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Bitcoins: The Second Biggest Ponzi Scheme in History

garynorth.com

231–240 of 306 posts

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#231
post #98

Earlier quoted context omitted.

The article itself is not badly written. Keep in mind many people on this forum have a significant financial incentive to ensure that people don't think this way about BTC.

> ...many people on this forum have a significant financial incentive to ensure that people don't think this way about BTC. How can you make an assertion like that with no facts? Do you know that for sure? Do you have data to back that up?

The data that there are three pro-BTC articles on the front page every day. It's personally why I've stopped visiting as often.

We get it: You want to keep convincing yourself you didn't waste thousands of dollars on a huge, pointless bubble. Don't get pissed when it gets pointed out, though.

And another data point: Your account has 6 comments, all Bitcoin-related in different threads. I wonder what virtual currency you invested in?

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#232
post #145

Earlier quoted context omitted.

Thing is Bitcoin fails miserably as a currency TODAY(2013). It currently cannot be used as a currency because of its volatility, unlike other fiat currencies, it cannot be controlled, potentially destroying any economy based on it. ( Think of it, some random panic on the dollar supply would send the value of the dollar spiraling to 100 time its value over the course of 1 year, with absolutely no way the US could do a…

Agreed on your first point. (no sarcasm intended) Are you saying that a currency that cannot be controlled (e.g. the money supply controlled by something like a federal reserve) is more dangerous than one that is?

that's the Keynesian viewpoint. The prevailing wisdom right now is that policy-controlled inflation helps prevent a wide range of issues. Bitcoin is inherently deflationary, which scares the crap out of people with their stake in the Keynesian camp.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#233
post #170
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…

What is the probability that a future cryptocurrency will possess some property that the majority of users want that bitcoin does not have?

The source code is open but the processing power is not so quickly reproducible. I think this is the biggest argument for bitcoin's sustained dominance at the moment.

There could be many cryptocurrencies. Some issued by commercial entities like Amazon, some for use in a specific online game, others perhaps behave like an ETF and are backed by USD or Gold, may be even a cyptocurrency that magically(?) security-ignorant individuals can use. These currencies could all be subject to market exchanges and futures.

Bubbles are fermented in hysteria that if you don't buy now you will never get a chance again. Whenever I start hearing those arguments my interest in speculative investment begins to dissipate. A bubble will not deter me from my optimistic interest in bitcoin because I believe its properties are incredibly productive.

As for bitcoin and ponzi schemes, the withdraw caps and illiquid nature of certain exchanges right now make it very possible to conceal a ponzi scheme.

Here is my challenge: for those really bullish on bitcoin, build things that use it! When all you do is speculate, then you stand on equal ground as everyone else. Do something to get an advantage.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#234
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…

Also:

> He made this money out of digits.

No, he didn't. He made the protocol, miners made money out of WORK, not digits. Didn't even bother reading further.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#235
post #172

Earlier quoted context omitted.

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…

How many of those 'requirements' are because of powerful entities abusing the system? What are the forces that have caused those requirements to arise with traditional currencies? Did you mean inflationary spiral for Southern Europe? Or are prices for things dropping there right now? Not sure.. But again, a lot of what happens is because of constantly 'hacking' the system (raise the debt ceiling, print more money, et…

No one can realistically claim they truly understand the current system. The Austrian economists seductively claim this, but that's because they reject empiricism as a way of challenging their axioms. Keynes seems to have hit upon the most predictive model we have for how economies operate at scale with currency, especially how we can get into depression-like circumstances when internet rates are 0% like they have been these past 5 years. But we are still debating whether he was a genius, villain, or charlatan, because people refuse to look at the data and arguments with fresh eyes.

So what constitutes a "hack", vs "bug", vs "works as designed" is a matter for debate. You point to the debt ceiling - that's a non-economic political enomaly unique to the USA (and interestingly, iirc, Denmark). It's not so much a hack as a periodic configuration change.

You also mention inflation. Currently there's very little inflation anywhere in the world. We are printing money everywhere, and yet there is no real inflation, not a peep, completely contrary to over 5 years of dire warnings from inflation hawks. Why is that? You'd think there may be a lesson here.

