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Madoff made his ponzi scheme last 17 years with a limited network. Imagine how long a ponzi scheme accessible by the whole world could last. Possibly forever (
by soneca 6y ago
Madoff made his ponzi scheme last 17 years with a limited network. Imagine how long a ponzi scheme accessible by the whole world could last.
Possibly forever (or at least longer than my lifetime). I am thinking about Bitcoin here.
- xutopia 6y agoWhy is Bitcoin different than gold though? Is gold also a Ponzi scheme?
- assface 6y agoGold has material use. You can make things with it.
- Icathian 6y agoOkay, but the value of gold has basically zero relationship to it's industrial or commercial uses, so that isn't really relevant here.
- lotsofpulp 6y agoThere could be some value attributed to being able to use gold as a store of value and currency in the event of a dissolution of modern society such that the internet or widespread electricity is no longer around.
- danielbarla 6y agoSure, but this is based on the idea that the innate uses and value of gold would be similar (or "relatively high") after such a transformation of the world. This is not clear to me at all, compared to say, a similar wealth invested into a large cache of firearms and ammo. Or whatever will happen to be useful, depending on the scenario. It reminds me of an anecdote from my grandfather from the end of WW2, people were giving away gold rings for loaves of bread. (Clearly, only when in desperate need, but it did happen.)
- lotsofpulp 6y agoFirearms and ammo are a necessity, but one person/small tribe can only defend against so many others. What you really need is a community (or bigger tribe) that will come to your aid, and the community will need to be able to trade between themselves and others, which is where gold comes in.
- rainbowzootsuit 6y agoIn that situation, the inability to eat it or shoot something with it is probably going to make gold/silver pretty close to worthless as well until society re-exists. Even if the US government ceases to exist, the features of non reproducibility built into cash dollars (watermarks, intaglio printing) would still exist although they won't be as ultimately durable into the future as an element. At least you can also use them as fire starters.
- jpdb 6y agoPaper money has a lower bound of material value equal to $(toilet paper - utility value for the comfort of toilet paper over a dollar bill) per square inch.
- booleandilemma 6y agoBy that point you're going to have bigger things to worry about, like where to get fresh water and go to bathroom. And people with guns are going to quickly steal your gold anyway.
- ddevault 6y agoGold is also the most reasonable element to use as a store of value. It isn't very reactive or radioactive, so it's stable for long periods of time, it's a solid at room temperature, it's not hazardous to human health, it's easily manipulated and formed, and it's not super abundant but also not super rare. Silver is the only other element that comes close, and it tarnishes.
- teawrecks 6y agoThen why don't we all use gold as payment?
- jcbrand 6y agoWe used to (indirectly at least) until 1971 when the US went off the gold standard in order to not be bankrupted by the Vietnam war
- hudon 6y agoGold is found in nature. We can’t manufacture it or change its atomic number. Bitcoin is human code run on human machines. If society or the powers that be see fit to generate infinite Bitcoin, they can (ie forks are political power plays and we can’t control how the powerful will coopt Bitcoin in the future).
- dTal 6y agoWe can't manufacture it or change its atomic number, but the powerful can (and have) manipulated its "value" in all the same ways as they could manipulate bitcoin. They can buy up supply, insist that taxes be paid in it, or threaten to lock up anyone who mysteriously comes across a large amount of it. Gold's status as a physical element is basically irrelevant. Bitcoin is basically gold you can email.
- tim333 6y ago>If society or the powers that be see fit to generate infinite Bitcoin But not real ones. It's like saying you can make infinite Mona Lisas with a colour photocopier.
- ForHackernews 6y agoWho decides what is a "real" bitcoin? This is the point parent commenter is making. The only difference between Bitcoin OG and Bitcoin Cash or Segwit or any of the others is some kind of vague consensus that everyone agrees to pretend one magic bean is more special and valuable than the other, less-special magic bean with the same name.
- jcbrand 6y agoThe real Bitcoin will be the one that the market prefers. Why is Gold coins more valuable than copper coins? Why is the original Bitcoin more valuable than any of its forks?
- ForHackernews 6y ago
- dilippkumar 6y agoNot GP, here is my thesis. Right now, on coinbase, rate of bitcoin purchases paid in dollars > rate of dollars purchased in bitcoin. Anyone who wants to exit bitcoin today is getting dollars from people buying into bitcoin. When this changes (for whatever reason), coinbase and other exchanges have a limited capacity to buy back bitcoins for dollars, assuming they would even want to do that in the middle of a run on crypto exchanges. If bitcoin was a viable currency, then people buying bitcoin today would never want to trade it back for dollars. But that’s not happening- everyone still buys groceries, coffee, gas, tools and computer software with dollars. A run on coinbase is a problem when bitcoin is an “investment” and not an actively used currency. Finally, Monero has shown that there is still plenty of room for innovation beyond what bitcoin currently implements. If crypto currencies are the future, already Monero looks like a more viable option than btc (note that all the illegal stuff that used to happen with btc is now happening with xmr on the dark web). It’s very possible that even Monero isn’t the final incarnation of the ultimate crypto currency and something even better will replace it one day. A new crypto doesn’t threaten people who want to transact with that currency. Everyone on the darkweb markets switched from btc to xmr and business continues as usual, and it will continue even when the next evolution arrives. But those who see it as a store of value are at the mercy of everyone else buying that currency more than how much everyone else is selling- a classic ponzi scheme.
