8 ms·

Can someone familiar explain why cryptocurrencies aren't a bubble? They both seem to exhibit similar characteristics. Clearly, are shown by the site here, thes

by tabeth 9y ago

Can someone familiar explain why cryptocurrencies aren't a bubble? They both seem to exhibit similar characteristics. Clearly, are shown by the site here, these aren't nearly as liquid as fiat currencies, nor are they really used to purchase anything. So... What is it? EDIT: upon thinking about it, MLM wasn't the term I meant.

ct0 9y ago
Having never been a part of an MLM, I would say the key difference is that there is no obligation to buy product.
jhpriestley 9y ago
They're not a MLM because there isn't the "pyramid" aspect. If I buy bitcoin at $10 and sell it to you at $100, then I don't get a percent of your sales going forward or anything like that. It's a plain old bubble.
- qeternity 9y ago
  That's not what makes MLM a "pyramid". Residuals are part of lots of legitimate business. What makes most MLM a pyramid scheme is the fact that growth is predicated on bringing new members into the scheme, rather than existing members growing their business.
  - arkades 9y ago
    Not growth, but revenues. All asset appreciation is predicated on increases in demand for an asset. Asset appreciation isn’t a pyramid. Pyramids have no source of value - even an ephemeral asset - just dues of new members being channeled into revenue for preceding members.
    - xocyabencl 9y ago
      They key thing about pyramids/MLM is that the growth is based entirely on getting more investors i.e. people who are putting money in with the intention of getting money out later (this also included MLM sellers who have to buy product upfront). Whereas a non-pyramid grows because it has more non-investor users, or some other source of revenue from people who don't plan to take that money out later.
- goldenkey 9y ago
  I'd say it's more like a ponzi because the market volume is so far from accurate due to the chameleon hoardsters. They will dumptruck eventually, so anything gleaned from looking at current market stats is really just a facade. Wait till the whales start selling...And no disrespect to Satoshi who is most likely Finney but if he or his children ever decide to dump their share that most appraisers tend to consider "missing for good," you can bet the price will take a monstrous hit. Thats why I consider BTC a ponzi. The current dynamics are an ill reflection of the actual level of buyers and sellers. And there is no real way to assess number of hoarders due to not knowing how many BTC are lost or simply forgot about.
- biot 9y ago
  The part I’ve never liked is that Satoshi Nakamoto only mined for 10 days and got ~1M bitcoins. Today, if I mine for 10 days I’ll probably get 0.001 bitcoins. Even if you adjust for increased computing power, why are my hash calculations valued a billion times less than his? Why can’t I get 1M bitcoins for a similar effort? From a market value standpoint, his computing effort is worth $18B. If, today, I put the same computing effort in as he did, I only get enough for a nice lunch. I understand the technical reasons why due to the 21M bitcoin limit, hashrate difficulty increasing, etc. It just seems like a rigged system with the people “on top” getting huge rewards for very little work whereas the people lower down who do many orders of magnitude more work are getting very little reward. From that perspective, it has the scent of MLM, if you will.
  - zodiac 9y ago
    Could you design a secure PoW scheme that doesn't suffer form this flaw? I don't think you can
  - tromp 9y ago
    He would have had to mine for 139 days to get ~1M bitcoins (50BTC every 10 min). More if other people are mining too.
    - biot 9y ago
      Wikipedia says he mined “at genesis and for 10 days afterwards”. Regardless of 10 or 139 (perhaps “genesis” includes several years of development), it doesn’t change the point.
  - sumedh 9y ago
    > The part I’ve never liked is that Satoshi Nakamoto only mined for 10 days He took the risk initially so he gets to enjoy the spoils.
    - biot 9y ago
      Creation of bitcoin aside, what risk is involved in an early adopter letting their computer crunch numbers for a few weeks? If you were the third person ever to mine bitcoin, about the only risk I can think of is a bit of time & effort plus a slightly higher electric bill.
stormbrew 9y ago
So like, there are a lot of problems with cryptocurrencies obviously, but they don't really resemble mlm in any particular way even if you consider them to be a scam? In multilevel marketing, people are being sold downstream profits directly from people they sign up. If you sign up another person you take a cut of their revenue. If you sign up enough people and they sign up enough people you stand to gain a lot of money with very little work. When it falls apart, assuming you're not deep enough in that you're indited yourself, you keep that profit. It's the people at the tail end who lose because the only way to really profit is to sign people up. On the other hand when you sell someone on bitcoin you aren't taking a cut of their 'revenue'. If you're invested in bitcoin you're as in the hock for a crash as they are. It's an asset, though a somewhat different one to traditional assets. As such it's subject to the same kinds of asset bubbles as any other asset (ie. gold is not as liquid as fiat, nor is it really used to buy things). But it's not the same kind of thing as MLM.
- mswiss 9y ago
  You should think about which fiat your likening it too. Its more liquid that certain fiat (Venezuela) and can definitely be used to buy things. It's not being used to buy things because its a deflationary currency which along with an adoption curve means it's more advantageous to sit on it. The adoption is definitely increasing the value of it, its a more liquid gold to me, but like any other currency or asset the value is derived from the trust and value that people put in it.
- milcron 9y ago
  There are some MLM scams in crypto. Bitconnect, for instance.
adsfasdf2332 9y ago
because it is nothing like MLM or a pyramid scheme at all? Other than the fact that people have made a lot of money from them.
- 659087 9y ago
  It does have some similarities to an MLM scheme. Mainly the part where a bunch of obnoxious people are doing everything they can to con others to buy in and make them money.
helen842000 9y ago
I bought BTC to use as currency for transactions not as an investment. It should be used for that purpose. MLM only has one purpose - to recruit others into it. I don't ask other people to buy BTC so I can make a profit. MLM usually has a pyramid commission structure.
