6 ms·

The Postmodern Ponzi

27 points by louwrentius 6y ago

eurasiantiger 6y ago
>It’s hard to even communicate about the intellectual center of cryptocurrency, because so much discussion is framed in terms that have no meaning (i.e. “decentralized”, “blockchain”, etc) and the technical obscurantism and mystique is an inescapable and intrinsic part of the investment thesis. I stopped reading here. The writer is obviously a luddite who doesn’t even want to understand the topic, he just wants to smash all the new machines because he is afraid.
- leashless 6y ago
  He’s really not a Luddite: he’s a ZKSNARK implementer, among other things.
  - eurasiantiger 6y ago
    How is that a preclusion?
- grey-area 6y ago
  I agree that these terms have a meaning (though hard to pin down), but on the other hand, both blockchains and decentralisation have been proven many times in the past to be of limited use to ordinary people. I don’t need or want a decentralised currency with trustless consensus and irreversible transactions, I’d contend very few need that. There are so many disadvantages that flow from the choices made in Bitcoin as a currency, and many of those choices are inherent to the things people claim are good about it. Try to remove them and you are completely reworking it. Just as one example you can’t have instant confirmations in a fully distributed system which shares a ledger because there are n sources of truth, not one, and eventual consistency is a terrible idea for a currency. In any financial transaction I want to verify the identity of the counterparty, I want to manage risk by having a known third party manage the transaction and disputes, I want instant confirmation and low stable fees and prices, and I certainly don’t want to have any uncertainty (even for minutes) about whether a transaction worked. I too would love a truly supranational currency, but would want a very conservative one with light inflation built in (i.e loses value v. slowly) controlled by a transparent governing board with a financial stake in stability and low fees, decentralised records on the level of institutions, not the entire ledger, and not one which enriches early adopters. For this reason alone I think the built in advantages for early adopters in bitcoin was a terrible mistake - it attracts the wrong kind of people and encourages shilling and irrational exuberance when the value goes up quickly, which is deadly to a real currency.
- benlumen 6y ago
  https://www.stephendiehl.com/posts.html https://www.stephendiehl.com/posts.html A luddite? What a ridiculous allegation. Sounds like you stopped reading because your cognitive bias wouldn't let you continue, frankly.
  - eurasiantiger 6y ago
    Might be. However, in a world where attention is currency and bad information rife, it is not the reader’s fault if the writer does not express their views clearly enough to warrant attention.
- timkam 6y ago
  The author is not precise here, but I agree that in the crypto-bro, get-rich-quick world, the meaning of "decentralized" and "blockchain" certainly can be stretched in all kinds of ways. And I think this relates to the problem around cryptocurrencies: its communities are an unhealthy mix of a lot of people who want to make a quick bug, and a few people who are seriously working on the foundations of the technology in a meaningful manner.
dmingod666 6y ago
Bitcoin is right-wing now.. lolz "However today cryptocurrency is nothing more than an ecosystem of thinly veiled gambling products that is preying on the vulnerable, perpetuating economic inequality and deepening the existing problems in our society. It is time for us in the software engineering profession to decide how history will tell the story of our participation in this madness. If we choose to make short-term decisions based on indifference and greed then history will not judge us kindly." The author probably thinks the only speculation happening is in crypto... What do you think the whole of the stock market is doing? What about software developers working on wall street should they resign as well...?
- tW4r 6y ago
  Invest in our brand new cryptocoin GME
  - scotty79 6y ago
    No. But thank you. I won't also invest into stock of your company or mint version of your released products either.
- Traster 6y ago
  I suggest you go and talk to a software dev about what they’re building for wall street- because the last thing they’re doing is gambling and this “well everything is gambling” is the exact kind of thinking the article warns about. There is a difference between an investment strategy; which has a plan, an understanding of the market, a set of risk limits and an exit strategy, and gambling.
  - scotty79 6y ago
    So, timing your exit right is the key on wallstreet? How's s that not a Ponzi gambling by the same logic?
    - Traster 6y ago
      I’m going to come back to this because I think it’s an important point that you’re missing from the article. I mentioned 4 attributes of an investment strategy (each of which we could dig into in incredible detail). You’ve taken 1 and gone “well if we squint at it you do that in a ponzu scheme too”. Which is exactly the point the article is making - if you decide to completely ignore the facts that distinguish these things then yes, yes they are exactly the same. It reminds me of the Reddit debate about whether a hot pocket is a ravioli or a sandwich - it’s a fun mental game to abstract away definitions until you get unexpected results, but it’s also kind of stupid.
