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Those people don't understand what a pyramid scheme is. The acquisition of bitcoin by newcomers in no way enriches earlier adopters, as in a classic pyramid sc

Those people don't understand what a pyramid scheme is. The acquisition of bitcoin by newcomers in no way enriches earlier adopters, as in a classic pyramid scheme. Miners continually invest huge sums in capital equipment with the hope that the price continues to rise. If it does not, they are toast. This is not gambling or a Ponzi; this is just a risk/reward business decision. It's the exact decision that the capitalist makes when she decides to build a new production line at the factory. Buying bitcoin early is like investing early in any new technology: it could be worth nothing, or it could go bananas. Many alt-coins have trickled down to very low prices over time or stopped functioning altogether. There are no sure things in this space, even for the early adopters.

deleted 9y ago
[deleted]
matt4077 9y ago
> The acquisition of bitcoin by newcomers in no way enriches earlier adopters, as in a classic pyramid scheme. Of course it does. Bitcoin used to be at $1, now it's at $1,xxx. What happened in between was a massive influx of newcomers. The difference to, for example, the stock market is in the "underlying value". If I buy some stock and it's price collapsed the next day, I'm still entitled to my share of future profits etc. If the company is sound, I have lost nothing. A ponzi scheme's underlying value is only the future growth of the scheme itself. I'd say the jury is still out for bitcoin et alt: how much of the growth is being fuelled by speculation, and to what extend is that speculation actually speculating on future speculation?
- splintercell 9y ago
  > The difference to, for example, the stock market is in the "underlying value". If I buy some stock and it's price collapsed the next day, I'm still entitled to my share of future profits etc. If the company is sound, I have lost nothing. Bitcoin is a payment network (Even if the price collapses to really low). Ethereum is a smart contracts platform, so you can still build certain kind of apps on it even if it's price collapses. A ponzi scheme as NO business model (or the business model claimed, isn't a valid one). Using bitcoin I can actually transfer wealth from one part of the world to another, similarly using Ethereum I can create decentralized applications funded by payment (like pay-to-seed bit torrent network).
  - loceng 9y ago
    On the surface Bitcoin is a payment network, that isn't all there is though. If Bitcoin or the other cryptocurrencies didn't at least have some value or perceived value to its users, then they wouldn't gain adoption. This usefulness doesn't negate that it has a Ponzi scheme structure to it. In a traditional Ponzi scheme, the value is the big returns you're getting - being fed by the next investor in line to be scammed. That only works when the Ponzi artist targets people with substantial amounts of money - however Bitcoin now enables that for very small transactions, globally. That Bitcoin has value outside of the Ponzi aspect, doesn't negate that it's a Ponzi structure.
    - someSven 9y ago
      I think it does. A ponzi has one issuer, and it's worthless. Bitcoin is speculation and it's a brand, and a plattform whitch is usefull.
      - loceng 9y ago
        A Ponzi scheme is only worthless and useless once it ends because the issuer decides to run off with a chunk of money; that likely should easily equate to people selling off their Bitcoin to eager investors who see this stock-market like system that if they get in 'early' on - or at a low enough price - they can make money selling back out. That Bitcoin is speculation, a brand, and useful in some ways - that is why it can be sustained ... because the network of speculators/investors is global, and people with $100 or people with $10s of millions that want to gamble can join in on. The 'single issuer' could also be considered the Bitcoin blockchain itself. Years ago I met someone who sold off $20MM+ of Bitcoin, bought real estate for rentals, then bought more Bitcoin when low to rinse and repeat. How many people are doing this which keeps Bitcoin going, while slowly increasing the price? It could easily be 50%+ of money, of course everyone with Bitcoin is incentivized to increase adoption - so their Bitcoin doesn't become worthless, and so in fact it becomes worth 100x.
        fivestar 9y ago
- jcoffland 9y ago
  > Bitcoin used to be at $1, now it's at $1,xxx. It's now at $2,4xx.
  - boznz 9y ago
    Wow.. The biggest game of JENGA in history!
    - jcoffland 9y ago
      The US dollar will collapse one day too.
  - fivestar 9y ago
    Which is evidence of nothing.
    - jcoffland 9y ago
      It's evidence of the price of Bitcoin.
- loceng 9y ago
  Conversation going on at http://avc.com/2017/06/icos-and-vcs/ http://avc.com/2017/06/icos-and-vcs/ today ...
- deleted 9y ago
  [deleted]
- clarkmoody 9y ago
  > Of course it does. Let's assume the newcomer is a miner, spending money to acquire the newly-created bitcoins from block coinbase transactions. That new money is created through inflation, which makes all existing bitcoin less-scarce. The miner must pay electricity costs, probably in terms of fiat currency, so there is continual sell pressure from coin inflation. That doesn't sound like it enriches earlier adopters. Rather, mining hurts the value of earlier coins through the two mechanisms of inflation and continual selling pressure. If the newcomer purchases bitcoin on an exchange, then it may cause upward pressure on the price (it depends on market conditions / liquidity). If the newcomers are purchasing bitcoin at a slower rate than the miners produce & sell, then there may be a decreasing price. And finally, those with lots of coins cannot simply dump them on exchanges and expect not to drive down the price. There is no direct mechanism whereby newcomers to bitcoin enrich existing holders. Instead, all value is derived from market forces of supply & demand on the exchanges. Bitcoin is no more a Ponzi / pyramid than Google stock.