- xur17 9y ago
  If you don't mind me asking, what types of transactions do you currently use it for? Based on the current technology and fees, it is quite expensive to transact, and really doesn't make sense for me. That said, I can see a future for it if something like lightning network ever gets released (and actually works).
  - freeone3000 9y ago
    Bitcoin has a flat fee per transaction, so even at $6 it doesn't take a lot of money until it's winning out over the 5% PayPal takes.
    - ac29 9y ago
      Bitcoin has any fee you want per transaction, from 0 to all the bitcoin you control. The more you pay in fees, the more likely it is to be included on the blockchain sooner.
  - helen842000 9y ago
    Currently it doesn't make sense to use it for transactions with it changing wildly from one hour to the next which is a shame. I will be glad when it settles down. However I have in the past used it for online transactions and used it in small bars/restaurants and used BTC ATMs
- y04nn 9y ago
  Yes, people may be able to live their life without going back to USD currency, so their will be no devaluation of a crypo X as long as people trust it (as gold). When a cryto X is not trusted anymore people are going to stop using it to go back to USD or another crypto thus devaluating the cryto X in respect to the USD. A big advantage of cryptocurrencies (I think) is that there is no regulation (no central bank injecting billions), but it is also its Achilles's heel because it can't be used ha s a commodity currency because it miss the stability of a currency backed by a central bank.
berberous 9y ago
It is definitely a speculative bubble. I think we are in a similar position as 1998. The technologists can see that [the Internet]/[cryptocurrencies] are very interesting technologies, with the potential to change the world. But retail investors are pouring in, without any understanding of the tech, and inflating both good and bad [companies]/[coins] in a pure speculative frenzy. If I had to bet, there is still lots of upwards runway left, but at some point, it will come crashing down, the bad [companies][coins] will be worthless, and out of the ashes will rise a more sensible market with some of these [companies][coins] truly changing the world.
- jjawssd 9y ago
  I think the big question here is what the crash will settle at for the big 3: BTC/ETH/LTC. Thoughts?
  - bsdnoob 9y ago
    Why not Monero?
    - jjawssd 9y ago
      Simply to limit scope because Coinbase does not support Monero.
  - wsc981 9y ago
    I believe BTC is here to stay, due to it being some form of "backing" currency for all other crypto currencies. I guess one could claim the same for ETH, since it's used for many ICOs. But apart from that I am not sure what the future of ETH or LTC will be. To me it seems some adaptations of ETH have a much clearer use-case and therefore are likely to raise a lot in value in the future. One of the ETH based coins that I really believe in is OmiseGo[0] (OMG) which will bring banking capabilities to many people that currently don't have a bank account. --- [0]: https://omisego.network https://omisego.network
    - zodiac 9y ago
sp821543 9y ago
They are in a bubble, and bubbles can last for years. They also drive innovation.
macawfish 9y ago
In some sense, money itself has an "MLM" quality to it.
mtgx 9y ago
Depends what timescale you mean. Does one cryptocurrency increase 20x in a month? Then yes, it's a bubble, and it will likely crash pretty hard in another month or two (but probably not as much as it rose). Does it increase 20x in a few years? Not necessarily a bubble because its value may simply be related to its adoption and potential. The thing about cryptocurrencies is they have rather limited supply once they are launched on the market. So if their userbase/number of adopters increases by 10x overnight, and most of them intend to keep those coins, then it doesn't really qualify as a bubble, even if the value explodes.
volgo 9y ago
It is a bubble. In fact I'd venture so far as to say it's a Ponzi scheme. But in any successful Ponzi scheme, the early investors actually get a huge payout. I don't regret investing in it one bit.
xutopia 9y ago
Today I went to one bank to transfer 60k from one account to an account in a different bank. I paid 7.50$ to get a certified check from Bank A. Went to the Bank B near my house to deposit it there. Unfortunately the branch near my house isn't where my account is. They tried faxing a photocopy of my certified check to the other branch but the line was busy. They're going to continue trying until 3pm today when they close. After 2 hours I see the funds are in my account but I'm not allowed to access it because I'm limited to only 2000$ per day. They didn't call me as per instruction once the funds were in my account. During that same time I transferred 15k$ from one crypto-wallet to another. It took 10 minutes all told. Sure there are lots of people who are buying crypto because they think they'll make loads of money but a significant portion of us are in it because we dislike the infantilizing ways the current banks hold us hostage.
- dclowd9901 9y ago
  This is not a problem most people have.
  - superquest 9y ago
    Banking isn't an uncommon problem.
    - ac29 9y ago
      Trying to transfer nearly $100k in a day is.
      - robotresearcher 9y ago
        For individuals, yes. For businesses, no.
  - xutopia 9y ago
    I get that this doesn't happen every day but I paid for a certified check. Their method for certifying it involved 5 people and will take a few days before it clears. People do certified checks whenever they buy a house, a car or transfer significant money from one institution to another. And don't get me started on sending money to family members overseas!
aviv 9y ago
The bubble part of it is not their meteoric rise, it's that they can easily be replaced by the next best coin. There is no inherent reason why Bitcoin should be more popular than Litecoin as a store of value, except for the fact that it currently is. There will be many hundreds of coins flooding the market. There is no such equivalent in the real (offline) world. You have gold, silver, platinum, etc. - but that's about it. No one is inventing/digging up new types of metals.
- shusson 9y ago
  What about the value in terms of the size of the network?
bitxbit 9y ago
Just think about crypto-backed real-world assets and compare that against "market capitalization" (which is ridiculous to even call it that in my view). This is why ICOs are nothing more than buying into pump-and-dump stocks or at best microcap biotechs.