scotty79 6y ago
By that logic real estate investment, precious metals investment, stock market investmet are all ponzi schemes just with different externalities. Mechanics is everywhere the same, as large amount of money flows into limited something the price increases an people who time their entry end exit right gain and others loose.
- leashless 6y ago
  Bitcoin and gold are in very similar categories. Real estate, the stock market etc. are distinct: economic value is at least in theory based on underlying economic activity.
  - Viker 6y ago
    You can mine gold without bitcoin. You can not mine bitcoin without gold...
- hankchinaski 6y ago
  some assets have real utility (real estate) other reflect value in term of tangible assets (stocks price/book value). i can pass the argument with precious metals although i think those also have real utility to certain extents (usage in electronics etc). so no not all investments are ponzi schemes.
  - scotty79 6y ago
    Those things have some utility and yet most of them are bought solely for their resell value, not for their utility. Not all investments are ponzi schemes (by that vague, rubbery definition of ponzi scheme). Just the ones that are in limited resources, mostly for their resell value, which results of their prize going way higher than the value of their utility. Like the ones I listed.
- timkam 6y ago
  If the value of gold increased as rapidly as the value of bitcoin, and the value of all kind of "I pull a fictitious metal name out of the air and make it tradable" materials increased at a striking pace as well, we'd also say it reeks of scam, right?
Turing_Machine 6y ago
> Purchasing a bitcoin is buying an entry in an accounting database, an extraordinarily expensive collection of bits. Wait until someone tells him about Treasury bonds.
- UrsaMedius 6y ago
  What's your point? That the US government would default on their loans?
  - Turing_Machine 6y ago
    A Treasury bond is just some bits sitting on a hard drive that promises to pay you so many "dollars", which is a purely imaginary unit whose value can be manipulated at the whim of the government. It's every bit as imaginary as Bitcoin. Arguably even more so, since Bitcoin can't be inflated at will and without limit. They don't have to formally default if they inflate the dollar enough that a current dollar is worth only 10% (or whatever) of what one was worth at the time the bond was issued. And it's starting to look like that's exactly the strategy that's in play.
- dkjaudyeqooe 6y ago
  I think you chose the worse possible example to try to make your point. Were you thinking of the US dollar?
i_love_limes 6y ago
I have read elsewhere that possibly another good starting point to think about Bitcoin is via the "Keynesian Beauty Content" https://en.wikipedia.org/wiki/Keynesian_beauty_contest https://en.wikipedia.org/wiki/Keynesian_beauty_contest This is additionally interesting because of the critiques that Keynes leveled at the Gold standard when it was being widely used in the 19th and early 20th century, which have turned out to hold the test of time.
bondarchuk 6y ago
The essence of what makes this nocoiner cope "postmodern" is that the nocoiner does not try to convince his audience that bitcoin is a ponzi, worthless, or not a real currency. Rather, the nocoiner claims that the scam is perpetuated by a media apparatus which keeps bitcoin suspended in a haze of post-truth confusion, and if only the cultural landscape which denies that there is a single self-evident truth could be brought down, then bitcoin would fall with it. This is no different than the fallacy of gamblers who somehow believe their spin of the roulette wheel is somehow blessed by luck.
- alephu5 6y ago
  Are there any companies providing actual financial or banking services using bitcoin? Are people using these? Stephen's argument assumes that the answer is "no", and from this makes a compelling case for it being a Ponzi scheme. I personally would change my mind about this if you could show that this technology offers advantages over traditional products, and I'm willing to bet that even the author would reconsider his position. On the key metrics, transaction cost and speed, current cryptocurrencies lag behind. If it were capable of providing these it would even become a stable store of value since it could provide the framework for all banking around the world whose provisioning price could remain approximately constant.
  - grey-area 6y ago
    Indeed, and unfortunately the basic premise of Bitcoin (a distributed global ledger), makes most of those metrics very difficult to hit, along with some other important ones like cost in energy per transaction. Distributed consensus means you can't have instant confirmations. POW means you can't bring cost per transaction down (in energy or in money). etc.
lr1970 6y ago
