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Bitcoin is a Ponzi

• rob74 5y ago
  Yeah... if Bitcoin is a Ponzi scheme, then any investment bubble where stocks etc. rise to values which have nothing to do with reality is a Ponzi scheme too. There too the inverstors who have held the stocks the longest and who sell before the bubble bursts will get the most profits, while the ones who got in late will lose money. Which is also unfair of course, but not fraudulent per se...
• louloulou 5y ago
  Lol at most of HN thinking Bitcoin is a ponzi and the fractionally reserved US dollar monetary&banking system is not. It's been over a decade guys, try opening your eyes and your minds or you're going to go down with the ship.
  • logicchains 5y ago
    >It's been over a decade guys, try opening your eyes and your minds or you're going to go down with the ship. In HN's mind, crime is okay if our enlightened government does it.
  • toephu2 5y ago
    The difference is USD is backed by the U.S. government. Bitcoin is backed by nothing.
    • louloulou 5y ago
      I guess that's why it's fallen in value so much relative to the USD over the past decade.
    • reginold 5y ago
      Bitcoin is backed by nothing but math.
• russianbandit 5y ago
  Were seashells a Ponzi? What about glass beads? These were used as “currency” in our history, but nobody uses them as such anymore. Let’s say Bitcoin is a Ponzi. What or who will do the inevitable rug pull that comes with those scams? What if the rug pull never comes (or does 1000 years from now)? Is it still a Ponzi? Was it a Ponzi for those people who benefited from it in that 1000 years?
• tim333 5y ago
  By the authors definition, fiat currency, art and gold are pretty much Ponzis. With fiat I guess you don't expect good profits but when you sell any that comes from new money buying it off you. The 'operators' in each of these - artists, governments, gold miners take a chunk of the money. The type of scheme operated my Mr Ponzi was characterised by fraud and the money going to Mr Ponzi and so was different.
• sentinel 5y ago
  Another day another “stay away from bitcoin” post on HN
  • Karrot_Kream 5y ago
    It's okay maybe things will change the 600th time. /s
  • glenvdb 5y ago
    The anti-Bitcoin sentiment on HN is frankly baffling to me. It's one of the most exciting things happening in tech right now, and HN is at best ambivalent and at worst openly hostile to Bitcoin. Why wouldn't the tech crowd be excited about digital native money which is perfect for the Internet? Look at what's happening around the ecosystem with the Lightning Network, Impervious.AI, RGB etc. https://rgb-org.github.io/ https://rgb-org.github.io/ https://www.impervious.ai/ https://www.impervious.ai/
    • jschwartzi 5y ago
      Bitcoin isn’t exciting because it doesn’t solve very many problems relative to the massive energy expenditure needed to create it. It’s like a fire at an oil well or a gas pipeline break. The arguments for why we should use it remind me a lot of arguments for why this year is the year of the Linux desktop. Bitcoin may be eating a lot of speculation but I can’t buy beans with it.
    • curuinor 5y ago
      it's as old as android with like 5 orders of magnitude less societal impact and worse societal impact when there is societal impact than android. it's eaten a material amount of all gains in renewable energy basically using cycles to heat the world for what ends up being an O(n) database insert.
      • glenvdb 5y ago
        Database insert? Ok... You may benefit from reading about why Bitcoin works the way that it does, and why certain tradeoffs were made. But you don't really care to know, do you?
• CryptoJunky1122 5y ago
  Bitcoin continue working even if there are no newcomers, is this how a ponzi works?
• justicezyx 5y ago
  You are not going to convince people who already dumped billions dollar into this thing. You better invent a bitcoin killer or ask governments to shut it down. Ponzi as a concept is unaware to most bitcoin holder.
• EastOfTruth 5y ago
  cryptos are a currency even if the US don't want to admit it...
• iplaman 5y ago
  Bitcoin is now being considered as official currency in Brazil where the author is. It will be interesting to see how this develops https://timesofindia.indiatimes.com/business/cryptocurrency/bitcoin/brazil-to-launch-bitcoin-as-a-currency-soon-federal-deputy/articleshow/86818724.cms https://timesofindia.indiatimes.com/business/cryptocurrency/...