- OscarCunningham 6y ago"rate of bitcoin purchases paid in dollars > rate of dollars purchased in bitcoin" Why don't these two numbers have to be equal?
- dilippkumar 6y ago“Rate” here meant the first derivative of the number of transactions. Not the “btc <—> usd exchange rate” An equivalent way to say the same thing is: “number of bitcoins being purchased with USD per hour > number of USDs being purchased with bitcoin per hour”.
- OscarCunningham 6y ago
- michaelt 6y agoArguably nothing. Except with gold, there's a history of greater or lesser fools buying it from you that goes back thousands of years; there are a great many non-scam businesses trading in it, and they ain't come out with many new precious metals in my lifetime. Cryptocurrencies have a much shorter history, an exceptionally large number of scams, and nigh-limitless supply of new types of coin and token.
- jedberg 6y agoThe value of gold is supported by huge militaries all around the world, including the US military. Just like fiat currency, it derives its value in part from the large group of people with guns willing to commit violence to support its value. Bitcoin doesn't have an army of people willing to commit violence to support its value. At least not yet.
- simonh 6y agoYou do realise the gold standard was abandoned a long time ago. What are they going to do, force people to buy it at gunpoint? Back in the 60s the gold trade was highly regulated. That's why the plot of Goldfinger doesn't really make any sense from a moderns perspective. It seemed quaint even to me as a teenager in the 80s. Nowadays gold is just posh bitcoin.
- jedberg 6y agoI'm aware that we aren't on the gold standard, but the US still has the largest store of gold in the world, and uses its army (and courts) to defend the value of gold. Along with the next top three holders, Germany, France, and Italy.
- simonh 6y agoAs I said, what are they actually doing to achieve this?
- Applejinx 6y agoIn an abstract enough sense, Jeff Bezos is a Ponzi scheme :D …okay, then: Elon Musk.
- pen2l 6y agoIs a ponzi scheme that lasts forever... a ponzi scheme? Because if it lasts forever, there's no loser!
- mumblemumble 6y agoBitcoin is not, in any way, a Ponzi scheme. It may be the subject of a bubble, it may be subject to market manipulation, it may still play a part in any number of scams or frauds beyond the ones that have already been identified, some of which themselves may be Ponzi schemes. But, even if, for the sake of argment, all of those and more were true, Bitcoin itself would still not be a Ponzi scheme. It is and would still be just a digital commodity.
- zabzonk 6y agoThose who got in early made almost infinitely more than those who got in later (or who lost) - classic Ponzi scheme.
- mumblemumble 6y agoThat is something that applies to all sorts of situations, and is in no way a litmus test for whether or not something is a Ponzi scheme. For it to be a Ponzi scheme, you first have to have some sort of centralized control of the ledger so that you can lie to people about the volume of assets they have in your care. And already we have made a complete departure from what Bitcoin is and how it works.
- user-the-name 6y agoBut there is a lie. The lie is the supposed value in USD of the bitcoins you hold.
- ghodith 6y agoI mean, if the person can transfer them right now for that amount in USD how is it a lie?
- user-the-name 6y agoIn a Ponzi scheme, you can transfer your funds right now in USD as well. Exactly the same situation.
- darknavi 6y agoThe stock market in general. The last few years have really swoon us that the stock market is 100% "funny money" that goes up and down purely based on opinion.
- danans 6y ago> goes up and down purely based on opinion. Not opinion as much as fear and greed.
- splistud 6y agoBuying equities in our society is done on a voluntary basis. What other possible pricing mechanism could there be other than people's opinion of what an equity is worth? If you want to throw your hands up in the air and call it funny money, because you don't understand what you're seeing, that's fine I guess. But understand the deficiency is yours, not the nature of the market.
- jsight 6y agoI'm not sure that I see how it could be a ponzi scheme. Ultimately, everyone has as many bitcoins as they believe that they have. The only question is how valuable are those coins? That should always be a function of market demand.
- MereInterest 6y agoMoney goes in, with the promise that you will get more money out at the end. While this works in some cases (e.g. investing in a business that produces value), in this case the only other money in the system comes from other people buying into it. Therefore, I believe bitcoin to be equivalent to a ponzi scheme. Implicit in this is the assumption that bitcoin does not provide value in itself, which is another discussion altogether.