by tabeth 9y ago

ct0 9y ago

Having never been a part of an MLM, I would say the key difference is that there is no obligation to buy product.

jhpriestley 9y ago

They're not a MLM because there isn't the "pyramid" aspect. If I buy bitcoin at $10 and sell it to you at $100, then I don't get a percent of your sales going forward or anything like that. It's a plain old bubble.

qeternity 9y ago
That's not what makes MLM a "pyramid". Residuals are part of lots of legitimate business. What makes most MLM a pyramid scheme is the fact that growth is predicated on bringing new members into the scheme, rather than existing members growing their business.
- arkades 9y ago
  Not growth, but revenues. All asset appreciation is predicated on increases in demand for an asset. Asset appreciation isn’t a pyramid. Pyramids have no source of value - even an ephemeral asset - just dues of new members being channeled into revenue for preceding members.
  - xocyabencl 9y ago
    They key thing about pyramids/MLM is that the growth is based entirely on getting more investors i.e. people who are putting money in with the intention of getting money out later (this also included MLM sellers who have to buy product upfront). Whereas a non-pyramid grows because it has more non-investor users, or some other source of revenue from people who don't plan to take that money out later.
goldenkey 9y ago
I'd say it's more like a ponzi because the market volume is so far from accurate due to the chameleon hoardsters. They will dumptruck eventually, so anything gleaned from looking at current market stats is really just a facade. Wait till the whales start selling...And no disrespect to Satoshi who is most likely Finney but if he or his children ever decide to dump their share that most appraisers tend to consider "missing for good," you can bet the price will take a monstrous hit. Thats why I consider BTC a ponzi. The current dynamics are an ill reflection of the actual level of buyers and sellers. And there is no real way to assess number of hoarders due to not knowing how many BTC are lost or simply forgot about.
biot 9y ago
The part I’ve never liked is that Satoshi Nakamoto only mined for 10 days and got ~1M bitcoins. Today, if I mine for 10 days I’ll probably get 0.001 bitcoins. Even if you adjust for increased computing power, why are my hash calculations valued a billion times less than his? Why can’t I get 1M bitcoins for a similar effort? From a market value standpoint, his computing effort is worth $18B. If, today, I put the same computing effort in as he did, I only get enough for a nice lunch. I understand the technical reasons why due to the 21M bitcoin limit, hashrate difficulty increasing, etc. It just seems like a rigged system with the people “on top” getting huge rewards for very little work whereas the people lower down who do many orders of magnitude more work are getting very little reward. From that perspective, it has the scent of MLM, if you will.
- zodiac 9y ago
  Could you design a secure PoW scheme that doesn't suffer form this flaw? I don't think you can
- tromp 9y ago
  He would have had to mine for 139 days to get ~1M bitcoins (50BTC every 10 min). More if other people are mining too.
  - biot 9y ago
    Wikipedia says he mined “at genesis and for 10 days afterwards”. Regardless of 10 or 139 (perhaps “genesis” includes several years of development), it doesn’t change the point.
- sumedh 9y ago
  > The part I’ve never liked is that Satoshi Nakamoto only mined for 10 days He took the risk initially so he gets to enjoy the spoils.
  - biot 9y ago
    Creation of bitcoin aside, what risk is involved in an early adopter letting their computer crunch numbers for a few weeks? If you were the third person ever to mine bitcoin, about the only risk I can think of is a bit of time & effort plus a slightly higher electric bill.