  • toomuchtodo 5y ago
    Brazil also has an instant payments platform that recently went live (Pix) that sees more volume than Zelle in the US with ~110 million users. It’s already ubiquitous in a year of operation.
  • zekrioca 5y ago
    I don’t think this will pass there.
• hda2 5y ago
  No, this discussion ended when bitcoin was ratified as legal tender. Regardless of how you define it, the cat has left the bag.
• phase5 5y ago
  It's been more than a decade of innovation. Gary Gensler (SEC Chairman) has acknowledged the value of Bitcoin. Lets ignore idiots like Jorge Stolfi. He's no different from the BSV characters...
• quijoteuniv 5y ago
  Are you talking about Bitcoin or capitalism?
• swinglock 5y ago
  > 5. the operators take away a large portion of this money. What operators?
• swinglock 5y ago
  > By that definition, real estate too is a ponzi. No. Like stocks, real estate creates value while it is being owned, namely the sheltering service it provides to those who live in it. Bitcoin is money which provides sheltering services for wealth.
• theurbandragon 5y ago
  Some would claim that the "Dollar" is a Ponzi scheme by the Fed...
• frebord 5y ago
  What about the hodlers. What if your ponzi becomes a globally accepted currency.
• arvindamirtaa 5y ago
  > No, national currencies too fail to fit the definition, because people do not "invest" in them with the expectation of gain. The entire forex trading industry: am I a joke to you?
  • Swizec 5y ago
    Isn’t forex kind of a joke to everyone? Hearing your friend got into Forex is about the same as when they get into Amway, Tupperware, DoTerra, or Herbalife …
    • deleted 5y ago
      [deleted]
    • whimsicalism 5y ago
      Yes, this is true, but at the same time - there are major institutional players and market makers who do make money off of Forex.
      • Swizec 5y ago
        Hey Tupperware makes hella money off Tupperware too! Reusing your customers as your sales force, marketing, and distribution channel is hugely profitable.
    • sien 5y ago
      George Soros would like a word. https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday
      • qaq 5y ago
        The fact that you can name notable exceptions is only reinforces the general rule
        • sien 5y ago
          It's a 6 trillion dollar a day market. https://en.wikipedia.org/wiki/Foreign_exchange_market https://en.wikipedia.org/wiki/Foreign_exchange_market
• sockfish 5y ago
  "By that definition the USD is a ponzi. No, national currencies too fail to fit the definition, because people do not "invest" in them with the expectation of gain" <-- The 6.6trillion/day forex market begs to differ.
  • Finnucane 5y ago
    Also it is not true that "governments make their currencies slightly inflationary precisely to discourage hoarding." In fact, this is done so that there can be economic expansion. It is true that some economists have advocated for deliberately trying to increase inflation to spur spending, but it turns out that actually forcing inflation is not easy (see also: Japan for the past two decades).
    • AlexCoventry 5y ago
      The US seems to be pulling it off for the last few months. https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/ https://www.statista.com/statistics/273418/unadjusted-monthl...
      • Finnucane 5y ago
        Yes, but not as a matter of deliberate policy.
  • bpodgursky 5y ago
    There are a lot of people who are "investing" in Bitcoin right now not out of expectation of real gains, but as a way to maintain assets against an inflating dollar... nominal gains, but not real ones.
    • aidanlister 5y ago
      This is not true: you don't invest in something with 20% weekly swings to "maintain assets" against 1-3% inflation. You just don't.
• fighterpilot 5y ago
  > gold > real estate > stocks Sure, these things aren't ponzis. What about art and stamp collecting, though? How are they not ponzis under this definition?
  • reducesuffering 5y ago
    They have value as tax evasion schemes
    • fighterpilot 5y ago
      And bitcoin has value to some people who wish to avoid local hyper-inflation or who wish to do transactions not allowed by financial institutions.
