swaps, Coin settled perpetual swaps, Put option contracts, Margin shorting. The way I would recommend people short bitcoin is cash settled perpetual swaps, you will be paid out as there are insurance funds that are VERY LARGE you can see what they are, that will pay out winners should losers positions can't be sold to the market.
4.) So does every exchange with respect to the market they serve, the smart exchanges actually want to be price neutral as they view as a business, both FTX and Binance CEO go on the record about this.
So you don't want to short BTC but you still think it's a ponzi scheme ... report it as such to the SEC. Accept that's a loss cause because bitcoin is deemed as property, furthermore a commodity and thus regulated by the CFTC.
I'll finish about the crooked casino portion... you can do this in a decentralized fashion with DYDX or another de centralized exchange. EVEN IF you didn't want to take the time to do that. RIGHT NOW you can go to IBKR and take a short position on the greyscale trust which is essence a short position on BTC. FURTHERMORE if you think these exchanges are crooked and are doomed to fail. Take a short position on the exchange it self. Binance and FTX have their own coins (which are probably securities) that you can take short positions out on.
Final words, how long must a market remain irrational before your prospectus is wrong about the market being irrational? The paradox is if you answer infinity, you may be "right" but you're still wrong.
I get your point, and I'm telling you that the thing they should do is nothing, not take a short position.
Your argument that "if you're so smart you should short it" is BS. If you're smart, you'd stay the heck away.
(1) Decentralized exchanges have all sorts of their own issues, from contract bugs to flashbots, to requiring crypto collateral that may also get nuked in the event of a systemic collapse due to Tether or Bitcoin.
(2) Herbalife is an MLM, but MLMs are not illegal. In fact it says so on their wikpedia page [1]
(3) Anything at any crypto exchange is subject to massive systemic risk.
> So you don't want to short BTC but you still think it's a ponzi scheme ... report it as such to the SEC. Accept that's a loss cause because bitcoin is deemed as property, furthermore a commodity and thus regulated by the CFTC.
The SEC is well aware of its structure, as is the CFTC. They'll act as they deem appropriate in due course, or they won't. But that's a non sequitur. It's actually the first item listed under common misconceptions.
>> That is not the legal definition of ponzi in country X. The legal definition is relevant to understanding the legal implications: can anyone in Crypto Space be prosecuted for running/promoting/aiding that scheme in country X? But if one wants to know whether bitcoin is a good investment, or just an old type of investment fraud with a new coat of paint, the legal definition is irrelevant. One must use a quacks-like-a-duck definition, that describes the mechanism through which fools and money are separated and the reasons why it is a fraud.
> FURTHERMORE if you think these exchanges are crooked and are doomed to fail. Take a short position on the exchange it self. Binance and FTX have their own coins (which are probably securities) that you can take short positions out on.
At the same casino, taking a short against the casino at the casino is the worst plan I've ever heard. If they go under they won't pay you out. The entire crypto ecosystem is one giant distributed casino. Why would you say crooked exchanges are doomed to fail - and on any particular time horizon?
> Final words, how long must a market remain irrational before your prospectus is wrong about the market being irrational? The paradox is if you answer infinity, you may be "right" but you're still wrong.
This is a total non sequitur.
Nothing you've said is representative of the way markets actually operate here in reality, and you've provided incorrect and dangerous advice.
I don't have infinite money to keep propping up my short positions until this thing collapses. That's the reason, not because I don't want to put my money where my mouth is, it's because I don't have enough money to see the pay off.
It's not that hard of a concept to grasp, I believe...
Worth considering...
Some things are simply tradeable, and his advice is not “throw money at the owners of a fraudulent casino to say you are short”
Nassim Taleb himself wrote a paper arguing Bitcoin’s value is zero and sold all his Bitcoin. I do not believe he believes it is his moral duty to open a Binance account and make a short on a Tether Exchange
So far, that 12 year short position has been a disaster for all of the people (literally every single person) on the planet.
So while most industries have costs that feed back into economy, mining costs are just burnt.
But yeah beyond that it’s just musical chairs. Depends entirely on inflows.
And those aren’t too high. Coinbase’s USD volume is $300,000,000-$1,500,000,000. And that’s buying and selling. You couldn’t sell the whole $1,500,000 and exit without crashing price. 2% depth negative is a bit over a million.
So with an apparent $1 trillion in value in the btc market, the exit door is thin.
Isn't USD created? Thus BTC functions as a USD sink. As the USD economy expands BTC represents some claims on it. It's a store of value that automatically appreciates (by design basically).
People like Bitcoin's provable global ledger and this is where the value lies. The value is not burned, it's embedded into this ledger.
Aren't you just stating that Bitcoin has absolutely no intrinsic value?
Likewise a whole slew of physical goods, who have built-in traits due to what they are that make them (on some level) valuable.
Bitcoin only has value due to a shared hallucination.
I think you'll also have a hard time explaining how "good conductivity" is fundamentally different from e.g. "resistance to tampering of historical records".
In the absence of substantial compute resources dedicated to maintaining the longest fork, there is in principle nothing stopping anyone from changing a historic blok and rolling forwards from that.
The good conductivity is a base physical property, not really requiring any external investment of anything to be maintained.
What real world value has this brought?
Yes, miners “take your money” but only a portion of every transaction as a service fee for processing your transaction. This is a payment for a service, the value of which is predicated on a service immediately provided rather than a promise for future value.
Also “nothing is left” is also a false statement as most of the bitcoin/money processed by miner’s isn’t going to them.
Also, every time a miner processes a block of transactions they receive newly minted bitcoin from something called a Coinbase transaction. This transaction will not keep getting doled out since the protocol enforces that there can only be 21 milllion bitcoin minted, but it provides extra incentive for the money poured in for the time being.
In other words, money is not “burned” it’s being exchanged into a different commodity. If this commodity fails to hold value over the long run then sure there’s nothing left in terms of value but I’d say the same risks exist and have been realized by government issued currencies. Look at countries like Venezuela for example.
I have a lot more reasons on why it’s improbable Bitcoin will ever plunge to 0 in value but in the spirit of clearing up some misconceptions I’ll leave that for another comment.
Everyone else can only create "value". So I can combine two widgets together to make a third widget and sell it for less than you could do it. That's "value" in a nutshell.
So on an exchange balance sheet (stockmarket, coinbase, etc), dollars aren't created or destroyed, just transferred for something of perceived value. So I trade one dollar for a fraction of AMD Stock, e.g. But the dollar goes to whoever sold me AMD. The price of AMD stock can go up and down ("value") but the total dollars created or destroyed is always zero. Same is true with BTC.
Right, makes sense? Good.
So every transaction in BTC has a "cost" associated with it, where some "value" of BTC is transferred to miners. The miners spend money burning energy which removes "value" from the economy as a whole. Basically that means we had "X" many tons of fossil fuels left on Earth, but now we have slightly less because energy was "burned" for the transaction.
If I give you a ton of coal you can burn that for heat. But that removes the coal permanently from the world. OTOH, if I want to make a cryptocurrency with 10^86 coins and if I do that a billion times over, well, I have a limitless supply of cryptocurrency.
If you look at the situation as a flow of dollars you see an equation that looks like this:
BTC bought in dollars = BTC Sold in dollars + Mining Costs in dollars.
So while dollars flow back and forth, some have to go to the miners to burn physical energy. That incurs real world costs. So "value" has to be extracted and transferred to the energy companies to "burn" energy. Even if dollars aren't exchanged in the transaction, "value" has to be extracted regardless for confirmation. That value is "burned" by consuming non-renewable energy.
You might say that's exactly what credit card transactions are, (which is not incorrect) but the burn rate of Visa per transaction is much less than BTC.
This shows the cost of 1 BTC transaction vs 100K Visa transactions.
https://www.statista.com/statistics/881541/bitcoin-energy-co...
What this means is that if you reduce the "burning" cost per transaction in BTC, you can keep the value in BTC, and I'll be less cranky about it, since you're not hurting the environment.
I think this is generally false as a premise depending on your definition of “money”. If your definition of money is equivalent to US dollars then I guess this could be interpreted as correct, but other countries have “money” that isn’t issued by the Federal Reserve (the Federal Reserve being what we refer to as the US banking system)
> The price of AMD stock can go up and down ("value") but the total dollars created or destroyed is always zero. Same is true with BTC.
I don’t understand why you’re comparing the “value” of a stock or bitcoin with the “amount” of dollars. A fair comparison would involve the value of the US dollar, which is subject to change (take a look at the Forex market to see people capitalizing on that every day).
> The miners spend money burning energy which removes "value" from the economy as a whole
“Burning energy” is not removing value, it’s providing value by means of strengthening a proof of work blockchain. Whether that’s worth something to you is irrelevant to it being valuable to others.
> If I give you a ton of coal you can burn that for heat. But that removes the coal permanently from the world. OTOH, if I want to make a cryptocurrency with 10^86 coins and if I do that a billion times over, well, I have a limitless supply of cryptocurrency.
It seems like you’re saying scarcity implies value here. If that is what you’re implying, this arguments starts to take the form of a “straw man”. Bitcoin is not unlimited. Part of Bitcoin’s whole appeal is that there is a limited quantity of it to go around. Grouping Bitcoin with any other random cryptocurrency without that limitation will make any argument related to it a moot point.
> You might say that's exactly what credit card transactions are, (which is not incorrect) but the burn rate of Visa per transaction is much less than BTC.
I will agree that the amount of electricity to process a transaction on the Visa network is a lot lower than the energy required to run the Bitcoin infrastructure, but that energy just happens to be the price needed to pay for a decentralized proof of work blockchain. Even if you subjectively don’t believe Bitcoin is worth the value that’s spent to maintain its infrastructure, other people do and that’s reflected in the current economy.
Banks, exchanges (BTC or stock), and markets in the US all use dollars. So dollars it is.
"Value" can be represented by "money", but also by widgets, hay bales, labor, corporate stock, etc. AMD stock has "value" but is not "money".
> I don’t understand why you’re comparing the “value” of a stock or bitcoin with the “amount” of dollars
Dollars are transferred, but never created (unless you're the Fed). You "make money" by creating, or holding something of value and selling it. But you are not actually printing dollars -- really you're exchanging dollars for value.
Money doesn't have to be dollars it could be the North Korean Won, the Iraqi Dinar, Russian Rubles, etc, but it helps to have a stable currency to measure value. You could, yes, pay in Gold if you so desired.
> “Burning energy” is not removing value, it’s providing value by means of strengthening a proof of work blockchain. Whether that’s worth something to you is irrelevant to it being valuable to others.
That's where the disagreement is, right? I'll get to this in a minute.
> Bitcoin is not unlimited.
Today it is limited. It may change in the future. But more to the point, the original 21 million BTC came from thin air in the first place. There's only an "artificial" limitation in that people agree there will only be 21 million, and not a physical limitation.
People can't just code more coal or copper out of thin air.
So now the question is, how do you measure value?
> Even if you subjectively don’t believe Bitcoin is worth the value that’s spent to maintain its infrastructure, other people do and that’s reflected in the current economy.
Therein lies the problem.
All for-profit corporations want cash inflows that are greater than cash outflows. Corporations create things of value that other people or corporations want.
Profits must be objective, not subjective. "Value" can be subjective, sure, but profits must be objective.
So where do we find objective value in BTC? What about BTC drives economic efficiency?
Visa provides a bunch of services to merchants and customers. Yes they take a percentage of the transaction, but corporations realize the fee has value, since they don't have to do billing, fraud management in the VISA system, reconciliation, dealing with multiple banks, bad checks, etc etc etc. Those things have a direct measurable impact to a business, because they're cash outflows.
When we look at BTC we see money exchanging hands for BTC plus some money going to miners.
But what's more interesting is when money doesn't exchange hands, but when BTC is just transferred (like a gift). In that value must be extracted out of BTC in order to confirm the transaction because this needs to be converted to dollars to pay the electric bills.
Today most corporations that supported BTC have shut off BTC as a means of payment. The barriers of entry are high, and pricing BTC to the value of your goods and services is a hard issue since BTC fluctuates. That makes BTC hard to trust.
> but that energy just happens to be the price needed to pay for a decentralized proof of work blockchain.
No argument there, but I fail to see what huge advantage it has for businesses and the economy over Visa, say. The economic advantage for criminals OTOH is easy to see -- it just has to be less expensive than traditional money laundering.
But if crime is like 1% of all BTC use, and using it to pay for services is like 4% (numbers are pulled out of my ass to make the point) of BTC, then 95% of the perceived value of BTC right now is for speculation. E.g. Elon Musk isn't buying $1bn dollars worth of goods on BTC or Dogecoin.
The only way to make money on BTC then would be to create more demand for BTC. And that's certainly what it looks like from my viewpoint.
But in the end, if it's only purpose is speculation, well then we're burning a lot of real world resources for it -- hence "burning value".
So if someone new buys a miner btc at $54,000 today, that represents money paying for coal that was burnt. It isn’t profits and the money is gone. Effectively you are transforming $54,000 into burnt coal and a bitcoin.
Eg:
1. Miner expects $54,000 bitcoin sale. Takes $53,000 loan, buys coal, burns it. Gets bitcoin
2. Received $54,000, gives 1 BTC. Pays back loan
If you ask for your $54,000 back, it isn’t there. It’s gone.
(I know mining doesn’t work so precisely but that’s just a thought experiment to illustrate the dynamic)
You likely never used bitcoin for any of the many advertised functions. You held it, and sold for a loss. Some will win, more will lose. Its a concentration of wealth with a little more class chaos than normal because it's accessible to a more diverse crowd. It still ultimately fails to incentivize useful work to society and it's still going to cause wealth to concentrate in the wrong direction.