stormbrew 9y ago

So like, there are a lot of problems with cryptocurrencies obviously, but they don't really resemble mlm in any particular way even if you consider them to be a scam? In multilevel marketing, people are being sold downstream profits directly from people they sign up. If you sign up another person you take a cut of their revenue. If you sign up enough people and they sign up enough people you stand to gain a lot of money with very little work. When it falls apart, assuming you're not deep enough in that you're indited yourself, you keep that profit. It's the people at the tail end who lose because the only way to really profit is to sign people up. On the other hand when you sell someone on bitcoin you aren't taking a cut of their 'revenue'. If you're invested in bitcoin you're as in the hock for a crash as they are. It's an asset, though a somewhat different one to traditional assets. As such it's subject to the same kinds of asset bubbles as any other asset (ie. gold is not as liquid as fiat, nor is it really used to buy things). But it's not the same kind of thing as MLM.

mswiss 9y ago
You should think about which fiat your likening it too. Its more liquid that certain fiat (Venezuela) and can definitely be used to buy things. It's not being used to buy things because its a deflationary currency which along with an adoption curve means it's more advantageous to sit on it. The adoption is definitely increasing the value of it, its a more liquid gold to me, but like any other currency or asset the value is derived from the trust and value that people put in it.
milcron 9y ago
There are some MLM scams in crypto. Bitconnect, for instance.

adsfasdf2332 9y ago

because it is nothing like MLM or a pyramid scheme at all? Other than the fact that people have made a lot of money from them.

659087 9y ago
It does have some similarities to an MLM scheme. Mainly the part where a bunch of obnoxious people are doing everything they can to con others to buy in and make them money.

helen842000 9y ago

I bought BTC to use as currency for transactions not as an investment. It should be used for that purpose. MLM only has one purpose - to recruit others into it. I don't ask other people to buy BTC so I can make a profit. MLM usually has a pyramid commission structure.

xur17 9y ago
If you don't mind me asking, what types of transactions do you currently use it for? Based on the current technology and fees, it is quite expensive to transact, and really doesn't make sense for me. That said, I can see a future for it if something like lightning network ever gets released (and actually works).
- freeone3000 9y ago
  Bitcoin has a flat fee per transaction, so even at $6 it doesn't take a lot of money until it's winning out over the 5% PayPal takes.
  - ac29 9y ago
    Bitcoin has any fee you want per transaction, from 0 to all the bitcoin you control. The more you pay in fees, the more likely it is to be included on the blockchain sooner.
- helen842000 9y ago
  Currently it doesn't make sense to use it for transactions with it changing wildly from one hour to the next which is a shame. I will be glad when it settles down. However I have in the past used it for online transactions and used it in small bars/restaurants and used BTC ATMs
y04nn 9y ago
Yes, people may be able to live their life without going back to USD currency, so their will be no devaluation of a crypo X as long as people trust it (as gold). When a cryto X is not trusted anymore people are going to stop using it to go back to USD or another crypto thus devaluating the cryto X in respect to the USD. A big advantage of cryptocurrencies (I think) is that there is no regulation (no central bank injecting billions), but it is also its Achilles's heel because it can't be used ha s a commodity currency because it miss the stability of a currency backed by a central bank.

