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Nearly every cryptocurrency followed Bitcoins scheme, wherein massive quantities of the supply were produced for the first few weeks to a small group of users,
by 0wing 9y ago
Nearly every cryptocurrency followed Bitcoins scheme, wherein massive quantities of the supply were produced for the first few weeks to a small group of users, so any later users entering these systems must than buy from those horders or spend more and more capital on the increasingly expensive and reducing output of mining.
It's not exactly a ponzi or pyramid scheme, but the manipulative intent is clear so a new term is needed.
It's a Satoshi scheme.
- coralreef 9y agoYeah, there were relatively more coins produced early on. Those coins were also pretty much worthless early on.
- geezerjay 9y ago> Those coins were also pretty much worthless early on. ...hence the "pump" stage of the pump-and-dump scheme being conducted quite extensively, with all forms of scammers publicizing the immense virtues and magically perpetual low value of bitcoin, hoping that the next batch of fools and idiots open their wallets to finance the value pumping.
- Fnoord 9y agoIt could be worse. Imagine for a moment Satoshi is North Korean. "What on earth have we done?"
- coralreef 9y ago> publicizing the immense virtues and magically perpetual low value... This happens every day in securities. Those "pumpers" are called "analysts". They sometimes work for investment banks and research firms. You can choose to follow their advice or you can bet against it. Apple shares were $0.50 (unadjusted) in its early history. By your definition, anyone espousing the future of Apple and computers at that point is a pump and dump scammer.
- 0wing 9y agoApple doesn't generate more shares every 10 minutes. Apple and stocks also generate value, whereas Bitcoin and PoW software burns electricity/value.
- Zarath 9y agoLiterally every investment is a "ponzi" or "pyramid" by your definition. If I invest in a company I can get a hell of a lot more shares for cheap now than when they IPO.
- 0wing 9y agoNo. This is specific to crypto currency supply production algorithms. Coin supplies are created by running the software. Bitcoin and many other cryptocoins use a rule that lets the first users take control of the supply very easily by generating the coins for very low CPU/GPU difficulty. After a few weeks, the work required to produce more coins doubles. This just lets a few users control the supply, wait, and attempt to convince new users the coins are rare because the production/mining has become significantly more expensive. tl;dr: early miners generate most of the coins inexpensively, and try to sell to greater fools because the software stops creating coins as easily as the first few days
- Goladus 9y agoShares are fractional ownership of a company that can grow or shrink. The whole point is that their value corresponds with the total value of the company. It becomes a ponzi scheme when the only value from early shares comes from investment in later shares. That's what's happening with bitcoin.
- 0wing 9y agoIt's also simply how the supply is produced. Satoshi made a machine that prints money if you do work. He made it so it only required a small amount of work to begin with and as time goes on, someone else with the same machine and the same work gets less. It's made even worse because there were less users battling over the larger easy production near the start, and more and more users fighting over less and less output. tl;dr it's even more malicious than a ponzi