bitcoin?
I find bitcoin interesting. It does come off like a legal ponzi scheme to me.
https://www.washingtonpost.com/national-security/2022/02/08/bitfinex-hack-bitcoin-arrests/
https://www.washingtonpost.com/national-security/2022/02/08/bitfinex-hack-bitcoin-arrests/
it is interesting. The gaming community is going ape this last year or so trying to find a way to use the idea ... such as 'real items' (unique and owned by a player, rather than the current 'you have database entry #42, The Sword of a Thousand Truths' same as every other player).
I give it full marks for creativity and nerdliness. I give it a 0/100 for actually useful. Granted, by useful, I mean useful. You can *market* anything and claim that by being able to sell it, it has value, but that is just a side effect of the inmates running the asylum.
I give it full marks for creativity and nerdliness. I give it a 0/100 for actually useful. Granted, by useful, I mean useful. You can *market* anything and claim that by being able to sell it, it has value, but that is just a side effect of the inmates running the asylum.
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Bitcoin is a dead-end technology. Not for technical reasons, but for reasons that are external to the technology itself, which I've gone into before and I don't feel like repeating right now. At this point it has zero chance of achieving its original goal of being "cash for the Internet". It is very much a pyramid scheme, if you follow the money in its market:
Where does Bitcoin come from? It's created from thin air by burning large amounts of electricity. Where does the money for the electricity come from? The people creating Bitcoins must sell previously created Bitcoins, hopefully for more money than it cost to create the latest batch. One might be fooled into thinking that this injection of cash into the system is in some way a form of "backing" for BTC, but this is incorrect. No matter what, a sizeable portion of that money will burned in the mining process (the rest, miners will take as profit). This is necessarily true, as mining hardware is expensive and thus miners will be incentivized to instruct it to mine on one network or another based on prices; the electrical consumption of mining is directly proportional to a cryptocurrency's price. In other words, however high BTC's market capitalization (the product of the price by the total supply of BTC) is right now, that money doesn't exist anywhere. There's no way to convert all those BTC back into real money. So in the case of a market crash, only a small subset of Bitcoin holders will be able to get out, while the rest will be left holding worthless currency.
"Well, that in itself doesn't make Bitcoin a pyramid scheme", I hear you say. I'm not done.
What's the difference between Bitcoin and cash? Cash doesn't need a continuous input of energy to continue existing. The fact that Bitcoin is mined means a constant influx of marks is needed to continue operating it, and the later those marks enter, the worse deal they're getting (because previous marks have an incentive to get the price to go up and thus to hype up the currency).
Worse still? Once mining power has been added to a proof-of-work network, it's unclear how much of it can be removed without compromising the security of the network. At least one small network has suffered a 51% attack (with a double-spend, IIRC) in the past because it was small and relatively easy to attack.
So yes, not only does Bitcoin have all the qualities of a pyramid scheme, it's the most wasteful one in history. Those chickens will one day come home to roost, and it's going to be great to watch from the sidelines. I do feel a bit bad for the late adopters, but they have no one to blame but themselves.
And you know, it's a shame. I know Satoshi was active in a cryptography forum back in the mid-to-late '00s, so I don't think he's a conman. I think he honestly wanted to make something useful, but the beast got out of control way too fast.
Where does Bitcoin come from? It's created from thin air by burning large amounts of electricity. Where does the money for the electricity come from? The people creating Bitcoins must sell previously created Bitcoins, hopefully for more money than it cost to create the latest batch. One might be fooled into thinking that this injection of cash into the system is in some way a form of "backing" for BTC, but this is incorrect. No matter what, a sizeable portion of that money will burned in the mining process (the rest, miners will take as profit). This is necessarily true, as mining hardware is expensive and thus miners will be incentivized to instruct it to mine on one network or another based on prices; the electrical consumption of mining is directly proportional to a cryptocurrency's price. In other words, however high BTC's market capitalization (the product of the price by the total supply of BTC) is right now, that money doesn't exist anywhere. There's no way to convert all those BTC back into real money. So in the case of a market crash, only a small subset of Bitcoin holders will be able to get out, while the rest will be left holding worthless currency.
"Well, that in itself doesn't make Bitcoin a pyramid scheme", I hear you say. I'm not done.
What's the difference between Bitcoin and cash? Cash doesn't need a continuous input of energy to continue existing. The fact that Bitcoin is mined means a constant influx of marks is needed to continue operating it, and the later those marks enter, the worse deal they're getting (because previous marks have an incentive to get the price to go up and thus to hype up the currency).
Worse still? Once mining power has been added to a proof-of-work network, it's unclear how much of it can be removed without compromising the security of the network. At least one small network has suffered a 51% attack (with a double-spend, IIRC) in the past because it was small and relatively easy to attack.