berberous 9y ago

It is definitely a speculative bubble. I think we are in a similar position as 1998. The technologists can see that [the Internet]/[cryptocurrencies] are very interesting technologies, with the potential to change the world. But retail investors are pouring in, without any understanding of the tech, and inflating both good and bad [companies]/[coins] in a pure speculative frenzy. If I had to bet, there is still lots of upwards runway left, but at some point, it will come crashing down, the bad [companies][coins] will be worthless, and out of the ashes will rise a more sensible market with some of these [companies][coins] truly changing the world.

jjawssd 9y ago
I think the big question here is what the crash will settle at for the big 3: BTC/ETH/LTC. Thoughts?
- bsdnoob 9y ago
  Why not Monero?
  - jjawssd 9y ago
    Simply to limit scope because Coinbase does not support Monero.
- wsc981 9y ago
  I believe BTC is here to stay, due to it being some form of "backing" currency for all other crypto currencies. I guess one could claim the same for ETH, since it's used for many ICOs. But apart from that I am not sure what the future of ETH or LTC will be. To me it seems some adaptations of ETH have a much clearer use-case and therefore are likely to raise a lot in value in the future. One of the ETH based coins that I really believe in is OmiseGo[0] (OMG) which will bring banking capabilities to many people that currently don't have a bank account. --- [0]: https://omisego.network https://omisego.network
  - zodiac 9y ago

sp821543 9y ago

They are in a bubble, and bubbles can last for years. They also drive innovation.

macawfish 9y ago

In some sense, money itself has an "MLM" quality to it.

mtgx 9y ago

Depends what timescale you mean. Does one cryptocurrency increase 20x in a month? Then yes, it's a bubble, and it will likely crash pretty hard in another month or two (but probably not as much as it rose). Does it increase 20x in a few years? Not necessarily a bubble because its value may simply be related to its adoption and potential. The thing about cryptocurrencies is they have rather limited supply once they are launched on the market. So if their userbase/number of adopters increases by 10x overnight, and most of them intend to keep those coins, then it doesn't really qualify as a bubble, even if the value explodes.

volgo 9y ago

It is a bubble. In fact I'd venture so far as to say it's a Ponzi scheme. But in any successful Ponzi scheme, the early investors actually get a huge payout. I don't regret investing in it one bit.

xutopia 9y ago

Today I went to one bank to transfer 60k from one account to an account in a different bank. I paid 7.50$ to get a certified check from Bank A. Went to the Bank B near my house to deposit it there. Unfortunately the branch near my house isn't where my account is. They tried faxing a photocopy of my certified check to the other branch but the line was busy. They're going to continue trying until 3pm today when they close. After 2 hours I see the funds are in my account but I'm not allowed to access it because I'm limited to only 2000$ per day. They didn't call me as per instruction once the funds were in my account. During that same time I transferred 15k$ from one crypto-wallet to another. It took 10 minutes all told. Sure there are lots of people who are buying crypto because they think they'll make loads of money but a significant portion of us are in it because we dislike the infantilizing ways the current banks hold us hostage.

dclowd9901 9y ago
This is not a problem most people have.
- superquest 9y ago
  Banking isn't an uncommon problem.
  - ac29 9y ago
    Trying to transfer nearly $100k in a day is.
    - robotresearcher 9y ago
      For individuals, yes. For businesses, no.
- xutopia 9y ago
  I get that this doesn't happen every day but I paid for a certified check. Their method for certifying it involved 5 people and will take a few days before it clears. People do certified checks whenever they buy a house, a car or transfer significant money from one institution to another. And don't get me started on sending money to family members overseas!

aviv 9y ago

The bubble part of it is not their meteoric rise, it's that they can easily be replaced by the next best coin. There is no inherent reason why Bitcoin should be more popular than Litecoin as a store of value, except for the fact that it currently is. There will be many hundreds of coins flooding the market. There is no such equivalent in the real (offline) world. You have gold, silver, platinum, etc. - but that's about it. No one is inventing/digging up new types of metals.

shusson 9y ago
What about the value in terms of the size of the network?

bitxbit 9y ago

Just think about crypto-backed real-world assets and compare that against "market capitalization" (which is ridiculous to even call it that in my view). This is why ICOs are nothing more than buying into pump-and-dump stocks or at best microcap biotechs.