Bitcoin is a distributed feat currency with a proven limited supply (20M coins max) and slow and expensive transactions. At present, bitcoin cannot be coopted by any central bank and cannot be inflated by a "printing press". These two facts make it attractive to people willing to park their conventional feat currencies that are being debased by actions of governments and central banks. People do not realize how much worthless money in the world are chasing limited investment or speculative opportunities. Bitcoin seems to be as good or better than anything else.
- grey-area 6y ago
  Bitcoin is a distributed feat currency with a proven limited supply (20M coins max) and slow and expensive transactions My one problem with your thesis is that Bitcoin is no longer a currency but a speculative asset. It has not yet proven a stable store of value, or a useful currency, quite the opposite, and if nobody uses it to transact, what value does it have? PS It’s fiat, not feat.
- Viker 6y ago
  100 btc from 2013 was around 1000 usd. 100 btc in 2021 was around 5000000 usd... Satoshi still has around a million Btc... I call this printing money
  - hbogert 6y ago
    I call it deflation
- twiceaday 6y ago
  This reads like PR speculators use when they don't want to be honest. BTC turned out to be an insane investment over its lifespan. It is comical to not even mention this. It seems completely obvious that 99% of the public sentiment is built on the back of this. Everything else is fluff that will change to other fluff when it stops being true.
tucnak 6y ago
I'm sorry, but this reads like something a first–year student in English literature, critical theory, and whatnot—would write. It lacks density, does not introduce new language, and frankly, I'm not sure how this is supposed to add anything to our understanding of the subject... The text seems to criticise the surrounding discourse, and attributes much of it to right–wing political ideology and some sense of exploitation, but fails to engage this point further—in any capacity. Moreover, the text exhibits quite a bit of political signalling in its own right; plenty of externality talk and not much beyond that. Well, yeah, "externality" is a cool word, but it's not hard to see that it doesn't add anything, unless further critique manages to display contradictory economic, social, or political conditions—arising from such externalities. It almost seems like you can stamp "postmodern" in front of any modern concept, bring it to the context of some pseudo–Marxist frame of thinking, and there you go, seemingly you've done analysis.
deleted 6y ago
[deleted]
maipen 6y ago
Another cope posting. I try to be civil on this website, because there are legit smart people here. But cmon, stop posting this shitty whining posts on hackernews. Everyone that has been in crypto for a while, knows how it isn't being used outside of the cryptospace. But still, this is not a new market and has been going on for a while, it survived many many 85-95% dips and many bear markets. If you aren't atleast trying to get some money out of this, you are litteraly retarded or you just think you are so smart that you end up being the most stupid of all. Crypto created many many millionaires, it gave an opportunity to everyone, to have an actual chance of making life changing money. And still to this day, idiots still point fingers, mad that they didn't make money. Yes, when you make a profit by selling higher than you bought, someone else is buying it from you. Someone else loses and you win. But it's like that in every where. When you win, someone loses. When you get a job, someonelse won't get that job. When you take the last cookie from the jar, someonelse won't be able to get that same cookie, ever.
- deleted 6y ago
  [deleted]
Gatsky 6y ago
This is well written. It is not very balanced, the author obviously hates cryptocurrency. His main beef seems to be that software engineers had a hand in building it, and should know better. Well, to me the same principle could be applied to instagram, facebook, tiktok... platforms with seemingly little real purpose and probably net negative impact on society, where software engineers deliberately built systems to manipulate human attention while reaping large rewards for themselves. The negative externalities are less tangible but still real: new kinds of human suffering, turning hollow eyed vanity and dancing in front of a mirror into a career option, the spread of misinformation etc. But I guess he wants to write about bitcoin. > The world is an increasingly strange place and one of my favourite quotes about the times we’re living through is that we’re all all in a superposition of being both overwhelmed and underwhelmed. This does seem spot on.
cybervegan 6y ago
So Bitcoin is just distilled capitalism, right?
smitty1e 6y ago
> Like many people I’ve written a bit about fintech and the influences the new right-wing populism is having on financial markets I'd flag this as inflammatory, but I'm too much of a right-wing populist who cares about free speech. Natter on with the folly. Most right-wingers I know IRL would touch BitCoin with anything they don't care to lose. Let the tulip mania roll on, say I.