And I disagree that bitcoin proponents doesn't claim they make your money with for you: there's a lot of talk about the "deflationary nature" of bitcoin, aka the "magical scheme". Miners haven't burned all the money invested in bitcoin, but I'll admit this particular scheme has an unusually high cost of business, for a Ponzi scheme.
Most victims of a Ponzi scheme believe they're investing in something that will earn them money in the long run, otherwise they wouldn't have fallen for it.
Bitcoins long-term value is clear by examining it's usefulness: it's a tulip, at best.
I'll also freely admit that bitcoin is by far the most cleverly disguised Ponzi scheme yet, it's nature will probably only be obvious after the inevitable collapse.
Things like longevity and (protocol enforced) scarcity are previously things attributed to gold and remains one of the reasons why gold continues to hold value. Tulips on the other hand can easily wither away and its amount can grow exponentially. There are more reasons on why Bitcoin should be valuable in its own right, but many people who can write a lot better than me have written about it.
If you haven’t made up your mind on Bitcoin and still have an open mind to learning what it is, or even if you want more intelligent arguments to critique and debunk, I highly recommend reading The Bitcoin Standard written by Saifedean Ammous.
You can't build electrical circuits from bitcoin, nor can you wear them as a necklace(I guess you could print your keys on a shirt or something, but then they wouldn't be yours for very long)
Scarcity alone isn't enough, you need a use for them too..
While gold does have some interesting properties in no way would that explain a 10 trillion dollar market cap, and the price of 55 000 $/kg, sorry. It's just not that much better and rarer than other competitor materials. If comparing by properties alone, there are materials that should then be more expensive. For example Platinum is almost half of its price, and yet way rarer, and it's properties more useful.
This incorrect. I can purchase a home or food from humans and they have intrinsic value. If whatever market they were purchased on collapses, I simply live in the home and eat the food to realize their value, no further transacting required. Similarly with services I can pay for someone to build the home and harvest the food, the value is immediately realized because I can still eat, have a place to live and my time free to do other things. This is literally why the term "intrinsic" was uh, coined, to contrast these types of goods and services with things like precious metals which may have little intrinsic value.
If the market for food „collapses“ that means there is too much of it. Its value has gone down because your fellow humans do not want to buy any food from you anymore. Now, you can eat your own food, yes, but if you hoarded too much of it you will have to let the remainders rot away. In this extreme case the value of a good is only given by yourself. So your argument does not contradict the subjective theory of value at all.
On the day nobody cares for Bitcoin anymore, its value will go to _almost_ zero. Maybe some former Bitcoin zealots will keep the blockchain on their hard disks anyway as a memory. Then some subjective value will be left to Bitcoin even then.
Your entire statement is wrong. I'm surprised you managed to write so much without realising how wrong it is.
Sounds like you don't know what digital assets are, or what a ponzi scheme is.
Trading cards are ponzi schemes too. From an entertainment point of view, they are created for the purpose of being fun to trade. From a monetary point of view, they are a ponzi scheme.
Bitcoin is neither fun, nor solves a problem, nor has any use beyond monetary.
No, not really. You're confusing the concept of intrinsic vs perceived value, and completely ignoring the concept of utility.
People who buy cards for fun do it because it's fun, just like we could spend money to rent a sports car, go on a vacation, or drive around a test track. The monetary value of a hotel say from last month is zero, but that does not make hotels any type of fraud.
What would represent a Ponzi scheme would be, say, advertising Beany Babies as a safe and guaranteed investment to attract speculators, sell them Beany Babies for a hefty markup, and proceed to leave them holding the bag.
They might make a range of beanie babies, or they'll suddenly start using the range that already exists. A ponzi scheme can start anywhere in the lifecycle.
>Goods and services provided by humans have no intrinsic value but become precious simply there being demand by other humans.
Nonsense that's easy to disprove: try to stop eating food and start 'valuing' dirt as food. You will, of course, starve to death. Why? Because actual value is objective and exists regardless of what people think.
Intrinsic value objectively exists, but in most cases can only be estimated, correctly or not. It depends both on location and time coordinates.
Civilizations that estimate objective value too incorrectly collapse or get conquered. Those that estimate it correctly enough prosper.
The long term metric for any civilization is fortunately clear enough - energy use, also called the Kardashev's scale. It's a long term metric because foolish civilizations can waste energy in the short term (eg. by mining bitcoin) - but because it's wasted it results in less available energy in the future.
In cases like bitcoin there are no unknowns - it objectively has negative value and destroys wealth. It's backed by nothing and generates no income.
Don't get me wrong - I'm not saying don't play in crypto.
Never in history was it so easy to get rich by extracting wealth from others - which is what bitcoin and 99% of crypto in general is for. Is it a scam to promote it? My personal definition is pretty simple: it's a scam when promotion involves lies. Telling people bitcoin has value, while being a developer (thus smart enough to know it's worthless)? Scammer. Telling people it may go up in price (because other people may buy it)? Not a lie.
China was smart to ban crypto - they're too big to hope to profit at the expense of the west, and in fact most coins and tokens are held by Westerners, virtually guaranteeing it would end up as wealth transfer from China.
Crypto tokens can have real value - if they monetize efficiency increase in the real world. A smart contract economy is a possibility and it can exist - but right now it's all in the proof of concept stage. Without the ponzi factor I think eth should be valued between $1B-$10B (based on future potential, not current income), other smart contract platforms collectively at 20% of it, some defi tokens like MKR in the upper 8 figures - lower 9 figures. Everything else - worthless.
I'm really far from an expert in economics so I could be wrong but ain't that how the stock market works for non-dividends stocks?
You don't need to distribute dividends to give money back to shareholders.
> Telling people bitcoin has value, while being a developer (thus smart enough to know it's worthless)? Scammer.
There is little about being a programmer that qualifies you to declare Bitcoin a scam, or not a sacm. There is a set of programmers opposed to cryptocurrency that believes that their background qualifies them uniquely - that is hubris.
People don't need to understand any code to understand that Bitcoin is a spreadsheet.
For a dev there's no such excuse - they know for a fact bitcoin isn't backed by anything and all energy used for mining is irrevocably gone, and that no mechanism exists for bitcoin holders to earn transaction fees (because miners are a separate entity). There's no escape from knowledge that bitcoin is a negative sum game - which means claiming it's anything but a new version of a ponzi is a deliberate lie.
There are many different reasons to own Bitcoin, however the author seems to only view it through the lens of someone living in a wealthy and developed country with financial stability.
The properties of it being difficult/impossible to confiscate and its privacy make it valuable in oppressive regimes. A refugee could store their wealth in Bitcoin, leave their country, settle somewhere else, and access their Bitcoin without the risk of it being confiscated during the journey, because they can simply memorise the seed phrase (24 words).
It's predictable issuance schedule also makes it valuable in countries suffering from high inflation or hyper-inflation.
This is a good article to rethink the use cases of Bitcoin: https://bitcoinmagazine.com/culture/check-your-financial-pri...
Alex Gladstein works for the Human Rights Foundation and does lots of good work in Bitcoin advocacy. His other articles are worth checking out.
And the data backs this up. Some of the biggest growth in Bitcoin users around the world have been in places around Africa and Vietnam who are subject to some of the situations mentioned above.
Do you think these people see Bitcoin as a "Ponzi"? Do you think they care if such a definition doesn't change the properties they find useful/valuable?
But they have to know someone holds it in the first place. You can walk around with a seed phrase in your head and no one would know.
They aren't going to immediately execute everyone who is crossing the border. Even in authoritarian regimes, some people may be able to leave, and borders are not completely shutdown.
And in that situation, for those people, it is useful to be able to carry money, in a way where they do not know that you have it.
I think you fail to understand the power of a true authoritarian government, particularly if they can monitor and limit your access to the outside world.
* Use a VPN, you're guilty of Treason.
* Use a currency other than the North Korean won, you're guilty of treason.
* Use an electronic device other than state sponsored devices, you're guilty of treason.
All executions will be recorded for posterity and broadcast to the people as a reminder of the power of the state.
However, as soon as they start doing that to the first few people, what's going to stop everyone else from instantly sending their bitcoin to family and friends across the border for safe keeping?
With wealth like gold, land, oil, or any other physical resources, an oppressive regime can just kill all dissenters and take control of everything. The payoff to violence is huge.
But with a digital wealth like bitcoin, which can flee the country at the speed of light, even if the owners can't go with it, the payoff to violence evaporates. The oppressive regime that spends a lot of time and energy torturing and killing people will have no spoils to show for it.
The only wealth people could offer for Bitcoin is wealth in a country with an oppressive regime. Who internationally can even take possession of that to cover their expenses?
The only plausible option would be to actually just setup a mining rig and mine the Bitcoin, since presumably for a while their might be an electricity grid their and the BTC network ascribes value to that activity...except you can't mine on commodity hardware to anymore either.
Sure, there’s very tiny amount of people who use Bitcoin as you described. But so there’re people who get benefits from smoking.
As the article states, check your financial privilege.
And "tiny amount of people"? What's "tiny" here? Hundreds, thousands, millions? Do you know how many people use Bitcoin in this way?
Do you?
https://blog.chainalysis.com/reports/2021-global-crypto-adop...
It's very hard to get exact numbers of users, because of how Bitcoin works, but this should give you a good sense of proportions and you could infer numbers of people based on known population sizes for each country
"We calculate the metric by estimating total cryptocurrency received by that country, and weighting the on-chain value based on PPP per capita"
Weigh how?
"we rank countries by their P2P trade volume and weight it to favor countries with lower PPP per capita and fewer internet users"
Weigh how? How do you get the numbers on internet users?
"We rank all 154 countries according to each of those three metrics, take the geometric mean of each country’s ranking in all three, and then normalize that final number on a scale of 0 to 1"
What?
It's not a methodology conductive to analysis. Is a hodge-podge of smart sounding words that create pretty graphs.
Oh, and they changed the methodology this year, but still compare results to previous years that used the old methodology. Very scientific
It made me quickly appreciate that a persons ability to transact while not quite a human right, isn't too far from it either. There is no way the government (or financial world) should hold the power to wreck someone with no accountability. Bitcoin as I see it, is a way to shift the balance of power somewhere closer to where it belongs.
I don't hold bitcoin because I think it'll go up in value, I hold it because I don't want someone to tell me I can't pay rent because ... well they can't tell me why, because "sorry, I don't have access to that information"
I’m just shocked; never considered this could happen. Was this related to your employer, and… Well, I should just ask rather than guess :) thank you for sharing, and I’m really sorry that happened.
One of the best decisions I’ve made recently is to set up a company for myself. More specifically, I set up a non profit “for the world” (mostly as an intellectual exercise of “how hard would it be to mimic what openai originally set out to do? Turns out, it’s not hard!) which then put me in a position where I knew exactly how to set up an LLC for myself for consulting, and how to set up a bank account (use https://www.mercury.com — don’t use anything else).
The takeaway is that, if you’re in the US, you can have protection from exactly this sort of thing, for roughly zero cost — in Missouri the filing fee for an LLC was a whopping $50. That’s how much it cost me to set everything up, start to finish.
I now have a business banking account, quickbooks takes care of the taxes (admittedly $24/mo isn’t “totally free” but it’s also “pretty cheap” relatively speaking) — which means that yes, someone could freeze my LLC (hello IRS) or freeze my personal account (hello US Bank, you suck) but it’s highly unlikely both will ever be frozen simultaneously, unless both the business and my personal accounts are under scrutiny simultaneously.
The cure for that is very simple, as long as you’re rigorous: income comes in to your Mercury account; it flows out into your personal account, by paying yourself a salary. Never use the Mercury account for anything else. Congratulations, your LLC is almost impervious from problems. (My famous last words; the fact is, I have no idea what I’m talking about, and this is what I’m expecting to be true as t approaches infinity).
So yes. Bitcoin: good solution. LLC: also good solution. Wish I’d taken advantage of it sooner.
Unsure about outside of the US though, sadly. Though I’ve often toyed with the idea of making a company specializing in setting up one of those offshore bank tax havens, and offering a product like Stripe whose sole purpose is to automate that. :) Then everybody gets the loophole, rather than a rich few.
Anyway, thanks again for sharing that very unexpected story; I hope it never happens to you again!
However, I will say that one business wanted to hire me full time, and I refused and asked for a higher consulting rate, which they agreed to. So it’s not impossible for your next job to end up similarly.
But then you don’t get benefits (my wife’s health insurance covers us both), sick days, and you probably have to log hours (to my surprise). So even if it’s more lucrative for me right now, there are definite reasons this path isn’t suitable for everyone.
Definitely consider it if you can swing it though. And also, you can simply invoice yourself for services rendered from your LLC, which effectively transfers money from your personal account to the LLC. I’ve had to do this to bootstrap funds into the account (since your balance starts with $0, which is useless).
The problem is tax. There are two issues. One is that an LLC is a pass-through entity. That means all profits are expected to pass through immediately to your personal account, or used immediately on business expenses. If you try to maintain a $20k balance for a year, for example, you’ll discover that this balance counts against your deductions for that tax year (effectively a negative $20k deduction). Or at least that’s my understanding so far.
Therefore, as with most things, you should ask an accountant for advice. But that’s an unsatisfying answer. My answer was going to be, therefore, you can create a C Corp instead of an LLC, and transfer some of your personal funds into that (by invoicing yourself).
The problem (argh, they never end) is that the income will be taxed for the Corp, and then taxed again when you pay from the Corp back to yourself. This is precisely the “double taxation” problem that LLCs were designed to solve!
The reason it still might make sense is because of all the incredible benefits of setting up your own company. For example, merely opening a Mercury account at all means you can redeem $5k of aws credits. $5k! I’ve done this! To my surprise, it happened!
And that’s just one of like 80 Mercury perks. There are so many, and it’s been so much fun window shopping through them all. It’s how I wound up using quickbooks for example.