- LanceH 6y agoWhen you buy bitcoin, you get a share of the whole of bitcoin. You buy this at the current market value. You may hope it goes up, but it may not. You buy 1 bitcoin at market price, you have 1 bitcoin at market price. In a ponzi scheme, you buy in at a fictional price and are paid interest derived from the investments of future investors. Bitcoin purchasers don't receive anything from future investments unless they actually sell, again at market price. The word here is speculation, not ponzi. It's no different than buying/selling land that people may or may not want.
- solveit 6y ago> Money goes in, with the promise that you will get more money out at the end. Who promises?
- jsight 6y ago> Money goes in, with the promise that you will get more money out at the end. I'm not aware of any such promise.
- kingsuper20 6y agoor the $USD.
- inglor_cz 6y agoPay-as-you-go retirement systems depend on having enough young people entering the workforce. Preferrably qualified ones that can be taxed. Now that developed countries have mostly sunk below 2 kids per woman and most developing countries do not have school systems good enough to provide enough qualified workers to immigrate, we are feeling the slow press of unsustainability of the system. Unless we can offload a lot of that press on robots, people will have to work until their late 70s. The original Bismarck pension scheme calculated with only 2 years of survival in pension on average. We have expanded it to almost 20, it will have to be reduced again.
- tim333 6y agoBitcoin isn't really a ponzi scheme though, just an asset that gets bid up. In a ponzi you pay in x and are promised x+50% or some such and the scheme fails when there isn't money to pay out x+50%. With bitcoin you buy for price x and sell for price y which may be higher or lower. Different thing. It can't fail, just go up or down in price.
- supercanuck 6y agoWhat about tether?
- ForHackernews 6y agoSo your theory is that unlike Ponzi members, bitcoin buyers aren't paying in $x hoping to take $x+500% out in the future? Intriguing.
- rcxdude 6y agoWell, probably the biggest thing is it's not promised, and any returns are not being fabricated (a ponzi scheme will generally promise X% return, and will claim to have made X% on the invested money, when in reality they have made no return. When you buy bitcoin you get some bitcoin, which may or may not go up in price, but it's clear what you do and don't have).
- tim333 6y agoI hope lots of things I own will go up in value. That doesn't make them ponzi schemes.
- saalweachter 6y agoEh, I'm comfortable calling Bitcoin a Ponzi scheme because all profits extracted by early investors come from later investors. That's, like, a very specific and applicable definition.
- kolinko 6y agoSo you just redefined a the name „Ponzi” to mean something else than the commonly accepted definition.
- yummypaint 6y agoThe nature of ponzi schemes necessitate exponential growth, even if the doubling time can be made long, perhaps on the scale of years. This places a short bound on how long they can last. The US has about 1/20th of the worlds population, so that's less than 5 doubling periods before you run out of new marks. Maybe an additional decade or two at best?
- paulpauper 6y agocompounded interest has exponential growth and is as risk free of an investment as one can find.
- yummypaint 6y agoThe key difference is that banks aren't ponzi schemes. They use your money to actually do things in the world to make a profit, and give you a cut in the form of interest. A ponzi scheme doesn't make any new money, it only redistributes money among its members. This is the fundamental reason they can never be sustainable, and require the majority of those invested to be relatively new to the scheme.
- Clewza313 6y agoTether, which is apparently backed by Bitcoin itself, fits the bill. They've printed $20 billion (BILLION!) new USDT since the start of the year, and the rate of Tether printing is currently over 4x faster than the rate at which new Bitcoin is being mined. And like Madoff's scheme, it can keep going until the tide goes out and we find out who's been swimming naked.
- randomguy5421 6y agoI sold a month or so ago. I'd rather not hold the bag in the end, but at the same time I figured this thing can keep running so long as Tether is there to prop it up. Tether just printed another 2 billion USDT today, and didn't they print another billion USDT a few days ago?
- purple_ferret 6y agoThe current iteration of crypto yield farming seems more like a classic ponzi scheme to me. "Here I invented this new coin. If you buy it and lock it up, you can generate new ones which you'll be able to sell to others who'll want to get in on it to. This coin serves no other purpose than this though."
- deleted 6y ago[deleted]
- FooHentai 6y agoS’funny, I was thinking about fractional reserve banking and post-2008 economic stimuli.
- Aperocky 6y agolol it's called fiat currency.
- Applejinx 6y agoThe challenge there (and the exploit being attempted) is the 'too big to fail' concept. If you don't have enough people signed up, your ponzi can fail because a sufficient number of people who haven't fallen for it, can object. If you manage to get everybody signed up, it becomes necessary to not break your scheme, since everybody loses. I think this is like an unholy hybrid of the ponzi scheme and the Silicon Valley unicorn. It's the great exploit: if you can burn everybody, hard enough, you win forever. You blow up past the point where there is any possible remedy.
- knuthsat 6y agoFunny thing is that a bunch of human activities are pyramid schemes. From academia, pension funds, real estate or whatever.