27 points by louwrentius 6y ago

>It’s hard to even communicate about the intellectual center of cryptocurrency, because so much discussion is framed in terms that have no meaning (i.e. “decentralized”, “blockchain”, etc) and the technical obscurantism and mystique is an inescapable and intrinsic part of the investment thesis. I stopped reading here. The writer is obviously a luddite who doesn’t even want to understand the topic, he just wants to smash all the new machines because he is afraid.

leashless 6y ago
He’s really not a Luddite: he’s a ZKSNARK implementer, among other things.
- eurasiantiger 6y ago
  How is that a preclusion?
grey-area 6y ago
I agree that these terms have a meaning (though hard to pin down), but on the other hand, both blockchains and decentralisation have been proven many times in the past to be of limited use to ordinary people. I don’t need or want a decentralised currency with trustless consensus and irreversible transactions, I’d contend very few need that. There are so many disadvantages that flow from the choices made in Bitcoin as a currency, and many of those choices are inherent to the things people claim are good about it. Try to remove them and you are completely reworking it. Just as one example you can’t have instant confirmations in a fully distributed system which shares a ledger because there are n sources of truth, not one, and eventual consistency is a terrible idea for a currency. In any financial transaction I want to verify the identity of the counterparty, I want to manage risk by having a known third party manage the transaction and disputes, I want instant confirmation and low stable fees and prices, and I certainly don’t want to have any uncertainty (even for minutes) about whether a transaction worked. I too would love a truly supranational currency, but would want a very conservative one with light inflation built in (i.e loses value v. slowly) controlled by a transparent governing board with a financial stake in stability and low fees, decentralised records on the level of institutions, not the entire ledger, and not one which enriches early adopters. For this reason alone I think the built in advantages for early adopters in bitcoin was a terrible mistake - it attracts the wrong kind of people and encourages shilling and irrational exuberance when the value goes up quickly, which is deadly to a real currency.
benlumen 6y ago
https://www.stephendiehl.com/posts.html https://www.stephendiehl.com/posts.html A luddite? What a ridiculous allegation. Sounds like you stopped reading because your cognitive bias wouldn't let you continue, frankly.
- eurasiantiger 6y ago
  Might be. However, in a world where attention is currency and bad information rife, it is not the reader’s fault if the writer does not express their views clearly enough to warrant attention.
timkam 6y ago
The author is not precise here, but I agree that in the crypto-bro, get-rich-quick world, the meaning of "decentralized" and "blockchain" certainly can be stretched in all kinds of ways. And I think this relates to the problem around cryptocurrencies: its communities are an unhealthy mix of a lot of people who want to make a quick bug, and a few people who are seriously working on the foundations of the technology in a meaningful manner.

dmingod666 6y ago

Bitcoin is right-wing now.. lolz "However today cryptocurrency is nothing more than an ecosystem of thinly veiled gambling products that is preying on the vulnerable, perpetuating economic inequality and deepening the existing problems in our society. It is time for us in the software engineering profession to decide how history will tell the story of our participation in this madness. If we choose to make short-term decisions based on indifference and greed then history will not judge us kindly." The author probably thinks the only speculation happening is in crypto... What do you think the whole of the stock market is doing? What about software developers working on wall street should they resign as well...?

tW4r 6y ago
Invest in our brand new cryptocoin GME
- scotty79 6y ago
  No. But thank you. I won't also invest into stock of your company or mint version of your released products either.
Traster 6y ago
I suggest you go and talk to a software dev about what they’re building for wall street- because the last thing they’re doing is gambling and this “well everything is gambling” is the exact kind of thinking the article warns about. There is a difference between an investment strategy; which has a plan, an understanding of the market, a set of risk limits and an exit strategy, and gambling.
- scotty79 6y ago
  So, timing your exit right is the key on wallstreet? How's s that not a Ponzi gambling by the same logic?
  - Traster 6y ago
    I’m going to come back to this because I think it’s an important point that you’re missing from the article. I mentioned 4 attributes of an investment strategy (each of which we could dig into in incredible detail). You’ve taken 1 and gone “well if we squint at it you do that in a ponzu scheme too”. Which is exactly the point the article is making - if you decide to completely ignore the facts that distinguish these things then yes, yes they are exactly the same. It reminds me of the Reddit debate about whether a hot pocket is a ravioli or a sandwich - it’s a fun mental game to abstract away definitions until you get unexpected results, but it’s also kind of stupid.

