Bitcoins: The Second Biggest Ponzi Scheme in History • Hacker News Board

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#201

Post by EGreg » Sun, Dec 01, 2013, 5:06 PM UTC

While there is a great deal of insight in the Austrian definition of money, that does not disprove that Bitcoin is, or will be used as, money.

After all, the market may price bitcoins high today but even if they drop tomorrow, as long as they stabilize, they can be used as money.

Although it is true that whatever is the most liquid asset in the system becomes money, often that asset is liquid because of local law enforcement. Which is the case with fiat currencies.

Most money today is credit money. Bitcoin is not credit-money. The "underlying value" of bitcoins is not what's relevant. What's relevant in decentralized situation is the value TO SOMEONE of an asset is what they can trade it for of genuine use to them. So the value of a bitcoin today may be limited to speculating with it. But as more merchants accept bitcoin and the market is saturated and brings diminishing returns, the value of the bitcoin will stabilize.

Similar things happened with rapidly growing social networks, like Skype or Facebook. Those are the economics at play here. Initially maybe Facebook was a way to just put up your profile, because not all of your friends were on it. But eventually it became the way to stay in touch and update your friends on what's happening, because enough of your friends used it that it became useful.

When enough people trust bitcoin to accept it as money, then it will become money. Until then, the jury is out. But the network effect only grows stronger with the number of users...

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#202

Post by DennisP » Sun, Dec 01, 2013, 5:06 PM UTC

parasubvert wrote: post #155

ashray wrote: post #74

Earlier quoted context omitted.

True, and bitcoin does stick to this norm. The rate of bitcoin production is predictable for the next 100+ years. More can be produced with more effort, it's just not as easy as printing notes. So it is adjustable and it is growing. The price rise is caused by speculation and demand, not because new bitcoins aren't being produced.

Bitcoin does not stick to that norm. The supply is completely inelastic. Whereas a money supply typically requires different rates of creation or even destruction to respond to the market demand, partiularly in a time of currency hoarding (such as we are experiencing now in the real global economy). There is also a strong argument for multiple currencies with different supplies of money rather than a single global su…

Well we also have litecoin, peercoin, and a variety of ideas for future currencies. So we might end up with a pretty nice system of competing currencies, rather than one giant deflationary one.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#203

Post by gnaritas » Sun, Dec 01, 2013, 5:07 PM UTC

dictum wrote: post #186

akjetma wrote: post #176

Earlier quoted context omitted.

a fiat currency is just a currency without intrinsic value. it's not a derisive term, you'll find it in any introductory economics textbook.

What is the intrinsic value of Bitcoin, aside from its scarcity?

Bitcoin is a fiat currency.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#204

Post by fthssht » Sun, Dec 01, 2013, 5:09 PM UTC

bushido wrote: post #137

Aqueous wrote: post #107

Earlier quoted context omitted.

The more people who use BitCoin the less volatile it will be, the more BitCoin tokens will be spread across a large number of individual actors, the less a single actor can dictate price fluctuations.

This is among the most ridiculous statements I have heard about how the markets work. Its actually the exact opposite, the lesser the people the lesser the fluctuations/volatility. And this is not just about the markets, it applies to most things. ex: 1. Single drug company selling the life changing drug = High near-fixed-global price | As soon as more drug companies can sell increase price competition, higher varian…

Those examples are a joke. What about the volatility of big cap vs small cap stocks. Isn't that more relevant than suitors and relationships?

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#205

Post by Dylan16807 » Sun, Dec 01, 2013, 5:13 PM UTC

nwh wrote: post #100

Dylan16807 wrote: post #87

Earlier quoted context omitted.

4 times weaker? When you're talking about statistical attacks that depends on getting a very small number of random events ahead of your opponent, I would expect quadrupling the numbers to provide significant additional security in the medium term of 10 to 100 minutes. Clearly a litecoin confirmation is weaker than a bitcoin confirmation, but 4 or 12 litecoin confirmations should be much stronger than 1 or 3 bitcoin…

Confirmations are just a measure of computing power essentially. By saying a transaction needs 3 confirmations you are saying that you require 30 minutes of network hashing time before you call a transaction secure. For the same 30 minutes you'd need 12 Litecoin confirmations. The chance of me solving 4 litecoim blocks is the same as me solving 1 bit coin block, assuming the same hash power and difficulty. In reality…

The chance of solving 4 litecoin blocks is the same as solving 1 bitcoin block, sure.

But look at it this way. If bitcoin blocks were once a day, then if you had a few percent of the network power you would get 1 day = 1 confirmation ahead of your opponent all the time. But with bitcoin blocks every few minutes, you have an infinitessimal chance of getting 1 day = hundreds of confirmations ahead.

