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How is BTC mining a Ponzi scheme in a way that gold mining isn't? Neither require any insider information and new entities can join in the mining. In fact BTC m

by ArchD 5y ago

How is BTC mining a Ponzi scheme in a way that gold mining isn't? Neither require any insider information and new entities can join in the mining. In fact BTC mining has lower barriers to entry because it doesn't require license, land rights, etc.

birdyrooster 5y ago
Well for one, gold is a precious metal with great electro-conductivity properties, never rusts and can be worked at low (relatively speaking) temperatures. Kinda useful for all these chips we need and other electronics. Try to do that with Bitcoin.
- orestarod 5y ago
  That's not where its high value comes from though. And the vast majority of gold is not used in the industry.
  - birdyrooster 5y ago
    That's right, but I think the OP was asking about differences in BTC from Gold as Ponzi schemes. I don't think it was "what makes Gold valuable"? I am just saying you can't use the BTC for anything but the scheme if it was a Ponzi scheme. Just to put some additional data to this: Jewellery: 92,947 tonnes, 47.0% Private investment: 42,619 tonnes, 21.6% Official Holdings: 33,919 tonnes, 17.2% Other: 28,090 tonnes, 14.2% Below ground reserves: 54,000 tonnes To answer that question, I would suggest that gold is valuable because it has uses. BTC as a payment instrument is useful, but how useful?
    - bartvk 5y ago
      BTC also could be useful as a hedge against other assets, for example the stock market or the currency you save in. I view it as a possible hedge against the Euro. This is the currency I daily use, but I definitely keep the Greek Debt Crisis in mind.
      - pyrale 5y ago
        The principle of hedging is that two assets hedge each other if their price demonstrably evolve in opposite directions. For instance, if a bank sells an equal amount of puts (the right to sell at a given time) and calls (the right to buy at a given time) on an action with the same strike price and the same maturity, it is hedged: both positions cancel each other. Since BTC has no underlying asset, it's hard to demonstrate a correlation with anything. So if you buy btc as a hedge, you could pretend you're hedging against anything. In reality, the only significant factor is btc's popularity. That means you could probably buy anything that isn't correlated with Euro and get the same result.
        bartvk 5y ago
        Correlation is a pretty fickle thing. Multiple hedges make for a nice diverse portfolio. So yeah, I consider gold a good component as well. Why add bitcoin as well? Because it makes for a nice bet. We used to all rely on bonds and bills to stabilize our portfolios but central banks have killed that.
jfengel 5y ago
The fact that there's no way to fork gold. Gold is a scheme (not quite a ponzi scheme) in which we've all agreed to maintain the delusion that it's a good marker for totting up wealth. It happens to have nice material properties for that, and it's nearly unique in those properties. The main one being that you can't print more of it. BTC has a lot of those properties... as does Doge, as does Ethereum, as does Bitcoin Cash, and every other cryptocurrency. BTC has the name recognition -- which it shares with gold -- and in doing so may or may not become Gold 2.0. But once we've realized that there can be Gold 2.0, why not Gold 3.0, 4.0, etc.? Only gold can ever be gold 1.0. Even adding silver and platinum and such doesn't really substantially diminish that uniqueness. Whereas there's no one crypto... which means that the "you can't print more of it" goes away. The Dogecoin guy did it. So do thousands of others, every day. Maybe BTC will become the one and only Gold 2.0 and it'll stop there, and if so it'll have a value of some sort -- hard to say what, but eventually it'll reach some kind of equilibrium. Until it reaches that point, it has only its hope to be The crypto, and for the moment that relies on a continuous flow of new investors.
- jfengel 5y ago
  Addendum: the sense in which gold isn't quite a ponzi scheme is that the initial beneficiaries are long since dead. Everybody alive has roughly the same buy-in to it, so we can trade gold among each other on equal terms. Some original guy got rich by convincing others to take his lump of metal in exchange for goods and services. The fact that it's nice to look at helped. That happened thousands of years ago, and so we're all just living with it as a collective agreement. We could break it if we wanted to, but there's not much motivation to.
- saalweachter 5y ago
  TIL that the original "the other gold", silver, is only 9x more common than gold, in terms of "how much have we ever mined". Platinum, we've mined about 1/20th as much as gold. So that part of the D&D economy actually works pretty well; copper, on the other hand, is something like 3600x more common than gold.