Plus you’ll have an account that people can wire money to. Mercury has a nice little PDF with all your wire transfer details. It feels like driving a Tesla, whereas US Bank was like not having a car at all. (It was truly one of the worst business banking experiences imaginable. They even managed to lose an incoming $10k wire transfer. Nonsense like that simply doesn’t happen with Mercury.)
So there’s a brain dump of pretty much everything I’ve learned over two months of studying this. The takeaway is that if I had a day job, I would set up a C Corp and transfer a few grand to it by invoicing myself. (No, I wouldn’t use stripe atlas. That’s $500. You can do it yourself for $50, and it’s been surprisingly painless. Both Missouri filing and the IRS EIN were entirely online, so you don’t even have to mail anything.)
Just, uh… perhaps consider it a side hobby. This kind of nerdiness is uniquely fun to me. I imagine that it’s incredibly un-fun for most people. Treating it as a hobby helps overcome that pain, and the risk turns out to be minimal. I was surprised by that.
You don’t get taxed on having a balance; you do get taxed on the income that generated it. (Or am I missing something crazy?)
In one of these links, I am quite certain I saw words to the effect of "if you maintain a balance in the business, then the following tax year, it will count as a negative deduction for the shareholders (i.e. you), because the business type is a pass-through entity, and pass-through entities are expected to pass all of their income through to the shareholders."
The fact is, I don't know whether it was an LLC or a sole proprietorship, and I'm now second guessing what I thought I knew. Because yes, it does sound pretty ridiculous that an LLC needs to maintain a $0 balance or else it will penalize the owners of said LLC. That doesn't sound right.
And yet, words to that effect were located in one of these links. (Hunting for it now.)
EDIT: Welp. Can't find it anywhere. At least I admitted from the outset that "ask your accountant, do not trust me" is reasonable advice for anyone thinking of taking business advice from random HN comments.
I'll downshift to "I don't know whether it's a bad thing to maintain a long term balance in an LLC, but I'll be finding out the answer before the end of this tax year."
If there's no disadvantage to keeping a balance in an LLC, then I revert to "Just form an LLC for yourself; it costs $50 to do so. And you can keep as much money in it as you want, as long as you don't mind paying income tax simply for transferring money into your LLC."
It's possible I was thinking of a negative tax basis for an S corporation, if the S corporation has a long term account balance. But a tax basis is certainly not the same thing as a tax deduction, so I throw my hands up in the air and say "I'll be using a portion of my consulting income to clarify these questions with both an accountant and a lawyer; all advice should be considered suspect."
It's definitely not correct at all. Neither is issuing phantom invoices to yourself to put money into the account.
A bank account is just a vehicle to store business cash, it really has nothing directly to do with the way you should be maintaining your LLC's books. You should be recording things like that as "capital contributions" which increase your "capital account."
Similarly, profits and losses should be booked to your capital account. I would strongly recommend doing some reading on capital account bookkeeping.
I may have given the wrong impression, but to be clear I certainly wasn't recommending using Mercury as your tax accounting software! I was saying that as long as income flows into your LLC's bank account, and out into your personal account, and that you never use your business account for personal expenses, then you have nothing to worry about.
I really appreciate the reference on capital accounts; not knowing how to classify inbound transfers from my personal account was bothering me. That still raises the question of whether there is a tax, and how much the tax is. Are you saying there's no income tax when you transfer your personal funds into an LLC, since capital contributions aren't income?
After pausing and searching for the answer to my own question, https://howtostartanllc.com/form-an-llc/contributions-and-di... -- the answer is probably "no, not even slightly" and also "this is suddenly quite complicated."
https://www.legalzoom.com/articles/how-to-add-capital-contri... seems slightly less complicated:
> If you plan to contribute property, you will need to obtain a market valuation to determine the value of the property you are contributing to the LLC. Capital contributions in the form of property may also attract a number of potential tax consequences, so it's generally a good idea to consult with a tax advisor beforehand.
> You also can make a capital contribution in the form of services. As with property, you will need to obtain a market value for the value of your services. There also are tax consequences, as you will have to treat this value as if it were actual income you earned for your services, meaning you will have to pay personal income taxes on the value of these services. Because of this, services are not as popular a form of capital contribution.
So, yes, you can "invoice for services rendered" (aka services capital contribution, apparently) but it'll be taxed as income. Therefore, you want to contribute property, and the tax consequences are left as an exercise to the reader.
Looks like I'll be completing that exercise, but perhaps not at 2:30am.
Cheers for the tips.
EDIT: Two more useful resources:
- https://www.law.cornell.edu/wex/contribution
> The capital contribution increases the owner or partner's equity interest in the entity. Capital contributions are not considered business income unless given in the form of a loan.
- https://ttlc.intuit.com/community/business-taxes/discussion/...
> For a Single Member LLC (that has not made an election to be taxed as a corporation), the IRS does not recognize the LLC exists (for most purposes). Therefore, you and the LLC are the same. Therefore, there really isn't such thing a Capital Contribution for tax purposes.
Apparently "It's complicated(TM)" is still the final answer, because single member LLCs can't have Capital Contributions. Hmm.
One reason I post openly about this sort of thing is precisely because people like yourself come out and correct my misunderstandings. So again, thank you! This is certainly a reminder that I have lots more reading to do.
When you have money in the Revolut account you can spend them in any country and it would be very difficult for some entity to block your funds.
Thanks for the hint about Revolut and Monese. Now I'm curious what their requirements are...
It made me realize how fragile our access to bank accounts and identity actually are.
I have as such setup a portion of my wealth in crypto-assets with a dead mans switch and recovery methods covering fire, amnesia, identity loss, or death, while ensuring the majority can't be seized by a government or rubber hose attack without the consent of myself and a quorum of people I trust around the world confident I am not under duress. As long as I have the freedom to communicate and some time I can recover.
The market value of crypto-assets may not be predictable, but I prefer to be able to count on never losing access to it, and having theft protections no bank can offer.
And what also is scary, if I had been a real target and not bycatch, I bet anyone who helped me would've also faced the same asset freeze for helping me.
Well you certainly can't do that with Bitcoin unless your landlord has a similarly anarchocapitalist worldview. You'd have to cash it out at an exchange and pay the individual in question. This choke point would leave you similarly locked out.
This applies to only a fringe minority of the participants in the Ponzi.
More sympathetically, even if this was a real problem that doesn't mean a Ponzi scheme is the way out. It's like saying you got burned in 2001 so decided to invest with Madoff knowing full well he was a Ponzi, but at least he wasn't a tech company.
Would it? The parent commenter was in the United States, and even in cities of about 1 million people, I've seen Bitcoin ATMs at chain supermarkets. Some were even integrated into the ubiquitous CoinStar machines at the front of the store.
Would it? People are willing to exchange USD for BTC. You can't control everything.
it should absolutely be a human right in this age.
However, I think we should be careful with drawing the conclusion that technology for circumventing our institutions' ability to regulate altogether is the natural solution, when perhaps fixing the institutions would lead to an overall better outcome. If we all moved to Bitcoin, then we would no longer have central democratic control over who is allowed to transact or not, and I don't think that leads to a better society.
Plus, anonymous physical cash transactions have been the status quo forever
Physical cash is de facto restricted in many places in the form of upper bounds on the amounts that one can withdraw and deposit.
Governments should stop crimes that may lead to transactions, not transactions.
The analogy would be free speech. It shouldn’t be illegal to write an article in support of terrorists even though becoming one might be.
It’s not a right we currently recognize but it’s a cogent argument.
You set up a scene of a refugee "storing their wealth in Bitcoin", but it begs the question: where are these refugees with substantial wealth they are looking to exfiltrate? Typical refugees are emigrating from locales where they were earning dollars per day. The use case of shielding hoarded wealth during a journey to a freer locale is a blinkered fantasy. (Of course, if this is incorrect, surely there are hundreds, at least dozens of compelling case studies by now?)
Again, these proposed use cases are absolute fantasies.
say i've happened to save 1000$ and i want to leave the country and i don't want the police near the airport to take my money as they're known to do. do you think it would be an absolute fantasy for me to find some way to sell my 1000$ for bitcoin and buy them again somewhere else?
> It costs many thousands of dollars to cross borders illegally by the way, so you’re likely to exhaust your savings trying to escape whatever you’re running from.
...and worse, often end up in debt along the way. Where is the room in that common situation for the need for exfiltrating funds via BTC?
African migrants trying to cross the US southern border, on the low end. Airfare from West Africa isn't cheap. In this article[1], one migrant says the trip had cost her $5,000. It takes some assets to pull that off, and some of that is probably kept on their person for the duration of the journey. A microSD card in a condom in a....sensitive location....is not likely to be detected if/when narco-smuggler cartels shake you down for cash.
At the high end....government kleptocrats fleeing Afghanistan. Supposedly President Ashraf Ghani and his family had to leave piles of cash because they couldn't carry it all when he boarded a helicopter.[2] Too bad they didn't convert to stablecoins and store them on a wallet on a thumb drive.
[1]https://www.reuters.com/article/us-usa-immigration-africa/u-...
[2]https://www.reuters.com/world/asia-pacific/russia-says-afgha...
It remains to be seen whether it would have been practical to move money from Syrian liras to Bitcoin. No one wants to buy hyper-inflating currency.
IMO, the not-classy thing is cryptocurrency advocates constantly trying to leverage the plight of refugees, the unbanked, and those living in locales with constrained economic freedom to underwrite the reputation of a set of technologies that are overwhelmingly used as pernicious speculative vehicles.
The average transaction fee during slow periods is about $5 and it jumps to $20 whenever there is load on the network.
And the lightning network is a poor solution to this because the LN requires a lot of capital to fund channels, something poor people explicitly don't have.
Finally, the fact that Bitcoin proponents have to point to poor authoritarian countries to find legitimate usecases is telling in and of itself. It's basically a blunt admission that the technology is mostly useless in the US.
When people say this, do they mean $5/$20 per bitcoin or per any transaction whatever size?
Transaction fees are per kb of data so more complex transactions pay more. The amount transfered is irrelevant.
It costs $5 to spend any amount of Bitcoin?
Is that for real? (I genuinely don't know, that just sounds so high)
In addition to that, there's always the Lightning Network as well wherein you can transact for fractions of pennies.
You should fund a LN channel for more than one transaction because you cannot change the channel funds after creation, so you better make sure enough is in it. This makes it unsuitable for things that require more than a tiny fraction of your monthly income, e.g. rent.
LN channels also need to be constantly monitored to not get scammed, which the LN whitepaper suggests you to pay third parties for.
The LN whitepaper completely obmits the routing problem, too. It more or less says "we don't want to think about that now". A network whitepaper that doesn't think about routing, imagine that.
Yes, that makes it a closed system, but it was never realistic to have every single person on earth access bitcoin via on-chain transactions.
If you don’t pay enough it can take hours for your coffee to be paid for.
So every time you buy a coffee with Bitcoin the transaction fee is different and sometimes will cost more than the coffee itself.
You are also going to paying exchange fees each way and those fees are likely to be quite large in authoritarian countries (as any illegal activity is generally more expensive).
The problem is that the Bitcoin fee is also payable on all domestic transfers too, which of course are free in traditional banking.
Gold has been used to store value for thousands of years, while Bitcoin is a new and experimental technology. It's absurd to say that you would use an experimental technology to store long-term wealth. Maybe once it's tried and proven, fine. But right now it's inefficient, volatile, has high fees, and has got the problem with mining I talked about above.
For clarity: My comments above are directly relevant to the comment above about inflation. Guarding against inflation is about holding onto your wealth for the long term. I was comparing Bitcoin to gold for that purpose -- which is entirely valid.
Nope, you're laboring under a misapprehension. Even if all new compute power stopped being manufactured miners will run their existing equipment. The mining difficulty will plateau and overtime gently decrease as equipment breaks.
Older and less efficient (at computing double SHA-256) equipment can be profitably brought online where the price of electricity to do so is available and other more valuable uses of that energy in that locale are not possible.
You can ride this all the way back down the years and generations of ASICs then GPUs to CPUs. Once humanity is out of CPUs, well, we'll have more pressing issues. We'll talk again then, or not.
Yes, mining and securing the network nevermind transmitting transactions would be difficult with ink, paper, and abacus technology alone. I'd expect gold to hold some value here despite difficulty in securing and assaying it restricting its useble value to technical specialists and institutions. Nonperishable food, water filters, consumable entertaining substances, etc. would be a better bet if you're prepping against a Mad Max level of collapse.
I guess it should be possible to trade bitcoin via the stellar network (according to their intro page[1], any currency can be), but I could well be wrong.
I got some given to me in the Keybase drop so I read up on them, but that's the limit of my knowledge in this area. I'd love to find a way to use them but articles like this talking about ponzi schemes etc tend to put me off bothering.
You say that as though it makes it all but useless, despite the value it provides to people in those countries... that's very telling in itself.
But as I said there are many use cases, I just pointed out a few that I thought were most important on a global scale... because, you know, it's not all about people in wealthy developed nations.
But outside of those types of countries, and in countries like the US, the self-serving use case is a hedge against inflation. If inflation doesn't worry you, that's ok, but the recent money printing in trillions of dollars worries lots of other people. In 20 years I've seen the purchasing power of my money halved. I'm much happier to store my money in an asset that, so far, is seeing its purchasing power increase year on year.
From a technical standpoint the other use case, over the lightning network (and other layers and sidechains), is that it allows for instant micro-payments not possible with the legacy financial system. People are building products like podcast platforms which stream satoshis to content creators for every minute someone listens to their podcast. Others are building systems where every API call can be instantly billed. Or content distribution systems (think Bittorrent) where seeders can be compensated for service.
There are plenty of technical uses cases for a digital native money on the internet.
If you don't understand why it has utility I don't think there's anything more I can say to convince you. Sorry.