    • cutemonster 5y ago
      And money laundering, right? Transferring $1M by buying a painting
• richardatlarge 5y ago
  I’ve discouraged friends from investing in CC as I could never see a material basis for value, present or future. I wonder what if anything exists that is similar that is not a Ponzi scheme. Ask yourself this: if you woke up in the morning to find BCs value had zeroed out, how surprised would you be
  • glenvdb 5y ago
    I would be absolutely shocked if Bitcoin's value ever dropped to zero. I can't see any conceivable way that happens at this point. Even a coordinated effort by the world's governments to "ban" it (they can't really ban it) would not drive its price to zero... if anything it might even have the inverse effect. Can you provide any conceivable way this would actually happen? Maybe an asteroid hitting Earth and wiping out all human life on the planet?
    • ItsMonkk 5y ago
      You asked for any possible way. 1. Tether defaults. 2. People panic and sell at whatever price they can get. Let's say Bitcoin drops to $10k. 3. All miners that don't make a profit at $10k shut down. 4. With most miner's shut down, block times go from 10 minutes to 1 hour. 5. The fees to transact Bitcoin go up exponentially as people rush to get out. 10 Bitcoin to make it into a block, sure! 6. The price drops further. 7. More miners stop mining. 8. Block times go up so much that it will take the miners YEARS to reach the difficulty adjustment point that normally hits every 2 weeks. 9. Blocks stop being created, and the price is essentially 0. With China shutting down a lot of their mining, this is less likely than in May. The higher it goes, the more likely that a sudden shock can destroy it all. Eth has shorter block times and would be able to stabilize better. The block fees going up might actually save the system to keep enough miners mining, but I also think they will scare users away from buying at cheaper prices. I think some of these are a stretch. I think some of these would definitely happen if the things up to them happened.
      • dropnerd 5y ago
        at step 8, node operators and client devs would recognize that there is a crisis and there would be a hard fork if the stakes are high enough, code is not law, even in btc land
• amin 5y ago
  In a nutshell: A ponzi scheme has no external revenue, instead the payoffs come from new investors. This is the case when investing in Bitcoin.
  • topspin 5y ago
    The crucial difference that excludes Bitcoin (and any other such blockchain currency) is that a Ponzi scheme deceives investors by pretending it is profitable and the profits are derived from legitimate investments. Bitcoin et al. does not do this; there is no deception, no fraud and, therefore, no Ponzi.
    • yunohn 5y ago
      > profits are derived from legitimate investments Exactly, crypto doesn’t even claim to have legitimate investment profit. All of it is from newcomers pouring money into the pot…
    • baby 5y ago
      Wait what? Are you saying you don’t get spammed by people who tell you it’s going to the moon?
      • topspin 5y ago
        That claim has been and is made about all manner of financial instruments and most of that isn't Ponzi either. To be a Ponzi scheme you need the fraud; "it's safe, legitimate, consistently profitable investment backed by high quality equities with little to no risk, and it's going to the moon!" That's a Ponzi Scheme. Bitcoin doesn't claim to be a low risk AAA investment vehicle.
      • rabuse 5y ago
        That's not inherently built into the Bitcoin spec. People commit fraud with cash since, forever.
  • Bilal_io 5y ago
    Does the USD have external revenue? Is so, what is it?
• dhsysusbsjsi 5y ago
  I think this is simplistic. It’s viewing Bitcoin through a lens of a traditional Ponzi scheme assuming people that trade their fiat currency for Bitcoin are investing, with a view to one day take profits back into dollars. What if people are seeing discussion of minting a trillion dollar coin, trillions in QE, 25% of all dollars created in the last 12 months…and concluding that fiat currency is in an endgame and they are permanently trading what fiat they have now for one of a finite number of digital assets that will ever be created. As Michael Saylor once said in an interview: “It’s the superior asset, Laura”
  • echelon 5y ago
    Quantum computing is going to bring this entire house down. Money without an army is just paper. Or, in this case, imaginary numbers. There will be no one to cry to when the machines start cracking all the hashes and wipe away the entire ecosystem. I'd wager the NSA already has this capability, but they won't blow it on something so stupid.