scotty79 6y ago

By that logic real estate investment, precious metals investment, stock market investmet are all ponzi schemes just with different externalities. Mechanics is everywhere the same, as large amount of money flows into limited something the price increases an people who time their entry end exit right gain and others loose.

leashless 6y ago
Bitcoin and gold are in very similar categories. Real estate, the stock market etc. are distinct: economic value is at least in theory based on underlying economic activity.
- Viker 6y ago
  You can mine gold without bitcoin. You can not mine bitcoin without gold...
hankchinaski 6y ago
some assets have real utility (real estate) other reflect value in term of tangible assets (stocks price/book value). i can pass the argument with precious metals although i think those also have real utility to certain extents (usage in electronics etc). so no not all investments are ponzi schemes.
- scotty79 6y ago
  Those things have some utility and yet most of them are bought solely for their resell value, not for their utility. Not all investments are ponzi schemes (by that vague, rubbery definition of ponzi scheme). Just the ones that are in limited resources, mostly for their resell value, which results of their prize going way higher than the value of their utility. Like the ones I listed.
timkam 6y ago
If the value of gold increased as rapidly as the value of bitcoin, and the value of all kind of "I pull a fictitious metal name out of the air and make it tradable" materials increased at a striking pace as well, we'd also say it reeks of scam, right?

Turing_Machine 6y ago

> Purchasing a bitcoin is buying an entry in an accounting database, an extraordinarily expensive collection of bits. Wait until someone tells him about Treasury bonds.

UrsaMedius 6y ago
What's your point? That the US government would default on their loans?
- Turing_Machine 6y ago
  A Treasury bond is just some bits sitting on a hard drive that promises to pay you so many "dollars", which is a purely imaginary unit whose value can be manipulated at the whim of the government. It's every bit as imaginary as Bitcoin. Arguably even more so, since Bitcoin can't be inflated at will and without limit. They don't have to formally default if they inflate the dollar enough that a current dollar is worth only 10% (or whatever) of what one was worth at the time the bond was issued. And it's starting to look like that's exactly the strategy that's in play.
dkjaudyeqooe 6y ago
I think you chose the worse possible example to try to make your point. Were you thinking of the US dollar?

i_love_limes 6y ago

I have read elsewhere that possibly another good starting point to think about Bitcoin is via the "Keynesian Beauty Content" https://en.wikipedia.org/wiki/Keynesian_beauty_contest https://en.wikipedia.org/wiki/Keynesian_beauty_contest This is additionally interesting because of the critiques that Keynes leveled at the Gold standard when it was being widely used in the 19th and early 20th century, which have turned out to hold the test of time.

bondarchuk 6y ago

The essence of what makes this nocoiner cope "postmodern" is that the nocoiner does not try to convince his audience that bitcoin is a ponzi, worthless, or not a real currency. Rather, the nocoiner claims that the scam is perpetuated by a media apparatus which keeps bitcoin suspended in a haze of post-truth confusion, and if only the cultural landscape which denies that there is a single self-evident truth could be brought down, then bitcoin would fall with it. This is no different than the fallacy of gamblers who somehow believe their spin of the roulette wheel is somehow blessed by luck.

alephu5 6y ago
Are there any companies providing actual financial or banking services using bitcoin? Are people using these? Stephen's argument assumes that the answer is "no", and from this makes a compelling case for it being a Ponzi scheme. I personally would change my mind about this if you could show that this technology offers advantages over traditional products, and I'm willing to bet that even the author would reconsider his position. On the key metrics, transaction cost and speed, current cryptocurrencies lag behind. If it were capable of providing these it would even become a stable store of value since it could provide the framework for all banking around the world whose provisioning price could remain approximately constant.
- grey-area 6y ago
  Indeed, and unfortunately the basic premise of Bitcoin (a distributed global ledger), makes most of those metrics very difficult to hit, along with some other important ones like cost in energy per transaction. Distributed consensus means you can't have instant confirmations. POW means you can't bring cost per transaction down (in energy or in money). etc.