I don't trust politicians to manage their money or economy well. But I do trust code and math that enforces decentralised consensus that can't be manipulated by a handful of powerful people. Some have tried in Bitcoin's short 12 year history, and they've all failed.
You say Bitcoin is inefficient. In comparison to what? By what measures? If you compare Bitcoin to gold mining it uses less energy. https://cbeci.org/index/comparisons
If you compare it to the legacy financial system (and many other industries), it also uses less energy. https://bitcoinmagazine.com/business/bitcoin-energy-use-comp...
You say Bitcoin is volatile, but that is to be expected for a new form of money that people are still trying to figure out the value of. How long do you think it took for gold to reach a stable point of perceived value over its long history? Bitcoin is only 12 years old.
But perhaps calling it "volatile" isn't really even fair to begin with, when you compare it to top stocks and gold. https://ecoinometrics.substack.com/p/ecoinometrics-comparing...
Need for endless mining? Of course it's endless, it's a vital part of network security in an adversarial environment. As the network stores more value the energy expenditure will need to go up to secure it. This is true of any other store of value. Gold is not only incredibly expensive to mine, it's expensive to secure in large facilities.
The more Bitcoin integrates into the economy and the more wealth it secures, the more energy expenditure it should use. This is by design and a good thing. And if you compare it to other industries (linked above), it is far more efficient than current systems.
Forget "crypto". Most of them are varying degrees of scam or cargo-culting around "blockchain technology" (including Ethereum). Bitcoin is the only one that matters because it's truly neutral and decentralised. It wasn't founded by any company, there's no marketing team or CEO. It's just an open network protocol that people choose to opt-in to because they understand its value proposition to the world. In the same way that there's a separation of church and state, there needs to be a separation of money and state.
https://vijayboyapati.medium.com/the-bullish-case-for-bitcoi...
LOL, who in those countries would sell them bitcoin?
You've pulled out an argument I see all the time about the utility of bitcoin, but you can always just tell that it's made by someone who's never lived under an oppressive regime.
It's a first-worlders idea of what thirdworlders can do.
He works for the Human Rights Foundation and advocates Bitcoin for its humanitarian use cases. He has spoken to many people in these types of countries to get their take on it. See for yourself...
I mean, just ask the Chinese how easy it is to get bitcoin today. The billionaires, millionaires, and political elite can get their hands on bitcoin sure no matter where in the world they are, but not the common man (the actual oppressed in those regimes).
Unlike Alex, I don't have a conflict of interest.
Problem: Who is selling Bitcoin for local currency in an area where there is a problem which is generating refugees?
Sure - you can electronically send Bitcoin to people, but how is the seller going to receive local currency from a war torn region without being local themselves? And if they are local...why are they selling their Bitcoin?
Remember - this is an area presumably in some form of collapse. How is a refugee going to transact their savings to another party who can accept them safely in the first place (rather then say, just being robbed - presumably why they're fleeing).
With that said, each day that goes by I am more inclined to agree with him in relation to Bitcoin and all projects that tout "fixed supply", "store of value", PoW crap.
I agree that the unbanked and people that fear persecution or censorship can benefit from crypttocurrencies. The part where I don't agree anymore is these people have BTC as their best alternative to protect their wealth or to be sovereign over their finances.
This is a misconception and a fundamental misunderstanding of gold's primary utility for thousands of years.
While it is true that gold's price reflects a significant premium beyond the "natural" market price, this has been the case for millennia. Since ancient times, most demand for gold has not been for industrial uses or jewelry, but rather as a store of a value. This results in gold having a "monetary premium".
It's also worth mentioning that it is no coincidence that humans happened to chose gold as money. Among all chemical elements, gold has a favorable combination of chemical properties and rarity in the earth's crust that make it a suitable choice for storing value over long periods of time. In fact, nearly all gold mined in human history is still around today. We've been hoarding it since the time of the pharaohs.
I'm sympathetic to crypto skepticism, but I'm afraid many people are missing the forest for the trees. I'm curious for those that still truly believe Bitcoin is a ponzi scheme or a bubble - at what price point and time would you start to consider that you may be tragically wrong?
Bitcoin could be the world reserve currency and the same people would still say it's a scam.
Ultimately, who cares? The world is changing with or without them.
What price would tulips have had to have attained for them to be proved "not a mania"? [1] "At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled artisan."
Which is to say a high price by itself is not a proof of bitcoin not being bubble. I do have a criteria - bitcoin will not be a ponzi scheme if it genuinely winds up being used as currency. Of course, this wouldn't solve its other noxious problems.
[1] https://en.wikipedia.org/wiki/Tulip_mania#Social_mania_and_l...
In theory Bitcoin can keep growing as long as people believe in it.
It has a strictly negative EV though.
* it returns no revenue
* At current mining levels, it burns about 1.8% of its market cap annually. By burns I mean literally burns energy and ASICs. (About $18 billion at current market prices)
* That’s just for mining costs. There are other costs associated with bitcoin such as costs associated with running exchanges, etc. won’t venture to guess here but it’s all in the billions. Coinbase alone had costs of about $1.1 billion in Q1
No market price changes this fundamental math. People could bid up the price to $1 million per coin and burn $360 billion per year on mining and the dynamics would be the same.
Now, what would change my mind would be some kind of use case. Currently we have money laundering, avoiding governments, etc. thin gruel
There is some interesting stuff happening with Ethereum. I don’t know if it will take off, but I at least see ways in which it could (Chainlink etc)
If bitcoin develops some kind of use case, then I’d change my view.
Right now bitcoin in economic is more akin to tourism or a church or something. It takes a bunch of economic resources to run it, but it also makes people happy, and that’s the benefit.
But don’t be mistaken: money goes in to bitcoin to be burnt (like tourism). It doesn’t generate money. That there is a number going up doesn’t change any of the dynamics laid out above. That’s just shuffling around between participants, not revenue or a use case.
Bitcoin has and only ever will have a practical use for criminals.
Bitcoin mining produces heat, and maintains the bitcoin network. It doesn’t actually increase the supply of anything: the total number of bitcoins is arbitrary. The real value is whatever the network produces (happiness in its hodlers, money laundering, some future use case)
Gold’s utility is: some industrial uses, it looks pretty and has special properties, and if you had to bury some treasure for some descendants in 500 years you could reasonable figure some gold coins would probably be worth something comparable in the future, no maintenance required
That’s about it. Never been a big gold fan but those three uses seem pretty indisputable.
The people arguing for bitcoin present it as a store of value but you need a hell of a lot of costly ongoing maintenance for that. Gold would still have those uses even if all mining stopped. Without mining, bitcoin is defunct, conversely.
Edit: oh yeah, I suppose gold lets you keep some value anonymously and take it with you across borders. I think Bitcoin wins on that count but since I’m listing the uses of gold I shouldn’t omit that. There may be others I’m forgetting
I am not sure about that. If there were a magical new way of creating gold to inflate its supply, it would not be good for the world.
Also about the 500years thing, no i wouldn't actually trust that. Sorry to burst the bubble but gold hasn't been here that long in our hands compared to humans, and before gold we used other store of values or currencies. Many other civilizations held their value in their (then rare) tokens (see shell money, see Rai stones, (...), and all of them eventually lost all their value.
In this day and age, in 500 years i would be extremely surprised if humans, or super-humans, or human-AI hybrid, whatever, hadn't figure out how to make gold like we make a sandwich for breakfast. Gold (if still useful, and other much better materials haven't been developed by then) will be as common as Rai stones became when some cunning explorers decided to use their higher technology to transport them and make them total valueless to the tribes that used them to store value.
Gold will see it's "store of value" fate fade in not too long. It's just a matter of when. And don't get me wrong, BTC might too. I also can't imagine that in 500 years the encryption we have today won't be child's play for the future hyper-computers. But anyway, my point is that gold is nothing special in terms of store of value. We're just being bogged down right now for lack of technology, but that will come, just like it came to all the other tokens which eventually turned their value to almost 0.
Lol. Bitcoin is exactly comparable to gold. Plenty of people buy gold expecting it to appreciate...because other people use it as a hedge. Even if it were true originally that Gold's only purpose was as a hedge (protip: it's not), its very utility as a hedge would make it useful as a source of alpha for those wanting to bet on the demand for hedges.
This article is just stupid and pointless. It's attempting to take a label that has a strong negative valence, deconstruct its attributes and apply them to something else, and then port that valence over to the new thing. The negative valence ascribed to "ponzi scheme" is because it is a scam intended to defraud its investors. A ponzi scheme that is not an attempt to defraud its investors, even if it fits some "technical" description of a ponzi scheme, does not deserve to have the valence of "ponzi scheme" assigned to it.
I certainly don't believe Bitcoin meets the technical definition of a Ponzi scheme. But even if it did, this article would still be a stupid and pointless attempt at valence hijacking. An activity that the world already has far too much of.
Long run? I think not. Gold hasn’t really risen over millenia, just stayed in a certain band.
Buffett made a good argument that you could either buy a giant gold cube and fondle it, or a large number of productive assets in the states and collect the revenues. He’d bet on the assets being worth more over the decades, and over the long run he was right.
Bitcoin proponents expect bitcoin to soar long run, unlike gold, which doesn’t.
I said they expected it, not that it did. I know plenty of people who buy gold expecting it to appreciate. Whether or not it does appreciate is irrelevant.
> Buffett made a good argument that you could either buy a giant gold cube and fondle it, or a large number of productive assets in the states and collect the revenues. He’d bet on the assets being worth more over the decades, and over the long run he was right.
No he wasn't. If you invested all your money in the medieval equivalent of an index fund, it'd be worth far less today than if you had invested in gold. You can't just cherry pick the last century.
This isn’t true. Gold has about kept the same value, adjusted for inflation.
The economy grew enormously since medieval times. Anyone managing to keep reinvesting since then would be enormously rich.
Yes, and how is the equity in your local shoemaker or blacksmith doing?
> The economy grew enormously since medieval times. Anyone managing to keep reinvesting since then would be enormously rich.
By "keep reinvesting" do you mean "always correctly escaping the industries that died into the ones that kept growing all the way up to the present"? Because if so, you're right. But that's not a particularly good way to think about how returns compound.
Obviously there was no index fund, but no one in medieval times tried to get rich by buying gold and sitting on it. They used other methods.
Anyways, i'm sure there was a first person to discover gold. And i'm sure that person had the most gold when the discovery was made. That doesn't really have much bearing on whether gold is a ponzi scheme, though.
Having said that, speculating on FX is a zero-sum game, which I'm not generally in favor of.
Now apply that to Forex. There are players who needs to hedge against target currency devaluing and others who are willing to take the risk premium. That you can gamble on it if another matter but then again, you can gamble on many different otherwise useful financial instruments.
https://www.statista.com/statistics/273418/unadjusted-monthl...
There are plenty of shitcoins out there that are purely pump and dumps, but it seems like BTC is here to stay.
https://www.gold.org/goldhub/data/gold-supply-and-demand-sta...
As of June 30, 2012, the $100 bill comprised 77% of all US currency in circulation. Federal Reserve data from 2017 showed that the number of $100 bills exceeded the number of $1 bills. However, a 2018 research paper by the Federal Reserve Bank of Chicago estimated that 80 percent of $100 bills were in other countries. Possible reasons included economic instability that affected other currencies, and use of the bills for criminal activities.
https://en.wikipedia.org/wiki/United_States_one-hundred-doll...
There's actually been far more industrial usage proportionally recently than any prior year. Prior to 2020, the highest industrial usage year was 2016, at ~7%. The article is wrong; the VAST majority of the demand for gold does indeed come from investors. This is ignoring gold's historical status, of course. Before the advent of modern computing, there was extraordinarily little "practical" use for gold beyond use as tooth fillings. And yet, it is during this time that gold was most coveted. Why is this? Economists have been debating that for a century! :o)
>Jewelry is its own category but it does have “utility” if viewed through the lens of human behavior across civilizations over time.
Jewelry does have utility yes, but gold jewelry has no marginal utility over, say, brass jewelry, other than the material composition. And yet, gold jewelry commands a far higher price, and despite even this, it is still in higher demand. This is because buyers place a premium on the metal itself, hence why I referred to it as a para-investment.
(B) is perhaps gold's most unique physical property, but given the historical prominence of silver (a metal that corrodes rather easily), I seriously doubt that this alone justifies a single ounce of gold historically having been worth an average person's months of wages.
(C) is true of many metals, and has only come into existence as a method for verifying gold in more recent years, which again belies its historical value.
Go to Coinbase and try to figure out how to use Bitcoin to buy something with. All they talk about is Bitcoin as an investment.
A currency can’t be an investment as the expectation that it will rise in value undermines the main quality of a currency, which is to maintain a stable value, so it can be used as intermediary.
Coinbase has a focus on trading. However, you can use bitcoin to buy things through Coinbase Commerce.
The idea that gold is useful as a store of value is ridiculous. You have painted the picture perfectly with your comment. It is not easily moved. It is not easily utilized. It is worthless to the average person and it’s price is heavily inflated.
After all, the eponymous scheme by Charles Ponzi was built on legitimate postal reply coupons.
So a list of non-monetary uses for gold is not evidence that its monetary uses are not Ponzis.
Most financial instruments are at least Ponzi-adjacent in that their value is derived from the expectation that other market participants will pay more for them than you did.
Whether it's real estate or equities, precious metals or cryptocurrency, profit requires an infinite cycle of growth that must collapse at some point.
Generally speaking, the people who provide the goods, use fiat for production of the good, and convert the crypto back into fiat to realize profits.
and that therefore, someone selling goods for cryptocoins, must, in addition to using cryptocoins, also use fiat currencies (because most of their business expenses can only be paid in fiat currencies).
And the system has revenues. Ethereum did around $35 million daily in fees this last week. Uniswap did around $3 million. https://cryptofees.info/
No doubt there's something to it.