- oelmekki 9y ago
  > Of course it does. Bitcoin used to be at $1, now it's at $1,xxx. And you can bet those who bought at $1 sold all they had at $10 ("wow, it's like 10 times what I invested, this is insane, this probably won't go any further!"), those who bought at $10 sold everything at best at $100, those who bought at $100 sold at $1000, etc. Actually, I'm not sure the people bitcoin made rich are that many. I have yet to see an article explaining how someone got millionaire by getting early into bitcoin. As for fundamentals, the underlying value of cryptocurrencies is to be a store of value that is not as easily stolen than cash, while still not sitting in at a bank. You can see it as cash that can be transmitted over the network, in small or big amount (and quite fast in that case, comparatively to a wire transfer). Of course, whether this tech will become mainstream is yet to be seen, it can still fail. On the other hand, the company you bought stocks from can also bankrupt and close.
  - bonzini 9y ago
    If someone got millionaire on Bitcoins, spending it would not be easy; the IRS might want to know how you are living beyond what your paycheck allows...
    - oelmekki 9y ago
      Or they may declare their gains to IRS. Bitcoin is not just a tax evasion thing :) (and it's actually quite dumb to use it for tax evasion, given how the ledger is public and will always be there)
      - bonzini 9y ago
        That's not that easy. It assumes you have tracked your cost basis, for example.
    - nerfhammer 9y ago
      AFAIK it's not illegal to make money off of bitcoin speculation. It's just like selling any other form of property.
    - solotronics 9y ago
- DINKDINK 9y ago
  >Bitcoin used to be at $1, now it's at $1,xxx. What happened in between was a massive influx of newcomers. That argument does not follow. An equivalent argument is: "A house in San Francisco used to cost at $100k, now it costs $1000k. What happened was a massive influx of new people to San Francisco." What happened is that the utility of a house in San Francisco changed and no one was willing to sell below $1000k.
  - JSDave 9y ago
    > "A house in San Francisco used to cost at $100k, now it costs $1000k. What happened was a massive influx of new people to San Francisco." Seems pretty reasonable to me.
    - fivestar 9y ago
      Except that it isn't--it's a bubble and at some point that bubble is going to pop. We already went through all this in 2008 and people have already forgotten the lesson! It's amazing how fungible the human mind is. "This time it will be different." That's what every communist who ever lived thought, too. This time, the stupid scheme of wealth transfer will work perfectly if we just can pass a few more laws and control a little bit more of people's behavior, we can build our everlasting, perfect utopia. Real estate crashes when the last marginal buyer is priced out of the market. California real estate has crashed 2-3 times just in my lifetime. It will crash again and whoever bought at the top will be bagholders. It is the immutable law of bubbles.
    - DINKDINK 9y ago
      Asset prices move because bids /and/ asks change not because the number of people who hold the asset increase.
  - deleted 9y ago
    [deleted]
frgtpsswrdlame 9y ago
>The acquisition of bitcoin by newcomers in no way enriches earlier adopters Doesn't it though? The reason we're talking about ethereum here is because it's got the best adoption of any of the newer altcoins. And the more people talk about these altcoins the better they seem to do. Hence things like "this is good for bitcoin", they're trying to get buy in.
- moh_maya 9y ago
  I suppose. But there is no guarantee of return, or even the promise of return, which is something a Ponzi scheme almost always offers. As OP pointed out, everyone who is investing in mining / purchasing these coins is hoping they will be a store of value that will appreciate. At some level, it's no different from betting on specific commodities. No one is promising anything. I think that's an important distinction.
  - deleted 9y ago
    [deleted]
  - frgtpsswrdlame 9y ago
    The comment I'm replying to is talking about pyramid schemes so for clarification: the subject of this thread is ponzi schemes on an alt-coin but my belief is that the altcoins themselves are a classic pyramid scheme. >there is no guarantee of return, or even the promise of return You should check out some altcoin subreddits and /biz/ and I think you might disagree with yourself. "Frgtpsswrdlame-coin is going to the moon! You guys need to hop onto this, I already have a 100% return. Plus it's safe because frgtpsswrdlame-coin has <encryption gibberish>. It's still early so get in!" "Buy the dip! If you look at frgtpsswrdlame-coin's charts you can see that there's a <technical analysis gibberish> pattern forming which means this is going to bounce right back!" Perhaps what seperates this from a more traditional pyramid scheme like door-to-door knife sales is that you can't point to the guy who convinced you to buy in and you can't point to the guys at the top of the hierarchy but they still exist and they still misled you. It's just obfuscated because of the internet.
    - 9y ago
jensC 9y ago
I agree. Nobody at any time promised anything. If you invested early, it was a high risk that the whole cryptocurrency could just have imploded and actually for many it did (BTC and Mt.Gox or lost wallets). Now a few years later it pays out for those who cared early about it. Congratulations for those.
fivestar 9y ago
It's a Ponzi.