lr1970 6y ago

Bitcoin is a distributed feat currency with a proven limited supply (20M coins max) and slow and expensive transactions. At present, bitcoin cannot be coopted by any central bank and cannot be inflated by a "printing press". These two facts make it attractive to people willing to park their conventional feat currencies that are being debased by actions of governments and central banks. People do not realize how much worthless money in the world are chasing limited investment or speculative opportunities. Bitcoin seems to be as good or better than anything else.

grey-area 6y ago
Bitcoin is a distributed feat currency with a proven limited supply (20M coins max) and slow and expensive transactions My one problem with your thesis is that Bitcoin is no longer a currency but a speculative asset. It has not yet proven a stable store of value, or a useful currency, quite the opposite, and if nobody uses it to transact, what value does it have? PS It’s fiat, not feat.
Viker 6y ago
100 btc from 2013 was around 1000 usd. 100 btc in 2021 was around 5000000 usd... Satoshi still has around a million Btc... I call this printing money
- hbogert 6y ago
  I call it deflation
twiceaday 6y ago
This reads like PR speculators use when they don't want to be honest. BTC turned out to be an insane investment over its lifespan. It is comical to not even mention this. It seems completely obvious that 99% of the public sentiment is built on the back of this. Everything else is fluff that will change to other fluff when it stops being true.

tucnak 6y ago

I'm sorry, but this reads like something a first–year student in English literature, critical theory, and whatnot—would write. It lacks density, does not introduce new language, and frankly, I'm not sure how this is supposed to add anything to our understanding of the subject... The text seems to criticise the surrounding discourse, and attributes much of it to right–wing political ideology and some sense of exploitation, but fails to engage this point further—in any capacity. Moreover, the text exhibits quite a bit of political signalling in its own right; plenty of externality talk and not much beyond that. Well, yeah, "externality" is a cool word, but it's not hard to see that it doesn't add anything, unless further critique manages to display contradictory economic, social, or political conditions—arising from such externalities. It almost seems like you can stamp "postmodern" in front of any modern concept, bring it to the context of some pseudo–Marxist frame of thinking, and there you go, seemingly you've done analysis.

deleted 6y ago

[deleted]

maipen 6y ago

Another cope posting. I try to be civil on this website, because there are legit smart people here. But cmon, stop posting this shitty whining posts on hackernews. Everyone that has been in crypto for a while, knows how it isn't being used outside of the cryptospace. But still, this is not a new market and has been going on for a while, it survived many many 85-95% dips and many bear markets. If you aren't atleast trying to get some money out of this, you are litteraly retarded or you just think you are so smart that you end up being the most stupid of all. Crypto created many many millionaires, it gave an opportunity to everyone, to have an actual chance of making life changing money. And still to this day, idiots still point fingers, mad that they didn't make money. Yes, when you make a profit by selling higher than you bought, someone else is buying it from you. Someone else loses and you win. But it's like that in every where. When you win, someone loses. When you get a job, someonelse won't get that job. When you take the last cookie from the jar, someonelse won't be able to get that same cookie, ever.

deleted 6y ago
[deleted]

Gatsky 6y ago

This is well written. It is not very balanced, the author obviously hates cryptocurrency. His main beef seems to be that software engineers had a hand in building it, and should know better. Well, to me the same principle could be applied to instagram, facebook, tiktok... platforms with seemingly little real purpose and probably net negative impact on society, where software engineers deliberately built systems to manipulate human attention while reaping large rewards for themselves. The negative externalities are less tangible but still real: new kinds of human suffering, turning hollow eyed vanity and dancing in front of a mirror into a career option, the spread of misinformation etc. But I guess he wants to write about bitcoin. > The world is an increasingly strange place and one of my favourite quotes about the times we’re living through is that we’re all all in a superposition of being both overwhelmed and underwhelmed. This does seem spot on.

cybervegan 6y ago

So Bitcoin is just distilled capitalism, right?

smitty1e 6y ago

> Like many people I’ve written a bit about fintech and the influences the new right-wing populism is having on financial markets I'd flag this as inflammatory, but I'm too much of a right-wing populist who cares about free speech. Natter on with the folly. Most right-wingers I know IRL would touch BitCoin with anything they don't care to lose. Let the tulip mania roll on, say I.