Bitcoin is a Startup

It's not. Rewarding early adopters is not enough to consider something a Ponzi scheme but it's enough to make people who don't know what a Ponzi scheme is to call it one.

Seems legit, I'll invest some upvotes in your comment.

Bitcoins are worthless. They never had any value, and never will.

Valueless meaning they are as worthless as Bernie Madoff fund shares, Dutch tulip bulbs, Pets.com stock and Flooz and Beanz, Reichsmarks and confederate dollars and so forth. People might have been temporarily fooled into paying money for these things, but ultimately people realized they were worthless. Like a forged painting or counterfeit dollar.

Today I wrote a blog post about why they were worthless ( http://www.vartmp.com/blog/2013/08/21 ). Some interesting things came out of it. One was I did some research on Bitcoin. I found out that some of the idea guys behind Bitcoin actually anticipated my arguments and give their refutation of them. They're well aware of the fault lines of the argument.

The argument is whether the value of commodities or currencies are subjective, or whether they are ultimately derived from labor. Bitcoin partisans believe the former, I believe the latter.

As the subjective theory of value (STV) is false, Bitcoin certainly will, like Dutch tulip bulbs or Webvan/Pets.com stock, ultimately collapse to become worthless or near worthless. But the collapse will not disprove the subjective theory of value by itself - STV advocates can just say people stopped subjectively valuing Bitcoin.

On the other hand, if Bitcoins continue to hold value over the long-term, the labor theory of value will be disproved. It is impossible for a currency with no backing to retain value over the long term.

Not to get tangential, but this includes the US dollar, which was gold backed until 42 years ago. And which has a value today - it can be considered scrip that is accepted by army PXs, post offices and the like for goods and services in kind. That is also accepted by the government for taxes and such. It has no worth beyond that however. Currencies have no inherent value, whatever the Bitcoin people believe.

As I said, one thing I discovered putting my blog post together today was that Bitcoin people had anticipated the arguments of its worthlessness. Their counter is that Bitcoin value is based on their philosophical ideas, which as I said, I consider baseless, and thus, I know that Bitcoins will sooner or later, and probably sooner than later, be worth $0.

I also discovered something else while putting together my blog post. I had the idea that I could financially gain from this insight. I could just short Bitcoins. So I looked into that a little.

Various small hurdles are in the way of doing this, but most are navigable. Bitfinex looks like they allow this, although they may only facilitate it. Just for the principle of it, I'm going to short one Bitcoin (current worth = $122) for now, and maybe more later.

Bitfinex says to short a Bitcoin I "need to [borrow] bitcoins from others lenders". Hopefully Bitfinex can arrange this for me, otherwise I guess I have to go looking myself.

There is no way a Bitcoin can be worth $122 over the long term. Not that it can't temporarily - it can climb to $200, even $300. In the seventeenth century, during the Tulip bubble in Holland, 40 tulip bulbs sold for 100,000 florins, or what would be equivalent to about one million euros today. It can go up, but ultimately it must crash. As will Bitcoin. Keynes said markets can remain irrational longer than he could remain solvent, which is true. However, I feel pretty secure I could survive shorting one Bitcoin via an LLC or something.

I'm looking into how to short a Bitcoin via Bitfinex or the like. If anyone knows more about Bitcoin shorting or wants to go on the other side of the deal, I'd be happy to know.

> In the seventeenth century, during the Tulip bubble in Holland, 40 tulip bulbs sold for 100,000 florins, or what would be equivalent to about one million euros today. It can go up, but ultimately it must crash.

Dutch tulip bulbs aren't even close to worthless right now, and they weren't worthless after Tulipomania either; for example:

> Even the magnitudes of prices for valuable bulbs and their patterns of decline are not out of line with later prices for new varieties of rare bulbs. Single bulbs in the eighteenth century commanded prices as high as 1000 guilders. In this context, the 1000–2000 guilder price of Semper Augustus from 1623 to 1625 or even its 5500 guilder price in 1637 do not appear obviously overvalued.

This is partially because all unique new bulbs depreciated very quickly, from the 16th century on, as they were propagated and the supply was able to increase to meet demand. If you really want to compare Bitcoin to Tulipomania without embarrassing yourself, you should read some modern historical work on Tulipomania like Garber's Famous First Bubbles, and not an utterly obsolete polemical work by a hack. I've summarized some of the relevant facts in http://www.reddit.com/r/Economics/comments/1bm9fl/the_bitcoi... & https://plus.google.com/115274377971493973150/posts/1qWmh7Cq... if you have enough time to blog but not read books.

(I would address your 100k claim, except a quick search indicates it is coming from MacKay's history, which gets many things wrong such as mistakenly taking a rhetorical exercise - 2 tons of butter, one silver cup, etc. - for an actual transaction. It's purely rhetorical, as one can quickly imagine by seeing how many tons of butter a Picasso or a Ferrari would go for.)

> There is no way a Bitcoin can be worth $122 over the long term. Not that it can't temporarily - it can climb to $200, even $300...I'm looking into how to short a Bitcoin via Bitfinex or the like. If anyone knows more about Bitcoin shorting or wants to go on the other side of the deal, I'd be happy to know.

You must be completely mad to short Bitcoin even if you were infinitely confident it was going to zero. Never has the expression "the market can stay irrational longer than you can stay solvent" been more applicable. (And you know that, since you even quote it!) The best I can say for your strategy is that at least the fraudulent aspect ("However, I feel pretty secure I could survive shorting one Bitcoin via an LLC or something.") may rescue it.

BTC can be used in electronic black markets - not many currencies can be used for that, and that fact gives BTC huge value to many people. It is analogous to how USD is the only currency the USG will accept taxes in, which you have mentioned. Not to say that this black market might become unviable whatever reason down the track, but right now it's a big driver of value.