6 ms·

It's a pyramid scheme, just dressed up in high-tech, vaguely libertarian clothing. That's why sensible governments (not the "bank lobby") are starting to ban i

by Vivtek 15y ago

It's a pyramid scheme, just dressed up in high-tech, vaguely libertarian clothing. That's why sensible governments (not the "bank lobby") are starting to ban it - it's inherently a bad idea (unless you're an early adopter - just like any pyramid scheme). Bitcoins are no different from tulip bulbs.

awt 15y ago
Why is it inherently a bad idea? Why is it a pyramid scheme?
- achompas 15y ago
  Because Bitcoins are being suggested as an alternative to fiat money. However, given their current rate of appreciation, Bitcoins are actually an investment, not a currency. What is their inherent value, then? Commodities (whether precious or industrial) can be used in production or for luxury goods. Equities generate profits, which are subsequently shared with investors. What do Bitcoins do? Nothing.
  - weavejester 15y ago
    What do Bitcoins do? Nothing. That's not true. Bitcoins can be securely transferred between accounts without the need for a centralized broker. That's not "nothing".
    - achompas 15y ago
      So their unique value comes from private transactions...but there's only a finite supply of bitcoins? How many of these transactions can actually occur in 2013-2014, when every bitcoin has been mined and their value is skyrocketing?
      - weavejester 15y ago
        The amount of transactions that can take place is unlimited, and even though there is a maximum of 2.1 million coins, each coin is divisible to 8 decimal places, giving 2.1 quadrillion units of currency. Also, mining won't be completed this century, although the rate at which coins are generated decreases over time.
    - cube13 15y ago
      Cash, delivered in person, does the same thing.
      - weavejester 15y ago
        Which has an obvious disadvantage over bitcoins: it has to be delivered in person.
    - vladd 15y ago
      That's not the value of the bitcoin, it's the value of the cryptographic code which has been open sourced. Anybody can fork it and create its own "Webcoin", but there's no intrinsic value in any forked instance coin, beyond the publicity that allows early adopters to cash in.
weavejester 15y ago
Bitcoin looks nothing like a pyramid scheme. There is a relationship between the value of a bitcoin and the demand, but that's true for any product.
- hugh3 15y ago
  Bitcoin looks exactly like a pyramid scheme from a money-transfer point of view. Money gets shifted from gullible suckers to the folks who invent the scheme, until one day you run out of people willing to sign on for the scheme, at which point everything collapses and the late adopters are left holding the bag. It's kinda sad. I think when it happens I'll make like edw519 and self-publish a book "The Best Of Hugh3" in which I publish all my "told you so" comments. And hey, maybe just to be charitable I'll sell copies for a million bitcoins each!
  - weavejester 15y ago
    You don't appear to understand how Bitcoin works. Money does not shift from new investors to the creators of Bitcoin. I'm not quite sure what confusion of ideas lead you to believe this.
    - gammarator 15y ago
      0) Bitcoins were easiest to mine at the beginning => the creators & early adopters have a large number of bitcoins 1) New investors demanding a finite supply of bitcoins are increasing the exchange rate of bitcoins/dollar. 2) Early holders of large volumes of bitcoins can therefore cash in their bitcoins for a great deal of real money from new investors desiring to enter the market. ergo, money shifts from new investors to the creators. (If the creators are smart enough to cash out. Which it seems they are, as Satoshi has disappeared. http://en.wikipedia.org/wiki/Satoshi_Nakamoto http://en.wikipedia.org/wiki/Satoshi_Nakamoto)
      - weavejester 15y ago
        What you describe is a free market trading a limited resource; not a pyramid scheme. In a pyramid scheme the wealth always flows up to the creator of the scheme, but the creators of Bitcoin can only make money by selling their own bitcoins - they don't get a cut when anybody else does.
antiscam 15y ago
Yes, exactly. The Bitcoin marketers do something that's increasingly transparent: they (intentionally?) confuse the hypothetical with the real. A system based on the Bitcoin technology could theoretically be something more than a scam. But the right response to that is "so what?" because in practice, the present system is exactly a scam. It's exactly, as you say, the same as tulip bulbs. There's a simple reason for this. There are only three kinds of people who buy Bitcoins at present: (1) idealists, ideologues, and experimenters; (2) criminals; and (3) speculators. The first category is simple; it consists of the libertarian and anarchist extremists who simply like the idea of Bitcoin; they perceive it as threatening governments, fulfilling some fuzzy vision they have in their heads of following in John Galt's footsteps, fostering delusional hopes of a new world order. Read the Bitcoin forums to get a sense of these people; they're crazy enough that you worry about their psychological health, saying things like "I wouldn't pay taxes even if that would be the only way to get a starving welfare baby food" and "I reject all human morality and law." This fringe group is small, however, and marginal, and fortunately they don't have a lot of money. And this group has pretty much been exhausted; how many technologically savvy anarcho-extremists are there who haven't already gotten involved with Bitcoin, and how much money will the remainder contribute? (This category also includes what I call "experimenters" -- people who put in $20 to see how the technology works, etc. That's not objectionable, but it's not a big group either.) The second group are people who want to buy illegal things, launder money, and avoid taxes. You get people like Jon Matonis suggesting that Bitcoins would be useful to make tax-free payments, even though of course the laws in almost all countries don't agree. You presumably get child pornographers on Tor and so forth. This group will hopefully invite regulation, and also, since they're just trading with Bitcoins, they won't do much to increase their value long-term. The third group are simply people who want to buy it at $X and sell it at $X+n, hoping to convince someone else to pay the $n. That's literally all there is. Nobody needs Bitcoin for trade. There's nothing legal (and indeed there's probably even nothing illegal) you can buy with Bitcoins that you can't buy with established currency. Maybe there are a handful of things it'll be useful for in a hypothetical future, like making donations to Wikileaks for those so inclined, but even that can't be done now. Even the EFF doesn't want it. And the system is promoted without any regard for its weaknesses. Bitcoin transaction fees are expensive when making transfers internal to the system (it recently cost me $3 to transfer $1000 internal to the Bitcoin system as an experiment). In converting currency and making trades, the fees and spreads are typically exorbitant, and you face unreliability, potentially dishonest trading partners, and wildly fluctuating exchange rates. The environmental cost is mounting and needs to be paid for by dwindling subsidies for block generation and, eventually, increased transaction fees. The system is facing talk of increasing regulation, fortunately. So I have no problem calling people who talk as if the price of a Bitcoin will forever rise -- much less forever rise exponentially -- "scam artists." That's exactly what they are.