deleted 9y ago

[deleted]

matt4077 9y ago

> The acquisition of bitcoin by newcomers in no way enriches earlier adopters, as in a classic pyramid scheme. Of course it does. Bitcoin used to be at $1, now it's at $1,xxx. What happened in between was a massive influx of newcomers. The difference to, for example, the stock market is in the "underlying value". If I buy some stock and it's price collapsed the next day, I'm still entitled to my share of future profits etc. If the company is sound, I have lost nothing. A ponzi scheme's underlying value is only the future growth of the scheme itself. I'd say the jury is still out for bitcoin et alt: how much of the growth is being fuelled by speculation, and to what extend is that speculation actually speculating on future speculation?

splintercell 9y ago
> The difference to, for example, the stock market is in the "underlying value". If I buy some stock and it's price collapsed the next day, I'm still entitled to my share of future profits etc. If the company is sound, I have lost nothing. Bitcoin is a payment network (Even if the price collapses to really low). Ethereum is a smart contracts platform, so you can still build certain kind of apps on it even if it's price collapses. A ponzi scheme as NO business model (or the business model claimed, isn't a valid one). Using bitcoin I can actually transfer wealth from one part of the world to another, similarly using Ethereum I can create decentralized applications funded by payment (like pay-to-seed bit torrent network).
- loceng 9y ago
  On the surface Bitcoin is a payment network, that isn't all there is though. If Bitcoin or the other cryptocurrencies didn't at least have some value or perceived value to its users, then they wouldn't gain adoption. This usefulness doesn't negate that it has a Ponzi scheme structure to it. In a traditional Ponzi scheme, the value is the big returns you're getting - being fed by the next investor in line to be scammed. That only works when the Ponzi artist targets people with substantial amounts of money - however Bitcoin now enables that for very small transactions, globally. That Bitcoin has value outside of the Ponzi aspect, doesn't negate that it's a Ponzi structure.
  - someSven 9y ago
    I think it does. A ponzi has one issuer, and it's worthless. Bitcoin is speculation and it's a brand, and a plattform whitch is usefull.
    - loceng 9y ago
      A Ponzi scheme is only worthless and useless once it ends because the issuer decides to run off with a chunk of money; that likely should easily equate to people selling off their Bitcoin to eager investors who see this stock-market like system that if they get in 'early' on - or at a low enough price - they can make money selling back out. That Bitcoin is speculation, a brand, and useful in some ways - that is why it can be sustained ... because the network of speculators/investors is global, and people with $100 or people with $10s of millions that want to gamble can join in on. The 'single issuer' could also be considered the Bitcoin blockchain itself. Years ago I met someone who sold off $20MM+ of Bitcoin, bought real estate for rentals, then bought more Bitcoin when low to rinse and repeat. How many people are doing this which keeps Bitcoin going, while slowly increasing the price? It could easily be 50%+ of money, of course everyone with Bitcoin is incentivized to increase adoption - so their Bitcoin doesn't become worthless, and so in fact it becomes worth 100x.
      - fivestar 9y ago
jcoffland 9y ago
> Bitcoin used to be at $1, now it's at $1,xxx. It's now at $2,4xx.
- boznz 9y ago
  Wow.. The biggest game of JENGA in history!
  - jcoffland 9y ago
    The US dollar will collapse one day too.
- fivestar 9y ago
  Which is evidence of nothing.
  - jcoffland 9y ago
    It's evidence of the price of Bitcoin.
loceng 9y ago
Conversation going on at http://avc.com/2017/06/icos-and-vcs/ http://avc.com/2017/06/icos-and-vcs/ today ...
deleted 9y ago
[deleted]
clarkmoody 9y ago