by ArchD 5y ago

birdyrooster 5y ago

Well for one, gold is a precious metal with great electro-conductivity properties, never rusts and can be worked at low (relatively speaking) temperatures. Kinda useful for all these chips we need and other electronics. Try to do that with Bitcoin.

orestarod 5y ago
That's not where its high value comes from though. And the vast majority of gold is not used in the industry.
- birdyrooster 5y ago
  That's right, but I think the OP was asking about differences in BTC from Gold as Ponzi schemes. I don't think it was "what makes Gold valuable"? I am just saying you can't use the BTC for anything but the scheme if it was a Ponzi scheme. Just to put some additional data to this: Jewellery: 92,947 tonnes, 47.0% Private investment: 42,619 tonnes, 21.6% Official Holdings: 33,919 tonnes, 17.2% Other: 28,090 tonnes, 14.2% Below ground reserves: 54,000 tonnes To answer that question, I would suggest that gold is valuable because it has uses. BTC as a payment instrument is useful, but how useful?
  - bartvk 5y ago
    BTC also could be useful as a hedge against other assets, for example the stock market or the currency you save in. I view it as a possible hedge against the Euro. This is the currency I daily use, but I definitely keep the Greek Debt Crisis in mind.
    - pyrale 5y ago
      The principle of hedging is that two assets hedge each other if their price demonstrably evolve in opposite directions. For instance, if a bank sells an equal amount of puts (the right to sell at a given time) and calls (the right to buy at a given time) on an action with the same strike price and the same maturity, it is hedged: both positions cancel each other. Since BTC has no underlying asset, it's hard to demonstrate a correlation with anything. So if you buy btc as a hedge, you could pretend you're hedging against anything. In reality, the only significant factor is btc's popularity. That means you could probably buy anything that isn't correlated with Euro and get the same result.
      - bartvk 5y ago
        Correlation is a pretty fickle thing. Multiple hedges make for a nice diverse portfolio. So yeah, I consider gold a good component as well. Why add bitcoin as well? Because it makes for a nice bet. We used to all rely on bonds and bills to stabilize our portfolios but central banks have killed that.

jfengel 5y ago

The fact that there's no way to fork gold. Gold is a scheme (not quite a ponzi scheme) in which we've all agreed to maintain the delusion that it's a good marker for totting up wealth. It happens to have nice material properties for that, and it's nearly unique in those properties. The main one being that you can't print more of it. BTC has a lot of those properties... as does Doge, as does Ethereum, as does Bitcoin Cash, and every other cryptocurrency. BTC has the name recognition -- which it shares with gold -- and in doing so may or may not become Gold 2.0. But once we've realized that there can be Gold 2.0, why not Gold 3.0, 4.0, etc.? Only gold can ever be gold 1.0. Even adding silver and platinum and such doesn't really substantially diminish that uniqueness. Whereas there's no one crypto... which means that the "you can't print more of it" goes away. The Dogecoin guy did it. So do thousands of others, every day. Maybe BTC will become the one and only Gold 2.0 and it'll stop there, and if so it'll have a value of some sort -- hard to say what, but eventually it'll reach some kind of equilibrium. Until it reaches that point, it has only its hope to be The crypto, and for the moment that relies on a continuous flow of new investors.

jfengel 5y ago
Addendum: the sense in which gold isn't quite a ponzi scheme is that the initial beneficiaries are long since dead. Everybody alive has roughly the same buy-in to it, so we can trade gold among each other on equal terms. Some original guy got rich by convincing others to take his lump of metal in exchange for goods and services. The fact that it's nice to look at helped. That happened thousands of years ago, and so we're all just living with it as a collective agreement. We could break it if we wanted to, but there's not much motivation to.
saalweachter 5y ago
TIL that the original "the other gold", silver, is only 9x more common than gold, in terms of "how much have we ever mined". Platinum, we've mined about 1/20th as much as gold. So that part of the D&D economy actually works pretty well; copper, on the other hand, is something like 3600x more common than gold.