Southern Europe had massive capital inflows from the North during the past 10 years, leading to wage and price inflation. Private excesses led to a massive crash in demand when the financial crisis hit, and a major outflow of capital. So now the South is uncompetitive relative to their Northern neighbors. The typical tool to get more competitive is to drop their exchange rates relative to their peers to bring export prices inline. but with the Euro, they can't do that. So they're stuck in a deflationary spiral - difficult (high unemployment, lowered workforce participation) and destructive (business and livelihoods destroyed and permananent damage to the country's wealth generating capacity) considering prices and wages tend to be sticky downwards and thus don't trend in a nice linear manner.

The above situation doesn't occur quite as suddenly and badly in the USA among its member states because they have fiscal integration, which enables Federal transfers to poorer states to shore them up relative to their peers. Decay and deflation still eventually happens if the underlying reason is structural (see the Detroit area). But Southern Europe itself was a growth story, not a case of mismanagement but rather a victim of reckless investment with no EU system to soften the blow when there is a crisis.

As for the requirements on the money supply, there is plenty of history out there discussing the trouble with previous eras of the gold standard (see the Great Depression), or decentralized free money (the USA had hundreds of currencies in the 18th century- the civil war reparations was the onus to coalesce into a standard Federal reserve currency).

We have switched between predominantly commodity (deflationary) currency and debt-issuance (inflationary) currency for thousands of years. There's dangers on both sides.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#236
post #170
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…

There are two major hurdles that all of the altcoins have. The first is that it will be much harder to build a userbase to critical mass in a world where bitcoin does a pretty good job.

The other, more difficult problem is building trust in the underlying mechanism. The systems have to be open to take advantage of Linus's Law "given enough eyeballs, all bugs are shallow", but there has been such a proliferation of altcoins that I doubt there are enough skilled eyeballs to go around.

There are a lot of people jumping on the altcoin bandwagon hoping to be the next Satoshi. It is almost certain that some of those altcoins will have fundamental flaws. If they fail catastrophically, the reputational damage will, no matter how unfairly, impact upon all of the others. That will make the job more difficult, even for the worthy contenders.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#237
post #170
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…

Network effects should keep multiple cryptocurrencies from gaining much traction. The security of Bitcoin is far greater than any other Bitcoin-like cryptocurrency, and almost no merchants accept alt-coins as payment.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#238

From the BitCoin FAQ ( http://en.bitcoin.it/wiki/FAQ#Is_Bitcoin_a_Ponzi_scheme.3F ): Is Bitcoin a Ponzi scheme? In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy. A ponzi scheme is a zero sum game. Early adopters can only profit at the expense of late adopters. Bitcoin has possible win-win ou…

"The first thing to say is this is definitely not pyramid selling, OK" Toni - trying to sell Jeremy on a pyramid scheme -- Peep Show, Season 1, Episode 2; "The Interview"

That's nice. So, develop some balls and actually say "I think Bitcoin is a pyramid scheme" rather than quoting TV. Or you could learn some maths and determine for yourself why it's not.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#239
post #225

Earlier quoted context omitted.

I think the point is that people aren't buying bitcoins like I might exchange my money for South African Rand. When I exchange Dollars for Rand, I can more easily use the Rand to purchase goods and services in South Africa. I'm not speculating the Rand will be worth more in 2 weeks time. I just want something more fungible. It seems people who are buying bitcoins now aren't doing so to purchase goods/services. They a…

> Bitcoin may recover after a future crash but because nothing is really backing it, it's likely it'll fade into history. When bitcoin was first brought into existence it was worth nothing, and people invested anyway for mostly speculative reasons. Lets assume that at some point in the future it will be worth zero again, once the current batch of investors cash out. Why will it suddenly not have the speculative value…

It'll always have some value and may always be traded. I'm sure people still own and trade pogs but I wouldn't call pogs a currency.

When I said that it'll fade into history I meant that sites like Amazon will never accept it. By definition, currency is "the fact or quality of being generally accepted or in use".

If it isn't widely accepted, it's just not currency IMO.

The primary benefit seems to be anonymity and the majority of people don't care about that. I live in the US and we already have an anonymous form of money (cash) and I rarely see that used.

Why would "normal" people start using a more difficult to use currency just to be anonymous?

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#240
tl;dr: Bitcoin wouldn't be Ponzi Scheme if it could become money. It can't be because its price is too volatile. Therefore bitcoin is Ponzi Scheme.

My answer: Volatility is inversely proportional to the wealth that has been exchanged into bitcoin. At the moment individual with few hundred million $ could swing bitcoin market up and down as he pleases. It will be much harder if people stuff trillion dollars or so into bitcoins.

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