The distribution of timings is much wilder when you're only taking a couple samples. The longest confirmations in the world won't make 2-confirmation transactions completely safe, but 20 confirmations is pretty secure with any length.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#206

Post by pyalot2 » Sun, Dec 01, 2013, 5:14 PM UTC

lmg643 wrote: post #170

pyalot2 wrote: post #42

> In this sense, Bitcoins is not a Ponzi scheme. It is simply a supermoney scheme. Admits that bitcoin is not a ponzi scheme in his own article. > The money was siphoned off from the beginning. Somebody owned a good percentage of the original digits. Implies that most bitcoins are owned by satoshi nakamoto, without substantiating this claim by any number to quantify the impact. The estimated stash of satoshi is about…

there's no question that the author of this article wrote it with linkbait in mind - calling bitcoin a ponzi scheme. having thought about it - the argument that bitcoin is going to be worth a lot "because there are only 21 million" - we have to consider that bitcoin is just one of "n" virtual currencies. while bitcoin may be limited, we already have 37 alternatives (at least) and there's no reason another hundred can…

> So, i see there will be a lot of virtual currency flying around, all of it as qualified as bitcoin (sharing similar source code) and the idea that it will all be worth 1,000 a unit (or more) forever just doesn't make sense.

Do you remember the time when twitter was the new hotness? And like everybody and his aunt where building a twitter clone. I mean, it's so simple, just a list of teensy messages, how hard can it be. And we joked how the operators of twitter had like a couple servers and some louse PHP scripts to glue it all together, it was just so laughable from the outset. And most laughable of all, people where flocking to it like mad.

Twitter is the remaining "twitter like" website, all the clones quietly shut their doors again and twitter went public with market cap valuation of $22 billion...

I could now ask: Are you kidding me? A website where people can post 140 character messages is now worth $22 billion.

Ah but the wonders of the network effect. You see the value isn't in twitter. The value is in who uses twitter. Because everybody uses it, it's valuable, and because nobody used the clones, they're not valuable.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#207

Post by macspoofing » Sun, Dec 01, 2013, 5:14 PM UTC

He's right, sort of, about some things. Bitcoin is absolutely in a speculative bubble right now. People are buying it not to use as currency but to sit on it and watch its value appreciate. That's not good. Lots of people will be hurt when the inevitable crash occurs.

The bigger problem is that Bitcoin has intrinsically a deflationary nature. That's not a great property for a currency to have. Currency is meant to be spent. It's not meant to be buried in a backyard so that you can watch its value grow.

His points around the development of currencies are bunk. The fact that in the old days it took any currency decades or centuries to take a hold, is purely a function of that time. Bitcoin also does solve some big problems with the current financial system. Specifically today it's pretty friggen hard to move money around because of the insanely strict regulations around transfers. In an era of the internet and all that it enables, there is a huge pent-up demand for something compatible with "the internet way of thinking".

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#208

Post by ubernostrum » Sun, Dec 01, 2013, 5:14 PM UTC

akjetma wrote: post #176

ubernostrum wrote: post #153

Earlier quoted context omitted.

I hate to say this, but at this point when I see someone use the words "fiat currency" unironically, I also expect to hear an argument about gold fringe on a flag, and other similar easily-repeated cargo-cult phrases/arguments against whatever the person doesn't like. One of the real dangers to Bitcoin is precisely that sort of public image.

a fiat currency is just a currency without intrinsic value. it's not a derisive term, you'll find it in any introductory economics textbook.

I'm aware of the definition of the term and its origins.

I'm also aware of what happened to the term beyond its origins. And that is the problem.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#209

Post by EGreg » Sun, Dec 01, 2013, 5:15 PM UTC

skriticos2 wrote: post #199

lmg643 wrote: post #170

Earlier quoted context omitted.

there's no question that the author of this article wrote it with linkbait in mind - calling bitcoin a ponzi scheme. having thought about it - the argument that bitcoin is going to be worth a lot "because there are only 21 million" - we have to consider that bitcoin is just one of "n" virtual currencies. while bitcoin may be limited, we already have 37 alternatives (at least) and there's no reason another hundred can…

Nobody debates that. In fact, the alternatives are worth mostly jack and very few will take off. It's really not a technical question. Bitcoin came first, it has the traction. Getting traction into another chain is possible, but much more difficult than with Bitcoin. (Which only involved creating the first of a new, disruptive technology). Simply said, why would I want to buy any of the alternate coins? As long as yo…

Because you'll be an "early adopter" and there may be a good chance they'll go from $3 to $1000 eventually just like bitcoin, if they are subject to the same network effect as bitcoin -- namely that the more merchants accept them, the more valuable they become. It may take longer but you'll make more $, etc.

So you'll buy them because of speculation. Hence the proliferation of these various currencies, the latest of which -- QuarkCoin -- is probably going to surge tomorrow on Bter.com and other exchanges :-P

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#210

Post by chockablock » Sun, Dec 01, 2013, 5:18 PM UTC

pyalot2 wrote: post #200

Perseids wrote: post #132

Earlier quoted context omitted.

> There will be an eventual cap at 21 million bitcoins, so satoshis stash is somewhere between 9% to 4% of all bitcoins. Btw: As the rules and mechanics of the Bitcoin network are enforced by the majority of clients it would be pretty simple to invalidate these bitcoins if the majority of the Bitcoin software authors would agree to do so. Just ignore any transaction regarding these old addresses.

Of course if a majority agreed to a blacklist, redlist, whitelist or any other exclusionary mechanism, then some coins become less usable than others. However I think you will find that really nobody wants to participate in such a scheme for a pretty simple reason. Fungability is an important concept for money in order to work. A landmark case in scottland around 1750 (Crawfurd v. The Royal Bank) recognized that fung…

'fungibility'