Bitcoin is doing what, 100m transactions per year? Most of which are not for physical goods. Venmo, which started around the same time, does over 2 billion. M-Pesa, a "digital money" solution the same age does 15 billion. US credit transactions? 45 billion. Debit? 75 billion per year. And unlike Bitcoin, most of those are what people would call real transactions. Bitcoin's real use is a rounding error.
Cryptocurrency can be here to stay and also be driven by scams. Set up a Google News alert for "Ponzi scheme". Ponzi was active 100 years ago, but his approach is more popular than ever. As they say, there's a sucker born every minute.
Edit: Not sure why the downvotes, but this is a common phrase used to denote ponzi schemes.
After about a year, only about 0.3% of checkouts were done with crypto. Even manual bank transfer is used magnitudes more often.
Or is the author going to try to argue that txn fees don't count, and then Visa is also a Ponzi?
As long as you don't steal the electricity you need to pay for it in fiat. And you not only need electricity to mine new coins, but also for transactions
Ransomware creates demand in bitcoin and this demand keeps the value up.
It's clear as day from my perspective that everyone is jumping on the speculative mania bandwagon. It used to have some utility in facilitating cheap illicit transactions, but those days are long gone.
For the record I believe that enabling criminal activity is REAL utility, whether one agrees with the moral implications or not.
Almost nobody is using bitcoin as a currency. It's all speculative investment. This is coming from someone who has made quite a bit of money off crypto and has actually used it countless times as a currency to buy physical goods.
To those of you pointing out that other markets like equities are also detached from reality, I agree with you and don't think it means bitcoin is any less bullshit. At least ETH has some utility as gas for distributed applications.
The worlds largest country just banned Bitcoin too. I don’t think either event is indicative of btc’s intrinsic value.
But, can you give me a source on how their transactions are being processed off chain. I know that they use a government backed wallet. It was my understanding that any transactions handled in this way eventually have to be settled back into the main chain.
I'm unaware of the exact details, but the govt approved wallet uses a proprietary payment processing system in addition to the LN. Yes eventually in theory those transactions should make it back to the main chain when tokens exit the system (requiring El Salvador's permission).
At any rate, we've gone in a big circle and reinvented settlement banking on top of bitcoin.
The author published these in 2014:
https://ic.unicamp.br/~stolfi/bitcoin/bitcoin-beggar-1024.pn... https://ic.unicamp.br/~stolfi/bitcoin/2014-03-02-ShortHistor...
Bitcoin ended 2014 around $378.
I think it's proved it's staying power. Let's move on.
So, in the past month, the customers who paid via Bitcoin... presumably bought it with the intent of making normal commerce-related transactions.
If it's an investment, no more than 30% of your net worth should be wrapped up in one investment. If it's a currency and you're happy if the price takes a plunge.
It seems to me, as long as the price fluctuates, I would prefer cash because I would be able to buy BTC during the dips.
Either way, accepting bitcoin is horrifically bad for the environment, and one of the most ecologically destructive things tech companies do. It is not something I would be proud of.
But I don't think that changes the point much, that it is used for commerce.
And yes, the realisation that it's bad is a brewing thought. I've never invested any of my own money in Bitcoin (€200 in Ethereum) so I excuse (to myself) my involvement because it's passive.
https://wordpress.org/plugins/triplea-cryptocurrency-payment...
[0]https://www.theguardian.com/technology/2021/jul/31/out-of-co...
Yet trying to set up crypto as a person in a developed country in 2021 is kind of a pain in the ass. It's not too hard to exchange between types of crypto, but getting real money that I can buy a pizza with in and out of an exchange? Not too easy. There are requirements for credit cards or confirmed bank accounts for payment, scans of an ID card or driver's license to prove I'm a human, the possibility banks can at any point determine it's a scam and block transfers to any exchange, and so on.
If it's that hard for me, a person in a developed and ostensibly free country to do it, how the hell is some average person--not a government official or wealthy person with connections--in North Korea or Eritrea going to set it up and secure their financial future to any degree better than a pocket full of cash and old jewelry?
Back in 2010, credit card companies blocked off all donations to wikileaks, even though they had not been found to be breaking any laws.
Yet, people could still donate bitcoin to them.
Censorship resistance, is still useful, even in situations where nobody has broken any laws.
https://cbeci.org/index/comparisons
I'd be curious to read your thoughts.
That's absolutely nuts. If you said you could reduce an entire country's CO2 emissions to zero overnight, and you had a valid plan to do so, you'd be on the cover of every newspaper for your revolutionary plan to help save the earth.
But say you want to flip a switch and turn off a single cryptocurrency in order to do it, and you'll have floods of people trivializing it, saying "well, let me tell you why 110 million people's CO2 emissions aren't that big of a deal..."
Look at the top 3 countries (China, US, India).
Compare those to Bitcoin... can you honestly tell me that Bitcoin constitutes a significant amount of energy consumption in that context?
And it's also worth noting that energy consumption isn't necessarily bad for climate change. You're conflating "energy consumption" with "CO2 emissions". It's CO2 emissions that are the problem, and Bitcoin energy consumption is far more green than most other industries.
So we have a monetary network that consumes a globally insignificant amount of energy and is more green than many other industries... is it really a significant problem?
https://bitcoinmagazine.com/business/bitcoin-energy-use-comp...
Are you saying we should compare a digital coin with very niche usage to the collective impact of all of those actions taking place in the most massively populated and economically significant nations to ever exist?
And you're saying it's an insignificant amount of power, yet it consumes more power than an entire nation of 110,000,000 people? There are 110,000,000 people in the Philippines using cash every single day to drive their economy and live. Are there even 100 million people using bitcoin for daily business and consumer transactions involving physical goods? Or even 10 million? Or 1 million?
Is there a reason you're pretty serious about downplaying the impact of electricity equivalent to 110 million people and saying it's not globally significant? Because it's pretty significant. If that many people stopped using all electricity overnight, the impact would be pretty significant. Wiping out the entire Philippine economy would absolutely send shockwaves around the world. That'd be a huge hit to manufacturing and food industries on every corner of earth.
Would Bitcoin suddenly vanishing be more impactful than the Philippines vanishing overnight? Or, to choose a different country from that previous site, The Netherlands?
>But say you want to flip a switch and turn off a single cryptocurrency in order to do it, and you'll have floods of people trivializing it, saying "well, let me tell you why 110 million people's CO2 emissions aren't that big of a deal..."
Well, with Bitcoin, you can't "flip a switch" to turn it off. There's literally no one on the planet with that power, which is kind of the point. As long as people see value in the asset and the network, it will always be there.
Moving onto your latest post, everything you said depends entirely on whether you believe the value proposition of Bitcoin separating money and state.
As said by Satoshi Nakamoto, "The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible."
It's worth a lot to me and many other people not to see their wealth melted away by inflation, which is basically a hidden tax that disproportionally effects the people at the lower end of the socio-economic scale. And that's just one use case for it (i.e. store of value). There are other important features of Bitcoin that people value.
A sound money with decreasing inflation, absolute scarcity, that is difficult (if not impossible) to manipulate is very valuable to ~8 billion people on this planet. At the moment only a small percent of people understand that (maybe hundreds of millions?), but that may change over the coming decades.
Looked at it in that way, it's current energy expenditure is incredibly small and for the amount of wealth it secures and transfer globally... also incredibly efficient.
Bitcoin is anything but efficient. It takes massive amounts of energy to make a simple transaction. Far more than any current currency transfer network. If it continues to grow, and if it would horrifically become mainstream, energy usage would be several magnitudes higher than it is now.
Right now its primary uses are for bringing more people into the scheme to eventually dump for cash, and to exchange for illicit materials online. It's a very niche case used by a tiny, tiny fraction of the total population, and it already consumes more energy than many entire countries. Extrapolate that energy usage to 1000x the current population and 1000x the current usage to assume everyone is in on it and using it regularly for normal transactions--at a minimum, we're hitting 1000x energy usage rates.
That's energy usage exceeding China and America's total energy usage combined. Just to send bits on a network. You'd be more efficient carting blocks of gold manually across the world for every transaction.
Government runs a debt and finances it on the bond market with US Treasuries. That's not a ponzi scheme.
Edit: Not sure why the downvotes, but it's true and will continue to be true in the forseeable future.
The Social Security Administration is entirely solvent by itself. The only "ponzi scheme" comes from congress using it like a piggy bank. And despite all that, SSA is backed by the US government. Bitcoin is backed by... nothing. So it's basically the equivalent of the zimbabwe dollar, not SSA.
(also, such cases is precisely the reason people may believe that they have more trust in bitcoin, as flimsy as it may be, than to their national government issued fiat)
It's far worse than a ponzi: ponzi's aren't usually compulsory.
Hashrate and mining investment is a reflection of that belief.
Don't take this as advice to buy Bitcoin at 50k.
Normal currencies like USD are, in the end, also based on trust. They're just pieces of paper, and the value is in the belief that those pieces of paper will represent approximately the same thing tomorrow. Trillion dollar pieces of paper could be made worthless tomorrow, but everyone trusts that they won't due to the dire physical consequences.
Even those currencies, that we consider normal today, were bootstrapped over a very long period by originally representing physical metal that could be redeemed.
Possibly. It is an asset, after all. The problem is that people are buying it because they expect it to appreciate significantly, hence "when lambo." There's a difference between believing something will retain its value and believing it will appreciate.
Rephrasing: how much bitcoin do you think the average bitcoin-billionaire owns? It's belief that stops them from selling, and belief that sustains the value. If you think that sounds like a ponzi, you're missing one thing: all else equal, dollar (and equivalent) denominated value will rise, because those currencies slowly devalue by design.
It's the people invested in it that gives it value. Just like fiat, gold, art, stamps, useless antiques, etc. As long as it has value to someone, then it has value. I can't see it disappearing anytime soon. Yes, it might fall and rise in value but to disappear like any other Ponzi scheme? Don't hold your breath. Bitcoin is more than a decade old now. It will be the longest running "Ponzi" scheme. Be back in a decade to say I told you so. Bye!
I strongly believe bitcoin will be the new gold one day, if it doesn't pan out as a currency. It sounds insane, but I actually believe the Winklevoss twins when they say Elon and SpaceX will be able to mine gold on asteroids within the next 20 years, which would crash the price of gold. Not to mention as everything inevitably moves digital, we need to have a digital store of value.
What is the energy cost to get a refined kilo of gold back to Earth?
Hayabusa, 2005 - $100 billion dollars per kg
Hayabusa 2, 2019 - $33.3 billion dollars per kg
OSIRIS-REx - 2020 - $491.7 million per kg
Chang'e - 2020 - $104 million per kg
https://www.youtube.com/watch?v=tY6aCg5InzY&t=170s
Seems to be trending downward... Who knows if it'll be enough.
I was curious if a similar downward trend existed for solar panels...
"In 1956, solar panels cost roughly $300 per watt. By 1975, that figure had dropped to just over $100 a watt. Today, a solar panel can cost as little as $0.50 a watt."
https://news.energysage.com/the-history-and-invention-of-sol...
So, that's a factor of 600 to get to present costs. Gold currently costs $56,500 per kg. So, $33,900,000/kg. So, who knows where we could be in 50-70 years. Plenty of time to switch the entire global economy to Bitcoin, I suppose!
what would be their incentive to do it, then?
On the other hand, if one were to buy proven gold reserves stored on an asteroid, then that might make sense. The exploration company could discount the value of the gold by the existing cost of sending it to Earth and the ongoing cost of guarding it which will necessary given an absence of enforceable property rights. As the cost of terrestrializing shrinks and potential value of off-Earth use grows the value of the asteroid stored gold would increase over time.
What if I told you they could send asteroids to the planet to be mined _on the planet_ and crash the price of gold?
DART is a planetary defense-driven test of technologies for preventing an impact of Earth by a hazardous asteroid. DART will be the first demonstration of the kinetic impactor technique to change the motion of an asteroid in space.
Exactly, crypto doesn’t even claim to have legitimate investment profit. All of it is from newcomers pouring money into the pot…
"First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour."
Actually almost every other point he tries to make on things NOT a Ponzi could be made for Bitcoin too.
The entire forex trading industry: am I a joke to you?
Hearing your friend got into Forex is about the same as when they get into Amway, Tupperware, DoTerra, or Herbalife …
Hahaha somebody let GameStop, Tesla, and Virgin Galactic know about this rule.
What if people are seeing discussion of minting a trillion dollar coin, trillions in QE, 25% of all dollars created in the last 12 months…and concluding that fiat currency is in an endgame and they are permanently trading what fiat they have now for one of a finite number of digital assets that will ever be created.
As Michael Saylor once said in an interview: “It’s the superior asset, Laura”
It's a new shift, but I think quite profound.
Edit: If you're referring to mainstream media, the dollar value is all that most would be able to put into context. For those deep in the space, we're thinking about dollar values less and less. My primary benchmark on overall portfolio value is the value denominated in ETH, not USD.
Although USD might be your preferred, many would happily sell a vehicle for compensation in BTC, ETH, silver, gold, euros, etc.
"Oh shit, the internet went out. Hope the value of my ETH doesn't crash through the floor while the internet is down...."
For people that look at it like that, sure. That's not how everyone looks at it though. I personally look at it with the aim of acquiring as much ETH as possible because I can see that the future economy will be built on it and eventually things will be priced in ETH.
Just because the transitions are slow and you don't see it happening, doesn't mean that there's not a transition happening.
Edit: Not sure why the downvotes, but it's still true and still likely true for the forseeable future.
The author of this blog post's claim that 99.99% of people in crypto are only participating because of expectations of future profit is unsourced and a fiction that he has created based on preconceived notions.