by Vivtek 15y ago

awt 15y ago

Why is it inherently a bad idea? Why is it a pyramid scheme?

achompas 15y ago
Because Bitcoins are being suggested as an alternative to fiat money. However, given their current rate of appreciation, Bitcoins are actually an investment, not a currency. What is their inherent value, then? Commodities (whether precious or industrial) can be used in production or for luxury goods. Equities generate profits, which are subsequently shared with investors. What do Bitcoins do? Nothing.
- weavejester 15y ago
  What do Bitcoins do? Nothing. That's not true. Bitcoins can be securely transferred between accounts without the need for a centralized broker. That's not "nothing".
  - achompas 15y ago
    So their unique value comes from private transactions...but there's only a finite supply of bitcoins? How many of these transactions can actually occur in 2013-2014, when every bitcoin has been mined and their value is skyrocketing?
    - weavejester 15y ago
      The amount of transactions that can take place is unlimited, and even though there is a maximum of 2.1 million coins, each coin is divisible to 8 decimal places, giving 2.1 quadrillion units of currency. Also, mining won't be completed this century, although the rate at which coins are generated decreases over time.
  - cube13 15y ago
    Cash, delivered in person, does the same thing.
    - weavejester 15y ago
      Which has an obvious disadvantage over bitcoins: it has to be delivered in person.
  - vladd 15y ago
    That's not the value of the bitcoin, it's the value of the cryptographic code which has been open sourced. Anybody can fork it and create its own "Webcoin", but there's no intrinsic value in any forked instance coin, beyond the publicity that allows early adopters to cash in.

weavejester 15y ago

Bitcoin looks nothing like a pyramid scheme. There is a relationship between the value of a bitcoin and the demand, but that's true for any product.

