Imagine an empty room. A few people come in with money in their pockets and play a few rounds of a card game. When they leave, since nothing was in the room before and nothing is in there after, it's obvious the total sum of money couldn't change. Some got richer, some got poorer but the total is the same.
If they decided to exchange money for plastic chips to be used during their games and exchange it for money at the end, the same is still true.
However, if someone takes a cut every time chips are moved then that person is guaranteed to win and the players in total are guaranteed to lose. If you have a game where you know who is the winner and who are the loser without knowing anything about the game, I believe it's fair to call that a scam.
No, stocks are not like this because they produce dividends and gold is not like this either because there are consumers (jewelers, electronics industry) who buy gold add value to it and only sell the value added product. With a crypto"currency" none of this happens. You buy coins, sell the same and they just rot ("HODL" in modern parlance) meanwhile. And you lose money on every transaction. Sure, the price change might mean you leave with a monetary profit but it only means a greater fool is now sitting on a larger loss.
This is a very novel scam for many obvious reasons but that doesn't mean it's not a scam.
Just like how payment processors work like PayPal. They take a cut on each transaction. The difference with validators in a blockchain is that it’s permissionless.. Anybody in the room can participate and capture a % of these transaction fees.
What is negative sum in this example?
A has mined some coins which B buys for 100 USD. Now A has less than 100 USD because the transaction costed something and B has 0 USD. Together they already lost money. This will only get worse. Let's say B can convince C to buy his coin for 1000 USD from, say, an interest free bank loan. Aye, B has 1000 USD minus transaction fee so they made a profit but C has -1000 USD. Altogether they are short on money.
Even here, both users are short USD, but it is not a "negative sum" system as the users gain some positive value by having the payment processor transfer and secure their funds. If the only metric is how much USD a buyer has left, every visit to the bakery would be a negative sum game.
In the above example, PayPal and Wise are User C. In a permissionless blockchain, User A and B can both also opt to be validators and receive these protocol rewards, so there may not even be a User C that extracts rent on each transaction.
When a limited supply token is burned, the total supply is reduced, and assuming that does not decrease the demand, then the value will diffuse to all token holders. If 75% of all PayPal or Wise fees were burned such that all users of PayPal had their account slightly appreciate in value whenever there is significant transactional volume in the network, a lot of users would be pretty into that.
Besides, this is just one way. Bitcoin does not burn fees, so it’s much more like the PayPal and Wise approach, no money leaving circulation.
not really. unless you treat large parts of capitalism a scam. (thats rhetorical by the way)
Binance which lost $570M in one hack, knowingly promoted flawed investments and lied to regulators however, could be described as an unreliable finance partner.