So yes, not only does Bitcoin have all the qualities of a pyramid scheme, it's the most wasteful one in history. Those chickens will one day come home to roost, and it's going to be great to watch from the sidelines. I do feel a bit bad for the late adopters, but they have no one to blame but themselves.
And you know, it's a shame. I know Satoshi was active in a cryptography forum back in the mid-to-late '00s, so I don't think he's a conman. I think he honestly wanted to make something useful, but the beast got out of control way too fast.
Y'all may be interested in this series of unedited, raw interviews given by Casey Muratori:
https://www.youtube.com/channel/UC-P3YszdA4W9Va7oblY06Tw
The interviewer is a skeptic and an experienced C programmer, which is a good combination. The interviews are addressed to a technical audience, and he doesn't have an obvious agenda to support or condemn cryptocurrencies. I think there's a lot of value in this combination.
https://www.youtube.com/channel/UC-P3YszdA4W9Va7oblY06Tw
The interviewer is a skeptic and an experienced C programmer, which is a good combination. The interviews are addressed to a technical audience, and he doesn't have an obvious agenda to support or condemn cryptocurrencies. I think there's a lot of value in this combination.
It is still possible to make money from cryptocurrencies (at least in the short term) by using Contract For Difference (CFD). The important thing about CFD's is that one doesn't own the underlying asset. It is also possible to make money when the value is going down. Having said that, I do agree with earlier comments about the wastefulness.
It seems to me that most cryptocurrencies do well initially then fade at some point. For bitcoin in particular, it was so successful because Elon Musk poured millions into it at the start. I guess that could potentially happen again if one found someone willing to put in large amounts of money into yet another crypto currency.
It seems to me that most cryptocurrencies do well initially then fade at some point. For bitcoin in particular, it was so successful because Elon Musk poured millions into it at the start. I guess that could potentially happen again if one found someone willing to put in large amounts of money into yet another crypto currency.
I won't call it a ponzi scheme so early, but yes, its future looks quite suspicious to me as well.
I think it's a ponzi scheme in the same sense as credit cards are. If the economy collapses, zombies take over your town, and AI goes on the rampage, your credit card isn't going to be of much value to you.
And paper money is the same.
As well as a gold brick, not very useful if there's nobody else that sees value in it. Perhaps a liability if someone else sees value in it and all societal rules have broken down.
Diamonds? They have value so long as the company that controls the stockpile forcefully maintains a small sales output.
So, yes, bitcoin is a scheme, but what isn't? As long as someone else wants it, and they have something that you want, then it is serving its purpose, and will continue to serve.
There might be a day where people can't mine it for profit, but it's likely that the people who own billions in stockpiles will begin running blockchains in order to maintain those same stockpiles. If they follow the Diamond Stockpiler's template then there's no real problem.
Some might find that bitcoin holds more value because of its volatility. It's a gambler's paradise, and the house is generally set to win.
And paper money is the same.
As well as a gold brick, not very useful if there's nobody else that sees value in it. Perhaps a liability if someone else sees value in it and all societal rules have broken down.
Diamonds? They have value so long as the company that controls the stockpile forcefully maintains a small sales output.
So, yes, bitcoin is a scheme, but what isn't? As long as someone else wants it, and they have something that you want, then it is serving its purpose, and will continue to serve.
There might be a day where people can't mine it for profit, but it's likely that the people who own billions in stockpiles will begin running blockchains in order to maintain those same stockpiles. If they follow the Diamond Stockpiler's template then there's no real problem.
Some might find that bitcoin holds more value because of its volatility. It's a gambler's paradise, and the house is generally set to win.
A pyramid scheme is defined as an investment fund where the payouts to earlier shareholders is dependent on continuous influx of investments from new shareholders, and there is no other possible source of profit. Thus, a pyramid scheme is only sustainable if there's an infinite supply of money for the system (so it's not).
Bitcoin meets these criteria, as the only reason it's valued so high is because current holders believe they'll be able to cash out at a later time for a profit. Bitcoin falls close to zero as soon as this belief is falsified. This will necessarily come to pass, because the amount of wealth is finite. The value of Bitcoin has to equilibrate at some point. Once the value cannot continue rising then money stops flowing into the system (since the only appeal of Bitcoin is that you can sell it for a profit later) and mining becomes unprofitable and the network grinds to a halt.
On the other hand, most holders of dollars or gold are holding them because they believe they'll be able to trade said assets for a value close to the value they had when they acquired then. Yes, there are some people who speculate on their value, but their profit doesn't depend on new suckers buying more gold, but on the losses of other investors. I.e. it's even more literally a casino than Bitcoin.