hugh3 15y ago
Bitcoin looks exactly like a pyramid scheme from a money-transfer point of view. Money gets shifted from gullible suckers to the folks who invent the scheme, until one day you run out of people willing to sign on for the scheme, at which point everything collapses and the late adopters are left holding the bag. It's kinda sad. I think when it happens I'll make like edw519 and self-publish a book "The Best Of Hugh3" in which I publish all my "told you so" comments. And hey, maybe just to be charitable I'll sell copies for a million bitcoins each!
- weavejester 15y ago
  You don't appear to understand how Bitcoin works. Money does not shift from new investors to the creators of Bitcoin. I'm not quite sure what confusion of ideas lead you to believe this.
  - gammarator 15y ago
    0) Bitcoins were easiest to mine at the beginning => the creators & early adopters have a large number of bitcoins 1) New investors demanding a finite supply of bitcoins are increasing the exchange rate of bitcoins/dollar. 2) Early holders of large volumes of bitcoins can therefore cash in their bitcoins for a great deal of real money from new investors desiring to enter the market. ergo, money shifts from new investors to the creators. (If the creators are smart enough to cash out. Which it seems they are, as Satoshi has disappeared. http://en.wikipedia.org/wiki/Satoshi_Nakamoto http://en.wikipedia.org/wiki/Satoshi_Nakamoto)
    - weavejester 15y ago
      What you describe is a free market trading a limited resource; not a pyramid scheme. In a pyramid scheme the wealth always flows up to the creator of the scheme, but the creators of Bitcoin can only make money by selling their own bitcoins - they don't get a cut when anybody else does.

antiscam 15y ago

Yes, exactly. The Bitcoin marketers do something that's increasingly transparent: they (intentionally?) confuse the hypothetical with the real. A system based on the Bitcoin technology could theoretically be something more than a scam. But the right response to that is "so what?" because in practice, the present system is exactly a scam. It's exactly, as you say, the same as tulip bulbs. There's a simple reason for this. There are only three kinds of people who buy Bitcoins at present: (1) idealists, ideologues, and experimenters; (2) criminals; and (3) speculators. The first category is simple; it consists of the libertarian and anarchist extremists who simply like the idea of Bitcoin; they perceive it as threatening governments, fulfilling some fuzzy vision they have in their heads of following in John Galt's footsteps, fostering delusional hopes of a new world order. Read the Bitcoin forums to get a sense of these people; they're crazy enough that you worry about their psychological health, saying things like "I wouldn't pay taxes even if that would be the only way to get a starving welfare baby food" and "I reject all human morality and law." This fringe group is small, however, and marginal, and fortunately they don't have a lot of money. And this group has pretty much been exhausted; how many technologically savvy anarcho-extremists are there who haven't already gotten involved with Bitcoin, and how much money will the remainder contribute? (This category also includes what I call "experimenters" -- people who put in $20 to see how the technology works, etc. That's not objectionable, but it's not a big group either.) The second group are people who want to buy illegal things, launder money, and avoid taxes. You get people like Jon Matonis suggesting that Bitcoins would be useful to make tax-free payments, even though of course the laws in almost all countries don't agree. You presumably get child pornographers on Tor and so forth. This group will hopefully invite regulation, and also, since they're just trading with Bitcoins, they won't do much to increase their value long-term. The third group are simply people who want to buy it at $X and sell it at $X+n, hoping to convince someone else to pay the $n. That's literally all there is. Nobody needs Bitcoin for trade. There's nothing legal (and indeed there's probably even nothing illegal) you can buy with Bitcoins that you can't buy with established currency. Maybe there are a handful of things it'll be useful for in a hypothetical future, like making donations to Wikileaks for those so inclined, but even that can't be done now. Even the EFF doesn't want it. And the system is promoted without any regard for its weaknesses. Bitcoin transaction fees are expensive when making transfers internal to the system (it recently cost me $3 to transfer $1000 internal to the Bitcoin system as an experiment). In converting currency and making trades, the fees and spreads are typically exorbitant, and you face unreliability, potentially dishonest trading partners, and wildly fluctuating exchange rates. The environmental cost is mounting and needs to be paid for by dwindling subsidies for block generation and, eventually, increased transaction fees. The system is facing talk of increasing regulation, fortunately. So I have no problem calling people who talk as if the price of a Bitcoin will forever rise -- much less forever rise exponentially -- "scam artists." That's exactly what they are.