Don't participate if you don't want - I like participating in a system that isn't being tracked by agencies especially with news of Treasury actively building out systematic functionality to investigate any bank accounts with transactions exceeding $600
The crypto financial news community was writing about this long before Fortune picked it up.
You are exactly incorrect.
Cash represents the overwhelming supermajority of laundered funds and ongoing credit extended across criminal elements.
https://www.swift.com/sites/default/files/files/swift_bae_re...
Cash is the heart of the criminal economy, crypto is creating a transparency that doesn't exist in traditional peer to peer physical transaction systems like cash or IOUs.
I'm done with this, nothing productive is coming out of this conversation.
Your reply is also confused. Is the majority of money laundering denominated in USD and other real currencies? I'd believe it, because that's where the money is. But I'm saying the proportion of Bitcoin transactions that are fincrime-related is surely much higher than that of total USD transactions.
This seems pretty obvious to me given that Bitcoin is much less useful for quotidian transactions, but much more useful to people engaged in assorted financial crime. That's unsurprising given how much cryptocurrency advocates tout privacy/anonymity as features. But if you think otherwise, feel free to show the data that has convinced you otherwise.
Also, it's bad form to read something, go on a rant, and then declare the conversation over. Especially when the rant is incorrect.
> The estimated amount of money laundered globally in one year is 2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars. Due to the clandestine nature of money-laundering, it is however difficult to estimate the total amount of money that goes through the laundering cycle.
From Treasury via ABA Banking Journal (https://bankingjournal.aba.com/2015/06/treasury-u-s-money-la... and https://home.treasury.gov/system/files/136/2018NMLRA_12-18.p...):
> The United States continues to estimate that domestic financial crime, excluding tax evasion, generates approximately $300 billion of proceeds for potential laundering, based on the sources and analysis cited in the 2015 NMLRA. Criminal prosecutions and law enforcement investigations indicate that most of the money earned from crime in the United States stays in the United States, but also that the United States is an attractive destination for illicit funds generated abroad.
The news media did not create the gold rush mentality around crypto, it has been there almost from the beginning. Go and read the bitcointalk forums for evidence, if you want.
I like having spending power that isn't immediately based on CIA organized crime or boomers at the Fed/Treasury
Money without an army is just paper. Or, in this case, imaginary numbers.
There will be no one to cry to when the machines start cracking all the hashes and wipe away the entire ecosystem.
I'd wager the NSA already has this capability, but they won't blow it on something so stupid.
JQI at UMD, NIST's Quantum Computing Group - these teams must be doing something with all the grant money
It uses XMSS, and does it fairly well.
But if quantum computers start breaking encryption, crypto currency is probably pretty low on the list of worries…
https://en.bitcoin.it/wiki/Quantum_computing_and_Bitcoin#Mit...
IMO he comes off a grifter who needed to save his company and kept buying loads of BTC to start the "institutions are buying" FOMO.
He's probably referring to the lightning network, which is theoretically capable of handling millions or even someday billions of bitcoin transactions per second.
What if my grandmother had wheels?
More seriously, how many people do you know are seeing what you are talking about?
Everyone I know that invested in crypto did so hoping to trade it back later on for more fiat than they paid. Sure, maybe it's a biased sample, but it's a sizeable sample and I do not know even a single person that traded their fiat for crypto definitly.
I don't invest in a credit card for spending. I use a credit card, though.
One day, there will be a final generation left holding the bag.
That's why I see crypto tokenization as an important step towards having another "financial material" to work with. It doesn't commandeer enforcement at a global level, so it doesn't compete with governments on their own terms, but it can help build trust at scale by being designed around the trustless scenario, which reduces reliance on enforcement and bureaucratic methodology in many applications. Crypto projects with a focus on achieving good governance are some of the most promising out there, even as they are hidden in the endless waves of scams.
When you own a share of Apple you literally own a fraction of their factories, IP, etc.
When I started mining bitcoin no one was talking about it every have a USD value. It was just silly internet points that you could pass around to friends. I also know a lot of people who hold as a store of value believing that it will easily outlast the US dollar.
Just because all your friends are clowns doesn't mean that those are the only people that exist.
Could you share some numbers?
And? Should we should look at it through a lens of a non-traditional Ponzi scheme? Ponzi 2.0 is better than Ponzi 1.0?
> What if people are seeing discussion of minting a trillion dollar coin, trillions in QE, 25% of all dollars created in the last 12 months…and concluding that fiat currency is in an endgame and they are permanently trading what fiat they have now for one of a finite number of digital assets that will ever be created.
If the Debt Bubble is nearing its end and fiat currency is in grave jeopardy, what is the mechanism by which the people holding these "digital assets" will save themselves from the economic hell that awaits the world?
* Within margin of error
Meanwhile, the total number of people who view bitcoin as a permanent allocation in their asset portfolio will have increased drastically, and they'll keep on stacking sats.
Each boom bust cycle operates this way. A minority of new investors become true believers, and the rest of the chaff wash away in the crash.
That would have been a plausible explanation, if not for the abundance of digital currencies. There are now many more times crypto assets than there are actual currencies in the world, and new ones seem to be created every day. There is absolutely nothing "finite" about crypto anymore.
Bitcoin may be a scam on so e level, but it is not a Ponzi scheme. The linked article seems to miss the most important property of such a scheme:
Incoming capital is misrepresented as returns and passed back to investors. Bitcoin does not pay dividends. There are no returns in Bitcoin, only pure capital speculation. As there are no returns, there is no misrepresentation of capital inflow as returns and no Ponzi scheme.
Bitcoin is more like a tulip...
> First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour.
I believe Bitcoin has potential to become the "new" gold. It's better in many ways. Does that mean I can only buy Bitcoin if I want to use it as a hedge? No! I can buy it with the expectation of profit because I expect it to be commonly used as a hedge in the future, at which time it will have a much higher price and I'll have made money.
I see crypto as a "digital asset". It's something you store funds in to hedge markets or get around transactional issues (either because you're doing something potentially illegal by some entities definition or because your currency is shot to shit), which basically makes it like golds or precious gems.
I'm not totally sold it'll last long term, but I don't see the comparison as a huge logic leap.
The whole point of an economy is that something has value if it's valuable to someone, not just the person who's holding it.
I'm not going to use a chunk of gold for anything, but it has intrinsic uses that aren't tied to being an exchange of value. It can be used to make jewelry, electronics, food, and medical devices. In some of those applications, there is no substitute for gold.
Contrast that with Bitcoin, whose only value is speculative (whether people think it will increase in price). It has literally no other use or value. If the internet crashed, you couldn't sell your Bitcoin to someone to make jewelry out of it.
This is not the case with gold.
E.g. The price of copper has been going up over the past century (adjusted for inflation)
If you want to mine more magic numbers just add another digit to the search space and you'll easily have another 10 times more numbers.
* BTC forks (how many have there been, cause I forget.)
* If the BTC community wanted it to change, they could.
* The 100 other cryptocurrencies created every day.
Silver, platinum, palladium, rhodium, copper...
Just as people have generally centered around gold, people have so far generally centered on Bitcoin. There's a great deal of other metals and a great deal of other cryptocurrencies, but if nobody really cares about them, then they are not relevant to the conversation.
Sidenote: Both of them have surpassed gold in terms of pricing for a while recently. Not every cryptocurrency is valuable, but some can be if they can fill a gap like palladium and rhodium, that were mostly useless metals 100 years ago.
Banks existed long before the internet did, and in a post-apocalyptic crunch we could always go back.
I'm no crypto currency fanboi, but I feel no need to commit the intellectual fraud of misapplying well understood concepts to denigrate it. Every couple of months, however, someone decides they can score some clicks by yelling 'Ponzi' and we get this headline again.
In addition to being tedious it's also dangerous. Blockchain and cryptocurrency is new phenomena and we don't yet know what value there is here. We can, however, confidently assume that if the false narrative that Bitcoin is a Ponzi Scheme is successfully applied The Great And The Good will suddenly discover the moral obligation to crush it out of existence and criminalize everyone involved.
That possibility worries me far more than whatever part of the status quo bitcoin might disrupt.
And it puts the blatant “Join the Ponzi scheme early!” stuff I’ve seen on crypto forums into an amusing paradoxical state.
Blockchain and cryptocurrency is over a decade old. Several lifetimes in tech. So far the use appears to be speculation, fraud and burning through electricity as fast as possible.
I hope they do crush it, for that last bit alone if nothing else.
In HN's mind, crime is okay if our enlightened government does it.
This is a very simplistic view of equities markets and does not explain penny stocks, meme stocks (GME/AMC), TSLA, and other things that seem to escape traditional fundamental analyses.
Since that exceeds the lifespan of well over 99% of the population, it must follow that people are not investing in stocks because they expect the company to produce some external source of revenue that will eventually repay the principle. There are a host of complex reasons why people invest including wealth preservation, a desire to support a company they are interested in, speculation, a belief that investing is smart and the right thing to do... these are all fine reasons, but they have little to do with some kind of fundamental valuation that some people think stocks intrinsically have.
The vast majority of gains from the stock market have next to nothing to do with external sources of revenue.
You have a shareholder vote, okay but the percentage of shareholders who actually vote is roughly 9%. The only people doing the voting are large institutions, not individuals:
https://www.broadridge.com/proxypulse/reports/2013/second-ed...
The reason for this can be understood in many different ways, but one way I like to look at it is if paying a dividend had no effect on the price of a stock, then one could in principle buy a share of the stock at a price of X just before the dividend is paid and then sell the stock at a price of X just after the dividend is paid just as you describe, effectively pocketing the dividend and earning an almost risk free return.
Of course in practice we know that on average the price of a stock drops by the exact amount of the dividend paid, and hence collecting a dividend has no overall effect on the value of a stock.
To better familiarize yourself with the literature, perhaps you can start with this seminal paper produced by the Federal Reserve:
https://www.jstor.org/stable/2962249
It looks at both the short term and long term impact of dividends and shows precisely that the marginal price of a stock drops by the amount of the dividend, meaning your premise that you can simply just sell the stock at a future date for the same price you bought it for is just not supported by the facts.
Whether you hold the stock and collect multiple dividends for 10 years or 10 days, the fundamental principle is the same: a stock with a marginal price of X that pays a dividend of Y will on average decrease in price by Y. Dividends produce no change in the overall net value of a portfolio, all a dividend does is convert one form of value into another, but no increase in value is ever produced.
Since a minority of stocks return a dividend, then the holder of said stock likely never sees a cent of company earnings. Time duration to recoup cost of stock by P/E is NaN.
The vast majority of gains from the stock market have to do with inability to invest in new ideas (on both supply and demand side).
https://www.quora.com/What-percentage-of-publicly-traded-com...
It's not that simple.
Tesla unfortunately undermines your argument. Has it been hyped to the moon? Definitely. Is there a good chance people will lose a lot of money on it? That too. But they make actual cars that get actual people actual places. That is the kind of actual value creation that underlies most stocks.
But by understanding that it is a gambling machine - I can make a "reasonable" choice, buy some token, sell it at a "small" profit of 10-25% and move on.
The crypto is here, it's fact. It's not going anywhere soon. No one loud is out there with an agenda to deliver the message of its uselessness. Most people don't understand how crypto works - and not even trying - and I personally got over screaming "the emperor has no clothes" and now just quietly do some trades from time to time.
Just a bit of reality to the "lens of someone living in a wealthy" blah-blah-blah.
I did a SWIFT transfer of 30k USD from an eastern European country to a 1st world country. It cost me 20 USD to send and 10 USD to accept the cash within 3 working days. Yes I had to go the bank and it took some time - fair enough - BUT the fees were much lower than I would've paid to the exchanges. I had an ability to reverse the transaction (to an extent), it was an open and legal non-commercial transaction (and I don't have to explain it later to the tax man).
C'mon crypto, try to beat that :)
"Bank the unbanked", "inflation", "poor immigrants" - you know it's all BS.
We lived through crazy inflation periods - basically you either convert your local cash to USD/EU as soon as you can or buy some local products (that you can resell) if the currency is not available. Thus people buy fridges/TVs, etc. There is probably a local village smart-ass who would use crypto for it, sure. But it's just an exception. These people have zero trust in anything, including their governments, so crypto is even lower in this chain of trust.
Immigrants and refugees have 101 ways to transfer their money. There are so many companies/networks that it makes your head spin. And their amounts are so small so very often it all goes under the radar anyways.
Basically all the crypto-mania as is is a big joke AND a great opportunity to make a quick buck :)
Nano has instant transactions and 0 fees. Try to beat that.
Now let's calculate how much I am going to pay to BUY crypto and SELL crypto in fees .
Have you ever done it, seriously?
Speaking as a software architect, your MySQL database seems like a terrible solution.
Yeah, you still need to pay for the link with the 'old' system of course. And besides, the exchange fees are nothing compared to the huge gains :p.
Is crypto a better solution now? Sometimes. Is it a better solution overall? yes.
Is there any non currency use case of blockchain?
NFTs (Not just art but concert tickets like GET protocol, gaming like Axie Infinity, collectibles like Crypto Punks, etc)
DAOs (Internet scale corporations/governments)
Identity systems (ENS, BrightID, Proof of Humanity, etc which allow for supranational products that build on top of reputation and uniqueness. The Sign-In With Ethereum standard is bringing self-custody OAuth authentication to Web 2.0 applications)
Enterprise interoperability (Baseline)
There's a ton of stuff going on and it's almost impossible for any one person to keep up with everything. It's easy to write everything off as a scam but there's hundreds of thousands of really smart and high integrity developers working in this space and it's worth keeping an eye on.
The current bitcoin transaction fee is more than 100x what my bank charges, so no, not really.
A bitcoin transaction is settled as soon as the block is mined. Without any third parties or trust involved, and no way to reverse the transaction. While a bank transaction could settle in days and always with some trusted third party.