> Of course it does. Let's assume the newcomer is a miner, spending money to acquire the newly-created bitcoins from block coinbase transactions. That new money is created through inflation, which makes all existing bitcoin less-scarce. The miner must pay electricity costs, probably in terms of fiat currency, so there is continual sell pressure from coin inflation. That doesn't sound like it enriches earlier adopters. Rather, mining hurts the value of earlier coins through the two mechanisms of inflation and continual selling pressure. If the newcomer purchases bitcoin on an exchange, then it may cause upward pressure on the price (it depends on market conditions / liquidity). If the newcomers are purchasing bitcoin at a slower rate than the miners produce & sell, then there may be a decreasing price. And finally, those with lots of coins cannot simply dump them on exchanges and expect not to drive down the price. There is no direct mechanism whereby newcomers to bitcoin enrich existing holders. Instead, all value is derived from market forces of supply & demand on the exchanges. Bitcoin is no more a Ponzi / pyramid than Google stock.
oelmekki 9y ago
> Of course it does. Bitcoin used to be at $1, now it's at $1,xxx. And you can bet those who bought at $1 sold all they had at $10 ("wow, it's like 10 times what I invested, this is insane, this probably won't go any further!"), those who bought at $10 sold everything at best at $100, those who bought at $100 sold at $1000, etc. Actually, I'm not sure the people bitcoin made rich are that many. I have yet to see an article explaining how someone got millionaire by getting early into bitcoin. As for fundamentals, the underlying value of cryptocurrencies is to be a store of value that is not as easily stolen than cash, while still not sitting in at a bank. You can see it as cash that can be transmitted over the network, in small or big amount (and quite fast in that case, comparatively to a wire transfer). Of course, whether this tech will become mainstream is yet to be seen, it can still fail. On the other hand, the company you bought stocks from can also bankrupt and close.
- bonzini 9y ago
  If someone got millionaire on Bitcoins, spending it would not be easy; the IRS might want to know how you are living beyond what your paycheck allows...
  - oelmekki 9y ago
    Or they may declare their gains to IRS. Bitcoin is not just a tax evasion thing :) (and it's actually quite dumb to use it for tax evasion, given how the ledger is public and will always be there)
    - bonzini 9y ago
      That's not that easy. It assumes you have tracked your cost basis, for example.
  - nerfhammer 9y ago
    AFAIK it's not illegal to make money off of bitcoin speculation. It's just like selling any other form of property.
  - solotronics 9y ago
DINKDINK 9y ago
>Bitcoin used to be at $1, now it's at $1,xxx. What happened in between was a massive influx of newcomers. That argument does not follow. An equivalent argument is: "A house in San Francisco used to cost at $100k, now it costs $1000k. What happened was a massive influx of new people to San Francisco." What happened is that the utility of a house in San Francisco changed and no one was willing to sell below $1000k.
- JSDave 9y ago
  > "A house in San Francisco used to cost at $100k, now it costs $1000k. What happened was a massive influx of new people to San Francisco." Seems pretty reasonable to me.
  - fivestar 9y ago
    Except that it isn't--it's a bubble and at some point that bubble is going to pop. We already went through all this in 2008 and people have already forgotten the lesson! It's amazing how fungible the human mind is. "This time it will be different." That's what every communist who ever lived thought, too. This time, the stupid scheme of wealth transfer will work perfectly if we just can pass a few more laws and control a little bit more of people's behavior, we can build our everlasting, perfect utopia. Real estate crashes when the last marginal buyer is priced out of the market. California real estate has crashed 2-3 times just in my lifetime. It will crash again and whoever bought at the top will be bagholders. It is the immutable law of bubbles.
  - DINKDINK 9y ago
    Asset prices move because bids /and/ asks change not because the number of people who hold the asset increase.
- deleted 9y ago
  [deleted]