Bitcoin meets these criteria, as the only reason it's valued so high is because current holders believe they'll be able to cash out at a later time for a profit. Bitcoin falls close to zero as soon as this belief is falsified. This will necessarily come to pass, because the amount of wealth is finite. The value of Bitcoin has to equilibrate at some point. Once the value cannot continue rising then money stops flowing into the system (since the only appeal of Bitcoin is that you can sell it for a profit later) and mining becomes unprofitable and the network grinds to a halt.
On the other hand, most holders of dollars or gold are holding them because they believe they'll be able to trade said assets for a value close to the value they had when they acquired then. Yes, there are some people who speculate on their value, but their profit doesn't depend on new suckers buying more gold, but on the losses of other investors. I.e. it's even more literally a casino than Bitcoin.
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because the amount of wealth is finite
sorta. The problem is that
1) wealth isn't finite, its a 'slowing changing dimension' and its value is not even consistent depending on how you define wealth. For example if I have a diamond, it may be appraised at 10k but I may only be able to sell it for 7500, irrelevant as that may be the true value of assets is subjective between what was paid for it, what it can be sold for, and so on.
2) only an insignificant amount of wealth is tied up in BC. While possible, it is improbably that a significant amount ever will be, which means that it isn't doomed to crash because it won't really run out of suckers to buy in due to a lack of wealth. It may run out of suckers with money eventually though (the supply of suckers is inexhaustible but the ones who still have lots of money are uncommon).
You are basically taking the limit / extreme of a system that will not ever get there, like trying to predict the weather 10 years from now, as a bad example?
All that aside silver did me well, saw that coming.. more than $10/oz profits thank ye covid.
sorta. The problem is that
1) wealth isn't finite, its a 'slowing changing dimension' and its value is not even consistent depending on how you define wealth. For example if I have a diamond, it may be appraised at 10k but I may only be able to sell it for 7500, irrelevant as that may be the true value of assets is subjective between what was paid for it, what it can be sold for, and so on.
2) only an insignificant amount of wealth is tied up in BC. While possible, it is improbably that a significant amount ever will be, which means that it isn't doomed to crash because it won't really run out of suckers to buy in due to a lack of wealth. It may run out of suckers with money eventually though (the supply of suckers is inexhaustible but the ones who still have lots of money are uncommon).
You are basically taking the limit / extreme of a system that will not ever get there, like trying to predict the weather 10 years from now, as a bad example?
All that aside silver did me well, saw that coming.. more than $10/oz profits thank ye covid.
Wealth is finite. There are only four quantities with value to human beings: space, time, matter, and energy. You need space and time to do things, matter to make things, and energy to live. There are also ideas, but an idea only has value as far as it allows you to expand your control over any of the four other things.
As long as we're Earth-bound both space and matter are obviously finite. The finiteness of time is a consequence of our mortality. Energy is constantly falling onto the Earth from the Sun at a fixed rate and can be captured either by crops or by photovoltaics (in a zero-sum game). In fact nearly all energy in use today is actually solar; fossil fuel is just ages-old solar energy. The energy we could conceivably harvest from the Sun is still constrained by its hydrogen mass.
The price of an object is flexible, but not infinitely so. The price of a diamond could at the most be equal to the entire world and all its inhabitants. If you don't think so then buy the Andromeda galaxy from me for five bucks.
The number of people in the world is finite, and the total sum of funds that all of them would be willing to put into BTC is also finite. At some point that value will be reached.
I'm arguing that the failure point exists necessarily, even if only in the distant future. I personally believe it exists much much sooner than that, but that's much more difficult to argue, so I'm not doing that.
As long as we're Earth-bound both space and matter are obviously finite. The finiteness of time is a consequence of our mortality. Energy is constantly falling onto the Earth from the Sun at a fixed rate and can be captured either by crops or by photovoltaics (in a zero-sum game). In fact nearly all energy in use today is actually solar; fossil fuel is just ages-old solar energy. The energy we could conceivably harvest from the Sun is still constrained by its hydrogen mass.
| For example if I have a diamond, it may be appraised at 10k but I may only be able to sell it for 7500, irrelevant as that may be the true value of assets is subjective between what was paid for it, what it can be sold for, and so on. |
| While possible, it is improbably that a significant amount ever will be, which means that it isn't doomed to crash because it won't really run out of suckers to buy in due to a lack of wealth. |
| You are basically taking the limit / extreme of a system that will not ever get there, like trying to predict the weather 10 years from now, as a bad example? |
Oh, I agree it is likely to fail and sooner rather than later. Its already done so a couple of times, going way way up then bottom out for a few years and repeat. Whether it will ever bottom out forever and fade away is an interesting question. It won't fail because of lack of people buying in, though, at least IMHO. Time will tell :)
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