Try making a transaction over the lightning network (layer 2 tech of bitcoin), it’s instantly settled and almost for free. The whole country of El Salvador is making transactions within the country using this technology and they’re getting remittance from outside the country far cheaper than banks.
It boggles my mind that people genuinely believe this is a good thing, especially in an ecosystem so rife with scammers.
I get that it's rather integral to the primary use cases of bitcoin, but that doesn't mean you have to pretend it's a good thing when marketing the currency to the average joe as a PayPal replacement.
Because there's absolutely no protection against fraud. This is somewhat of a problem when there's such a gigantic amount of fraud going on.
> You have to accept responsibility when making transactions
Yes, and so does the other party.
What irreversible transactions do is give the receiving party the ability to shirk all responsibilities, because it's significantly more difficult (if not impossible) to hold them to account.
The purpose of blockchain is decentralised consensus for the Bitcoin protocol. It has fulfilled that function very well for the last ~12 years.
There MAY be other legitimate use cases, but the majority of them right now are varying degrees of money grabbing scams or cargo-cults.
There's also interesting things going on in the NFT space towards MMORPGs based around an economy of in game items being themselves NFT's. It's not all stuff and nonsense and jpeg millionaires lol :)
Some of it is, surely, but as time goes on more and more technologies will use it to greater effect with more utility beyond merely, "prices go up".
It's one of the most exciting things happening in tech right now, and HN is at best ambivalent and at worst openly hostile to Bitcoin.
Why wouldn't the tech crowd be excited about digital native money which is perfect for the Internet?
Look at what's happening around the ecosystem with the Lightning Network, Impervious.AI, RGB etc.
You may benefit from reading about why Bitcoin works the way that it does, and why certain tradeoffs were made.
But you don't really care to know, do you?
throughput of a blockchain is contingent upon tweaking but for the original bitcoin, still used, it's 6 mb/hour. electricity consumption is 14 gigawatts. if i were given 14 gigawatts of electricity i think i could do better than 6 megabytes/hour.
That for an open and fully accessible, decentralised system that exists in an adversarial environment there has to be a large cost to any attacks?
Of course there are much more efficient ways to store data, but those are centralised and vulnerable to the problems of centralisation. The blockchain's and proof-of-work's purpose is to be decentralised.
Looking at the comments here it's almost like a political debate where they keep trying to come up with justifications.
The bit that's lacking is an understanding of money, and what makes certain types of money sound or unsound. It's easy to overlook the problems of fiat money because its all we've ever known.
What was it about gold that made it the dominant form of money for literally thousands of years? Why was it abandoned? How does Bitcoin solve the problems of gold and fiat?
Vijay Boyapati (ex-Google engineer) does a pretty good job of outlining this in his article.
https://vijayboyapati.medium.com/the-bullish-case-for-bitcoi...
I wish more people on HN would read it with an open mind.
The repeated bashing of cryptocurrency on HN of all places is tiring. There is a lot of innovation in the space outside of BTC. What about DAOs? What about lending products? The space is booming in interesting ideas and all I ever see on HN are posts about BTC being some kind of scam. Where did the 'hacker' mindset go on this site?
Now it is absolutely shit at that job. Cost per transaction, transaction throughput, time to assurance a transaction won't be rolled back, all make Visa/Mastercard look amazing except for certain business domains. As such people offer it up as an investment, and that is the reality the average person engages. Like the gold rush, the people making money are the ones selling shovels (as pointed out in the article).
Does that make it a Ponzi scheme? I am not an economist, but I don't think so.
A horrible investment? I refuse to deal with crypto, volatility and environmental concerns are my primary reasons.
Actually holding land out of use so you can speculate on its increased value, which comes from the activity of the community around you (and not any actual hard work or investment you yourself did), is an unproductive speculative activity that is a drag on the whole economy and the cause of our housing crises. I'm not sure if I'd call it a ponzi specifically, but it's bad and we shouldn't encourage it.
[0] https://www.statista.com/statistics/1195753/bitcoin-trading-...
[1] https://www.statista.com/statistics/1200477/bitcoin-mining-b...
I laughed a little, but then I realized he was serious.
OK yeah that's called an investment. Most people don't invest in stuff they think will be unprofitable. Maybe you're different?
>> that expectation is sustained by such profits being paid to those who choose to cash out
Profits aren't paid out from Bitcoin. There are no profits being paid out. That's sort of the key difference. Bitcoin doesn't send you a check if you own it.
>> the operators take away a large portion of this money
If there were "operators" of the Bitcoin scheme, they left billions of dollars on the table. Which...I hope they did!
But sadly, unlikely.
That's a pedantic evasion. You're conflating profit ("making net money") with dividends or other rent mechanisms. Selling an investment is colloquially "profit taking" too. And you can only sell, on balance, to those entering the bitcoin system.
Bitcoin doesn't have to send you a check every month or it collapses.
Still pedantry. You're arguing that it's not a Ponzi scheme NOT because it funds promises to existing players with money coming in from new players (which is pretty much the standard definition), but because TECHNICALLY they have to "sell" their coins to get paid.
That technicality doesn't change the direction the money is flowing. It's just not relevant.
So, no it is not a Ponzi scheme. It might be something similar to a https://en.wikipedia.org/wiki/Pump_and_dump
A first definition of gambling, is games of pure chance.
The second definition is taking a risk in hope of a future reward.
No investment has ever been made that was not a gamble. Sure, some are better than others, and the mechanism for providing wealth differs, but they are all gambles in either the first or second sense.
Crypto speculation is not a first-example gamble, it is not pure chance what happens, there is not an explicit randomness component. The market may be hard or impossible to understand, it may be undeterministic (I don't claim to know either way), but so is all other markets, every other stock.. Sure, it is probably more risky to speculate crypto than EUR, it may be more risky to buy bitcoin than Microsoft stock, but in the end, you're doing the same thing, you're making some more or less informed gamble that the market do whatever you need it to do.
This sentence is proof enough that this person doesn't get bitcoin.
You're welcome to change those two lines, start mining and then see what happens.
Your mined blocks will be rejected by other nodes in the network and you'll be spending energy costs without getting anything in return.
The whole point of bitcoin is that you can't just change the source code and thereby the properties of the emergent network. You need to get a majority of nodes (not just miners) to support your change. This is not easy to do, and won't happen if your change is detrimental to the majority of network participants.
This might be questionable and thankfully we have non-PoW/PoS systems that dont do this but the whole Ponzi thing is just nonsense. Its entirely irrelevant if it matches some (your/anyones) definition of a Ponzi or not. Just to usual click-bait "bitcoin very bad" title that gets the HN people all existed to up-vote it.
Yes, bitcoin is garbage tech, but all the hate posts will only push it further. People should focus on systems that do the same as bitcoin but without the "bad". There is a multi billion dollar demand that does not go away. A little bit education about FBA systems would reduce the resource wasting from PoW by a lot and all without taking away the peoples freedom to gamble with "digital money".
Is it theoretically still possible to make a profit with that kind of hardware nowadays?
Please someone just tell me. I have no interest to do research into this. I just feel sadness for the crypto-bros.
The others have become a proxy for Bitcoin.
Going a bit more in-depth: Mining is a competitive activity. Your chance of being the person to mine a block is proportional to the fraction of the hash rate of all miners you hold. Therefore, if everyone is using super advanced mining hardware and you go in with a GPU, you hold an insignificant fraction of the hash rate and have next to no chance of actually mining a block, while you still spend on power and hardware maintenance - which will probably make mining a net negative for you.
Nowadays BTC mining is advanced enough that the only way to make a profit is with big specially-designed rigs located in places with access to very cheap energy sources.
Money’s value has been dictated by how much of something a currency can buy – which is dependent on inflation and economic performance.
I would love to have seen/heard the conversations that were had around the changes that people had to go through and if the conversations were similar to this day. Because I would imagine that back then, considering that money is just an agreed upon invisible force a la Bitcoin, people probably hard a very hard time understanding the intrinsic value of this metal coin/paper money.
I can't see any conceivable way that happens at this point. Even a coordinated effort by the world's governments to "ban" it (they can't really ban it) would not drive its price to zero... if anything it might even have the inverse effect.
Can you provide any conceivable way this would actually happen? Maybe an asteroid hitting Earth and wiping out all human life on the planet?
1. Tether defaults.
2. People panic and sell at whatever price they can get. Let's say Bitcoin drops to $10k.
3. All miners that don't make a profit at $10k shut down.
4. With most miner's shut down, block times go from 10 minutes to 1 hour.
5. The fees to transact Bitcoin go up exponentially as people rush to get out. 10 Bitcoin to make it into a block, sure!
6. The price drops further.
7. More miners stop mining.
8. Block times go up so much that it will take the miners YEARS to reach the difficulty adjustment point that normally hits every 2 weeks.
9. Blocks stop being created, and the price is essentially 0.
With China shutting down a lot of their mining, this is less likely than in May. The higher it goes, the more likely that a sudden shock can destroy it all. Eth has shorter block times and would be able to stabilize better. The block fees going up might actually save the system to keep enough miners mining, but I also think they will scare users away from buying at cheaper prices.
I think some of these are a stretch. I think some of these would definitely happen if the things up to them happened.
if the stakes are high enough, code is not law, even in btc land
I have no idea how that would end up, how quickly they could organize, and what would happen in the mean time.
I am little bit paranoid of holding 100% in BTC, the reason for this is because of Satoshi Nakamoto still holding 1 million BTCs. Nobody knows who this guy is, if he's going to spend all his bag, that's a sure fire way of bringing down BTC significantly.
Anyway, I'm still in to BTC, it significantly changed my life. I wish Nakamoto would publicly burn most of what it is in his bag.
1. A banana is yellow
2. A banana starts with B
Bitcoin is usually represented by a yellow coin with a b in it, and it starts with B, therefore bitcoin is a banana.
----
The article just redefine the word Ponzi so it loosely fit Bitcoin. But it is missing one key feature of the common interpretation of a Ponzi scheme: the fraudulent part.
There are companies that never made any profit yet their shares increased in value. There are companies who made some small profits but their shared increased much more because there are high expectations.
By the definition in the article any asset which can be speculated is part of a Ponzi scheme: land, stocks, bonds.
If you buy and sell land, increasing its price, without other means to derive value of that land, such as agriculture or rent, it fits the definition of a Ponzi scheme.
> bitcoins can be earned and spent, not just bought and sold. That makes no difference for the purpose of this discussion. If you buy a $2000 laptop directly with bitcoin, for financial analysis it is the same as if you had sold the coins for $2000 and bought the laptop with that.
The core of the post seems to be a claim that demand for Bitcoin is a recursion with no base case. But then this passage gets to the base case and just dismisses it as irrelevant -- since it could counterfactually transit through dollars. If you think a state currency is the only logically possible currency, that needs an argument (and an difficult one, given history).
The rest I'd call rhetoric and side issues.
If people expected no gain in USD (or inflation) then they would not hold USD and instead choose assets or other investments.
If one does expect profits they can achieve that not just by BTC going up in value, but other currencies being inflated.
I myself hold bitcoin as a store of value and do not necessarily expect profits. I simply feel that it will hold it's value better than other things. I could be wrong, but that doesn't mean it is a Ponzi.
I hold cash knowing full well that I’m bleeding due to inflation, but the versatility is well worth it. That’s pretty much everyone who is holding cash other than a small handful of forex traders speculating on USD vs euros or whatever
The reason to hold cash is its low volatility. You can store it in a savings account and even with inflation potentially driving your return negative when risk adjusted it may beat other assets and you don't even have to speculate on forex!
The vast majority of attorneys require the establishment of a retainer account (and in most jurisdictions it's one of the criteria to tell if the guy is officially 'your lawyer' or not yet)
And yet a lawyer is exactly one of those things where you say "oh shit I need one right now".
There's a reason the saying goes 'cash is king'
Good luck with your credit card
They are willing to pay the inflation penalty because holding the dollars in question provides them something. Generally that means either a sense of security or liquidity on short notice.
Holding dollars is paying a fee for liquidity.
With low inflation like we have seen in the past, risk adjusted it might be a better spot to hold that money relative to other investments. So yes, I hold a small portion of my portfolio in USD for that gain.
If it was not providing that low volatility (inflation spikes like crazy), then I'd be much less inclined to keep my money in USD outside of the minimum I'd need for immediate spending. Because returns are low. So the "gain" is in the risk adjusted return relative to other assets (which could ultimately be slightly negative).
[1] https://ca.finance.yahoo.com/news/public-filing-from-crypto-...
The question is: how long is the public going to place trust in cryptocurrencies?
There is an upper cap to the ability to generate bitcoins [1] which acts as a similar cap on the long-term viability of the system.
1. People invest thier time/effort for "Dollars" 2. When someone "buys" something they are effectively cashing out the worth of the "Dollar" through trade (someone else's time/effort) 3. "Dollars" do not nessarily create more labor (time/effort) 4. "Dollars" are just effectively pieces of paper or digital bits if people stop actually working. It is worth something because people are willing to work, invest time/effort, for "Dollars". 5. Printing money effectly dilutes the existing pool of labor, etc. "taking away money".
You can reliably expect a dollar to decrease in value, by contrast. People may hold it as a hedge but no one expects a dollar to 10x.
You have hit on something useful: dollars are just a claim on the real economy, but if the economy stops dollars are worthless. But this isn’t the same as the dollar (or any type of savings) being a ponzi
Silver or gold in a speculative bubble behaves just the same as crypto right now but they are not Ponzi schemes. They are simply a property of how markets work when speculation gets over energized
Yes, Bitcoin is a Ponzi scheme (by virtue of people making it so), but that does not, nor should it, imply that the only thing Bitcoin is, is a Ponzi scheme.
