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I know it's a losing battle, but I can't help but tilt at this particular pedantic windmill. Not all financial scams are Ponzi schemes. Most are not. Ponzi sch

I know it's a losing battle, but I can't help but tilt at this particular pedantic windmill. Not all financial scams are Ponzi schemes. Most are not. Ponzi schemes involve shady bookkeeping by the operator that conceals the source of fake profits. If Bitcoin were an actual scam (and I don't think it is) it would be a pump-and-dump. Most ICOs were clearly pump-and-dumps. There is a huge variety of financial scams, and it would be a fiscally safer world if more people knew about them.

ChainOfFools 5y ago
Shiller may have coined the phrase "Naturally occurring Ponzi" but I believe the World Bank was the first to describe Bitcoin as one: https://openknowledge.worldbank.org/bitstream/handle/10986/19358/WPS6967.txt?sequence=2&isAllowed=y https://openknowledge.worldbank.org/bitstream/handle/10986/1...
prepend 5y ago
The key characteristic of Ponzi schemes, I think, is that there is no real value and returns are paid based solely on new cash coming in. There’s shady bookkeeping only as an artifact to hide the cash-in/cash-out structure. I think this applies to Bitcoin because it’s payouts are solely based on speculation and new cash coming in.
- Sammi 5y ago
  Bitcoin has two well understood and valuable use cases: 1) Bitcoin can do trustable and reliable transactions with unlimited amounts of assets across the world in 10 minutes. What else can do that? It's the perfect settlement layer for large actors. 2) It doesn't inflate, which makes it a perfect store of value. Even gold inflates.
  - Synaesthesia 5y ago
    That's correct but there is still a huge issue for me with Bitcoin, which is that the vast majority of BTC is owned by literally a handful of people. It should be well distributed if it's gonna succeed as a currency and it never will be.
    - Sammi 5y ago
      No one can gatekeep anyone from buying and owning Bitcoin. It is infinitely divisible, so anyone can partake at any level. Anyone can put their savings in Bitcoin. In contrast to today's financial markets where size gives you huge leverage and access that you don't get otherwise. This is why the rich are getting richer currently. But the future of financial markets and wealth will be as distributed as the crypto assets and protocols will be.
  - paulgb 5y ago
    > It doesn't inflate It does currently inflate (currently 900 coins per day), the distinction is that the inflation will decrease over time to zero. One reason this is an important distinction is that the network which secures Bitcoin is currently ~85% subsidized by that inflation. A big unknown is whether transaction fees will go up enough to support the current level of security in the network in its non-inflationary state.
    - Sammi 5y ago
      The amount of total Bitcoin is known and capped.
      - paulgb 5y ago
        Yes, because the amount of inflation goes to zero over time. That doesn't mean that there's no inflation now (i.e. that new Bitcoin aren't created every day until that time). (I guess you could argue semantically that mining doesn't “create” Bitcoin but “unlocks” it or something, but it doesn't affect the dynamics I mentioned where the cost of running the network is currently subsidized by the newly unlocked Bitcoin and that subsidy will disappear over time.)
        Sammi 5y ago
        The total Bitcoin supply doesn't inflate. And so your assets won't be inflated away.
        paulgb 5y ago
        Again, it’s a semantic distinction. I think it’s more accurate to say it inflates at a known rate than “doesn’t inflate”, but I’m not going to argue semantics. It doesn’t address the problem of the network being subsidized by the diminishing pool of remaining unmined bitcoin, and what happens when that pool is exhausted.
  - jariel 5y ago
    "It's the perfect settlement layer for large actors." Wow, all the 'large actors' seemed to have not figured that out? If it's the 'perfect settlement' process, then why are literally zero large actors using it for settlement? Nobody uses it as a currency.
  - samvher 5y ago
    Maybe I'm being pedantic but it seems to me that inflation properties are separate from (though related to) total supply/printing. If prices denominated in bitcoin go up (e.g. because bitcoin crashes), isn't that still inflation? I always have some difficulties with the "printing is limited so it's a store of value" argument: it's only a store of value if people keep assigning it value. That property doesn't purely come from supply but also from demand.
- ghaff 5y ago
  Personally I think it makes sense to distinguish between deliberate Ponzi schemes and speculative bubbles but, at the end of the day, both depend on new money coming in to inflate value. One difference is that Ponzi schemes are pretty much guaranteed to collapse at some point and someone knows with certainty that it is in fact a Ponzi scheme. Whereas whether something is a bubble can only be definitively determined after it pops.
  - timoth3y 5y ago
    > both depend on new money coming in to inflate value This is true of all investable assets that don't produce cash flow. It's true for art, gold, comic books, baseball cards, wine, classic cars, everything.
- timoth3y 5y ago
  > I think this applies to Bitcoin because it’s payouts are solely based on speculation and new cash coming in. Bitcoin does not pay out anything. There is no cash flow. You can only sell it. It's true that price increases depend on later investors, but that is true of all investable assets; art, gold, comic books, etc. Bitcoin is likely a bubble. It may be a pump-and dump, but it is not a Ponzi scheme.
- deleted 5y ago
  [deleted]