frgtpsswrdlame 9y ago

>The acquisition of bitcoin by newcomers in no way enriches earlier adopters Doesn't it though? The reason we're talking about ethereum here is because it's got the best adoption of any of the newer altcoins. And the more people talk about these altcoins the better they seem to do. Hence things like "this is good for bitcoin", they're trying to get buy in.

moh_maya 9y ago
I suppose. But there is no guarantee of return, or even the promise of return, which is something a Ponzi scheme almost always offers. As OP pointed out, everyone who is investing in mining / purchasing these coins is hoping they will be a store of value that will appreciate. At some level, it's no different from betting on specific commodities. No one is promising anything. I think that's an important distinction.
- deleted 9y ago
  [deleted]
- frgtpsswrdlame 9y ago
  The comment I'm replying to is talking about pyramid schemes so for clarification: the subject of this thread is ponzi schemes on an alt-coin but my belief is that the altcoins themselves are a classic pyramid scheme. >there is no guarantee of return, or even the promise of return You should check out some altcoin subreddits and /biz/ and I think you might disagree with yourself. "Frgtpsswrdlame-coin is going to the moon! You guys need to hop onto this, I already have a 100% return. Plus it's safe because frgtpsswrdlame-coin has <encryption gibberish>. It's still early so get in!" "Buy the dip! If you look at frgtpsswrdlame-coin's charts you can see that there's a <technical analysis gibberish> pattern forming which means this is going to bounce right back!" Perhaps what seperates this from a more traditional pyramid scheme like door-to-door knife sales is that you can't point to the guy who convinced you to buy in and you can't point to the guys at the top of the hierarchy but they still exist and they still misled you. It's just obfuscated because of the internet.
  - 9y ago

jensC 9y ago

I agree. Nobody at any time promised anything. If you invested early, it was a high risk that the whole cryptocurrency could just have imploded and actually for many it did (BTC and Mt.Gox or lost wallets). Now a few years later it pays out for those who cared early about it. Congratulations for those.

fivestar 9y ago

It's a Ponzi.