Bitcoin is a Ponzi scheme in the same way that sociopaths exist in the game of geeks, mops, and sociopaths: https://meaningness.com/geeks-mops-sociopaths
It's part of the ethos but does not describe the whole ethos, and trivializing Bitcoin to a Ponzi scheme is the wrong answer. As, honestly, is trying to defend that Bitcoin is not a Ponzi scheme.
Irrespective of how value is in practice (or volume) making its way through the system is different from the system itself.
There are several promising elements of Bitcoin which contribute to its value. One is sheer access and connectedness (e.g. Metcalfe's law). People use facebook (its valuation reflects this) or pay for a phone plan because connecting to the Internet is a synecdoche for ubiquitous access. Creating a fabric where people in any country may work for a company, irrespective of its location, is a paradigm shift from what we had previously. Today, working for a US company from Taiwan is a legitimate challenge & deterrent.
There are many such examples, where transparent ledgers for instance may increase trust between parties and give people more confidence in financial robustness. All of these things have intrinsic value, just as the architecture which is PageRank has value for Google.
A common mistake I hear is for people to point to these advantages as if to suggest that it is without flaws or incapable of flaws, when we -- the people using the system -- are quite fallible and driven by prisoner's dilemma-type incentives which may by no means be long-term efficient or equitable (given we're all in the same boat). And I think these social challenges should be noted and not discounted on behalf of "technology being good enough".
So, I think this is a case of "Yes and".
Gold is worth more than metals far more rare because of hoarding and resulting scarcity, etc. Historically those who buy early accumulate more value.
>that expectation is sustained by such profits being paid to those who choose to cash out. However,
>there is no external source of revenue for those payoffs. Instead,
>the payoffs come entirely from new investment money, while
>the operators take away a large portion of this money.
This seems to perfectly fit financial markets.
The type of scheme operated my Mr Ponzi was characterised by fraud and the money going to Mr Ponzi and so was different.
If reading that kind of delusion (this guy Jorge Stolfi has been at it since 2014), here's some additional fuel to kindle your fire:
https://www.reddit.com/r/CryptoReality/comments/o7v5xs/is_bi...
Currently, the US Treasury pays old bond holders by a combination of tax revenue and by issuing new bonds. However, each year, a bigger fraction of old bonds are paid by issuing new bonds. Over time, this will lead to almost 100% of old bonds being paid by issuing new bonds, and then they will be a true ponzi.
Bitcoin, by definition, can't be fraud. The protocol and code are open source. We know how it works.
If you lose money because it's a speculative bubble that eventually pops, that's because you made a bad bet, not because you were defrauded.
You get rich from crypto by selling, not HODLing.
Bitcoin is money which provides sheltering services for wealth.
How is this true of bitcoin investors? When bitcoin price action is near all time highs, most bitcoin investors are not in the red.
I like the idea of a network for money separate from an asset presented here.
As far as I'm concerned cryptos are backed by cocaine and at a much higher tangible rate than fractional banking the dollar is.
There was a time when bitcoin was a possible way to either encode data into the blockchain, or to make financial transactions. These uses are still possible but at vastly less available price points.
Let’s say Bitcoin is a Ponzi. What or who will do the inevitable rug pull that comes with those scams? What if the rug pull never comes (or does 1000 years from now)? Is it still a Ponzi? Was it a Ponzi for those people who benefited from it in that 1000 years?
What if your ponzi becomes a globally accepted currency.
What operators?
Prove me wrong.
> real estate
> stocks
Sure, these things aren't ponzis. What about art and stamp collecting, though? How are they not ponzis under this definition?
If you define them by their "best" use, then knives are tools and Bitcoin is a currency.
It's clear that the HN crowd does not like Bitcoin. So why keep reiterating similar arguments all over?
There is zero utility in the article shared. It states some anti crypto views and that's it. Even the author concedes that this is according to his own definition and not based on real life legal tests (which have of course shown that Bitcoin is not a ponzi).
Just let Crypto users be. I get it. You don't like Crypto, but at this point it's not like an opinion piece can change the their views.
Users transacted in the trillions of USD over last month. Crypto got institutions, countries, wealthy individuals, poor individuals using it every day. It's clear it has some utility to them.
It's time to reflect and consider that your anti Crypto position might be wrong.
Edit: clarity
This is what the maxis are after.
If we don't cut this off ASAP, we all stand to lose.
[1] https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.ht...
When you find yourself saying that the people you disagree with are deliberately seeking catastrophic outcomes, it's time to take a step back and reconsider. I don't think anyone wants to destroy the global economy and cause a global war. Maybe the Bitcoin maxis are wrong about the long-term viability of Bitcoin, but I doubt very much they are some kind of nihilistic death cult bent on destroying civilization. Maybe dial it back a notch.
[1] https://www.btctimes.com/news/chinas-history-of-bitcoin-bans
[2] https://www.cnbc.com/2021/06/02/china-digital-currency-beiji...
[3] https://www.bloomberg.com/news/videos/2021-09-30/powell-says...
[4] https://www.cnbc.com/2021/09/22/the-fed-is-evaluating-whethe...
[5] https://www.cnbc.com/2018/06/14/bitcoin-and-ethereum-are-not...
[6] https://ocw.mit.edu/courses/sloan-school-of-management/15-s1...
True, the saga went on for a while, and I suspect their recent kibosh had more to do with domestic financial instability and a shaky power grid than ideology.
> Jerome Powell from the Federal Reserve has said from a video from 9/30/21 that he has no intention to ban crypto like China did, although it sounds like stablecoins may be regulated [2]
Yeah, and frankly, that may be enough to pop the bubble. I have long maintained the position that most price action in crypto is driven by rampant manipulation and un-backed stablecoin issuance. Once number stops going up, I don't think people will care at all anymore.
> The SEC has also already said in 2018 that Bitcoin and Ethereum are not securities [3].
Yes, Bitcoin is not a security because it's distributed solely by mining. Etherium is and always was a security, as it plainly fails the Howey test like every other ICO, in line with the formal guidance issued by the SEC. The SEC elected not to treat it as one, however. They have also indicated that every other ICO is at risk of being treated as a security.
> The head of the SEC, Gary Gensler, taught a course on blockchain for several years at MIT [4].
Yep, he's super smart, and I have a lot of respect for him.
> How do you think this technology is going to be completely banned, or everyone will forget about it and it will totally go away? The seeds are already planted, and as I said, there's no nipping this in the bud now.
I think stablecoins will be regulated, price action will subside and nobody will care anymore as we were on track to seeing before the printing spree of 2020. And I think most ICOs are going to get smacked down as unregistered securities offerings.
The China model of removing the bandaid would be much better though.
That's a best case though, and you could totally be right.
> By that definition, stocks too are ponzis. No. Stocks have an external source of revenue, namely the profit that the company makes by selling its products and services to customers (not investors); and these profits eventually return to the investors through dividends or cash buybacks. In time, those profits are expected to exceed the amount invested, with a significant profit for all investors -- that is, they are expected to be positive-sum games. The market value of stocks reflects these expectations among investors. While some companies fail to achieve this goal, enough of them succeed to make stocks the favorite option of savvy investors.
> By that definition, real estate too is a ponzi. No. Like stocks, real estate creates value while it is being owned, namely the sheltering service it provides to those who live in it. That value returns to the investor (owner) either by him living in the property, or by renting it to others.
> By that definition, gold too is a ponzi. No, gold clearly fails to satisfy that definition on two counts...
You left out the most important and contentious part. It is not surprising because the author of the article itself made the single, most important point a fine print because it hurts their argument.
So as long as its value is > 0, it has intrinsic value.
> First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour.
First, this does not negate the comparison. Bitcoin could also be like that, and therefore not a ponzi. Second, I know a long of gold investors who would disagree with this opinion. Third, the market cap of gold is over 4x bitcoin, indicating that gold has already reached saturation, whereas bitcoin has space to grow.
> Second, as a commodity, gold HAS a source of revenue besides the investors; namely, the purchases by consumers like jewelers and industry,
This is a point that always gets brought up in discussions of gold. It is wrong and practically dishonest. Gold as jewelry does NOT drive the value of gold, by and large. And even if it DOES, the valuing of gold as jewelry material over any other similar-colored material is itself non-intrinsic/socially constructed. People like to own gold jewelry for the same reason people like to own bitcoin.
Once we accept that the price is defined by speculators, the industrial and decorative applications of gold set a floor price rather than necessarily redefining the category.
There are a few key differences.
(1) Gold is zero-sum. Once out of the earth, it simply continues to exist. It produces nothing, consumes nothing, reacts with nothing, and doesn't really get lost or destroyed.
(2) On the other hand, if Bitcoin miners are turned off, 100% of the value evaporates instantly.
(3) Bitcoin therefore is negative-sum because miners require a steady influx of new capital in order to purchase coal to burn to 'secure' the network. This new capital is raised in the form of block rewards which are sold, exerting negative price pressure in the amount of ~$60M USD per day. If new capital stops coming in, Bitcoin bleeds value slowly, and then drops to zero all of a sudden.
The difference between a zero-sum vehicle and a negative-sum vehicle is enormous at the limit.
> People like to own gold jewelry for the same reason people like to own bitcoin.
I do disagree with this however, most people buy gold because it's shiny and a status symbol. They want others to see it. People buy bitcoin because number go up.
You're not saving anything. There are valid criticisms of the current financial system, but cryptocurrencies are not a good answer to them.
We've had romantic Bitcoin maxis in the beginning, saying Crypto will change the world, we now have luddists screaming to stop the crypto as it will destroy the world.
Only a small portion of users are the Crypto maxis. And they truly can't care less about such posts. They might have been wrong about what Crypto means, but you cannot deny the use. BC is a reserve currency of a nation. EU is contemplating digital euro. People invented a way and are exchanging ownership of IP daily with various block chains.
Crypto is here. I highly doubt it its going away. Too much value and utility.
Perhaps it would be best to simply create a HN News policy to ban crypto related stuff as it really boils down to maxi-haters reiterating their views over and over.
But I do understand that is great for Karma farming.
Bitcoin is getting a lot of attention from a lot of very smart financial people around the world because they see that with so much USD being printed, inflation is bound to happen and Bitcoin is one of many ways they can hedge against it.
HN is where you can find great commentary about tech related stuff. But outside of that eg. financial matters .. no.
> which have of course shown that Bitcoin is not a ponzi
What are you referring to here? This would be a rebuttal if it exists, but to my knowledge no such thing does
> Just let Crypto users be
This is your main point of substance. But as another user pointed out, the collapse of the Albanian ponzi started a war and devastated a country.
Bitcoin, if it is the ponzi it appears to be, is the biggest ponzi in history.
It is unwise to merely leave ponzis alone. They’re illegal for a reason
When we take a closer look at crypto it appears to be as corrupt or even more as the institutions it was trying to replace. Tether, of course, is the poster child of crypto corruption.
I expect that many users on HN have known about Bitcoins since the beginning and are upset that they didn't look into it years ago. Many will find their niche in it(smart contracts, NFTs..), younger people more so.
Stateless P2P open source currency is an incredibly powerful combination of words.
Bitcoin is fraud
Bitcoin is a bubble
Bitcoin is OpenSource
Idiotic definition of a ponzi scheme crafted intentionally to include bitcoin, fails to include bitcoin, but does cover many valid economic activities.
I agree with you in spirit. Stocks that will never pay a dividend (if you can see the future) are worth $0. Most stocks are effectively speculative assets.
The difference is that a stock has a real, legal value: ownership of a company that has cashflows. If that company is liquidated, you have rights as a shareholder. You may also be able to vote on important decisions that the company makes.
Bitcoin is an asset that, by definition, never will pay a dividend. It is a stock that we know with certainty is worth $0. Its only value is speculative.
In that sense, Bitcoin is very much like fiat currency: its value is imaginary and based on how other people value it.
But if we're comparing Bitcoin and, say, USD, then Bitcoin is by far the worse currency because it's deflationary and unbelievably expensive to transact.
That's why, in places with unstable currencies, people mostly shelter their money in USD. If cryptocurrencies factor into it, it's because those currencies are seen as easier ways to transact USD. People who need their assets to be spendable on a daily basis don't hold them in Bitcoin.
You want currency you hold to be deflationary. Deflation is a systemic problem for economies, not individuals with cash in hand. Its not expensive to transact, it is extremely cheap. You go find a provider to let you accept payments from anyone in the world for a smaller % of the transaction and that will cover chargebacks. It doesn't exist, and you are not doing an honest analysis when you compare the transaction cost of walmart instead of yourself, or the cost of exchanging cash without the costs of moving people to the same location to exchange it.
You have no practical legal right to anything as a shareholder. If a company is liquidated the shareholders get nothing in practice. Management controls the finances and expenditures of a company, and a majority of shareholders control management. This control is usually only given to special classes of stock that is for the most part impossible to buy. Why do you think people fight over control of companies? Management routinely steal huge sums by allocating it for the direct benefit of some shareholders over others.
HN doesn't know everything, do your own research, use your own logic.
This whole thing is just bringing the level of discourse here down, and I've been on HN for a long time.
I'm in favor of a blanket ban on crypto discussion here. It's all noise at this point.
Unless you mean specifically "missed the opportunity to make lots of money", in which case sure, that's absolutely accurate, but if I wanted to gamble I'd just go to a casino.
It's funny how people on HN which are likely some of the first people in the world to know about bitcoin (eg. since it was only at $100 or less) keep upvoting articles like this for years now.
I think these people deep down know that they missed an amazing chance by not investing in bitcoin (and other cryptocurrencies) years ago, so articles like this make them feel better about it and lets them justify not investing in bitcoin to themselves.
But then in a few years bitcoin 5xs again and then they realize if they bought it at todays price would still have made them massive profit.
But then they see a new article saying bitcoin is a ponzi and upvote it and feel good about themselves again.
Oh but they have to downvote any comments like yours too.
Sigh.