ChainOfFools 5y ago

Shiller may have coined the phrase "Naturally occurring Ponzi" but I believe the World Bank was the first to describe Bitcoin as one: https://openknowledge.worldbank.org/bitstream/handle/10986/19358/WPS6967.txt?sequence=2&isAllowed=y https://openknowledge.worldbank.org/bitstream/handle/10986/1...

prepend 5y ago

The key characteristic of Ponzi schemes, I think, is that there is no real value and returns are paid based solely on new cash coming in. There’s shady bookkeeping only as an artifact to hide the cash-in/cash-out structure. I think this applies to Bitcoin because it’s payouts are solely based on speculation and new cash coming in.

Sammi 5y ago
Bitcoin has two well understood and valuable use cases: 1) Bitcoin can do trustable and reliable transactions with unlimited amounts of assets across the world in 10 minutes. What else can do that? It's the perfect settlement layer for large actors. 2) It doesn't inflate, which makes it a perfect store of value. Even gold inflates.
- Synaesthesia 5y ago
  That's correct but there is still a huge issue for me with Bitcoin, which is that the vast majority of BTC is owned by literally a handful of people. It should be well distributed if it's gonna succeed as a currency and it never will be.
  - Sammi 5y ago
    No one can gatekeep anyone from buying and owning Bitcoin. It is infinitely divisible, so anyone can partake at any level. Anyone can put their savings in Bitcoin. In contrast to today's financial markets where size gives you huge leverage and access that you don't get otherwise. This is why the rich are getting richer currently. But the future of financial markets and wealth will be as distributed as the crypto assets and protocols will be.
- paulgb 5y ago
  > It doesn't inflate It does currently inflate (currently 900 coins per day), the distinction is that the inflation will decrease over time to zero. One reason this is an important distinction is that the network which secures Bitcoin is currently ~85% subsidized by that inflation. A big unknown is whether transaction fees will go up enough to support the current level of security in the network in its non-inflationary state.
  - Sammi 5y ago
    The amount of total Bitcoin is known and capped.
    - paulgb 5y ago
      Yes, because the amount of inflation goes to zero over time. That doesn't mean that there's no inflation now (i.e. that new Bitcoin aren't created every day until that time). (I guess you could argue semantically that mining doesn't “create” Bitcoin but “unlocks” it or something, but it doesn't affect the dynamics I mentioned where the cost of running the network is currently subsidized by the newly unlocked Bitcoin and that subsidy will disappear over time.)
      - Sammi 5y ago
        The total Bitcoin supply doesn't inflate. And so your assets won't be inflated away.
        paulgb 5y ago
        Again, it’s a semantic distinction. I think it’s more accurate to say it inflates at a known rate than “doesn’t inflate”, but I’m not going to argue semantics. It doesn’t address the problem of the network being subsidized by the diminishing pool of remaining unmined bitcoin, and what happens when that pool is exhausted.
- jariel 5y ago
  "It's the perfect settlement layer for large actors." Wow, all the 'large actors' seemed to have not figured that out? If it's the 'perfect settlement' process, then why are literally zero large actors using it for settlement? Nobody uses it as a currency.
- samvher 5y ago
  Maybe I'm being pedantic but it seems to me that inflation properties are separate from (though related to) total supply/printing. If prices denominated in bitcoin go up (e.g. because bitcoin crashes), isn't that still inflation? I always have some difficulties with the "printing is limited so it's a store of value" argument: it's only a store of value if people keep assigning it value. That property doesn't purely come from supply but also from demand.
ghaff 5y ago
Personally I think it makes sense to distinguish between deliberate Ponzi schemes and speculative bubbles but, at the end of the day, both depend on new money coming in to inflate value. One difference is that Ponzi schemes are pretty much guaranteed to collapse at some point and someone knows with certainty that it is in fact a Ponzi scheme. Whereas whether something is a bubble can only be definitively determined after it pops.
- timoth3y 5y ago
  > both depend on new money coming in to inflate value This is true of all investable assets that don't produce cash flow. It's true for art, gold, comic books, baseball cards, wine, classic cars, everything.
timoth3y 5y ago
> I think this applies to Bitcoin because it’s payouts are solely based on speculation and new cash coming in. Bitcoin does not pay out anything. There is no cash flow. You can only sell it. It's true that price increases depend on later investors, but that is true of all investable assets; art, gold, comic books, etc. Bitcoin is likely a bubble. It may be a pump-and dump, but it is not a Ponzi scheme.
deleted 5y ago
[deleted]