    • Sargos 5y ago
      Ethereum already has quantum resistant algorithms ready to go for each part of the system but they perform worse so it doesn't make sense to start using them until quantum computers are more real. There is no long term threat from quantum computing to Ethereum or other systems like it.
    • arthurcolle 5y ago
      They'll make new quantum proof encryption - isn't this an active area of cryptography research? JQI at UMD, NIST's Quantum Computing Group - these teams must be doing something with all the grant money
      • px43 5y ago
        QRL is a thing https://www.theqrl.org https://www.theqrl.org It uses XMSS, and does it fairly well.
• kayamon 5y ago
  In which a man doesn’t know what a proof of work system is.
• lpa22 5y ago
  > They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour. I strongly believe bitcoin will be the new gold one day, if it doesn't pan out as a currency. It sounds insane, but I actually believe the Winklevoss twins when they say Elon and SpaceX will be able to mine gold on asteroids within the next 20 years, which would crash the price of gold. Not to mention as everything inevitably moves digital, we need to have a digital store of value.
  • ChainOfFools 5y ago
    > Elon and SpaceX will be able to mine gold on asteroids within the next 20 years, which would crash the price of gold. what would be their incentive to do it, then?
    • chasebank 5y ago
      Well, if the cost of mining is less than the value of the gold, I’d imagine there’s plenty of incentive.
      • ChainOfFools 5y ago
        yes, until you "crash the price" by the very act of procuring substantial quantities of it below market value.
        • machiaweliczny 5y ago
          What if you crash the price but buy alternative asset first? That would be smart.
  • Daishiman 5y ago
    > I strongly believe bitcoin will be the new gold one day, if it doesn't pan out as a currency. It sounds insane, but I actually believe the Winklevoss twins when they say Elon and SpaceX will be able to mine gold on asteroids within the next 20 years, which would crash the price of gold. Not to mention as everything inevitably moves digital, we need to have a digital store of value. What is the energy cost to get a refined kilo of gold back to Earth?
• bin_bash 5y ago
  The article describes "5 features of a Ponzi scheme" which make it sound like some authoritative rules, but so far as I can tell these were simply made up just for this article. I can't find them referenced anywhere else.
  • amin 5y ago
    There you go: https://en.wikipedia.org/wiki/Ponzi_scheme https://en.wikipedia.org/wiki/Ponzi_scheme
    • bin_bash 5y ago
      That's the first place I looked. They're not on that page, I don't know why you linked it.
• topspin 5y ago
  Nope. No one is being deceived. A Ponzi scheme pretends to be based on legitimate equities and value and is therefore a fraud. Bitcoin makes no such claim.
  • Nursie 5y ago
    Not all of them, some are even advertised as Ponzi schemes.
    • topspin 5y ago
      Once the deception is dispelled it ceases to be a Ponzi scheme, the BS spewed by marketers not withstanding. Ponzi is fraud; deception is imperative. Everything is else Not Ponzi. I'm no crypto currency fanboi, but I feel no need to commit the intellectual fraud of misapplying well understood concepts to denigrate it. Every couple of months, however, someone decides they can score some clicks by yelling 'Ponzi' and we get this headline again. In addition to being tedious it's also dangerous. Blockchain and cryptocurrency is new phenomena and we don't yet know what value there is here. We can, however, confidently assume that if the false narrative that Bitcoin is a Ponzi Scheme is successfully applied The Great And The Good will suddenly discover the moral obligation to crush it out of existence and criminalize everyone involved. That possibility worries me far more than whatever part of the status quo bitcoin might disrupt.
      • Nursie 5y ago
        Intellectual fraud is somewhat overstating the fact that you disagree with someone else’s definition. And it puts the blatant “Join the Ponzi scheme early!” stuff I’ve seen on crypto forums into an amusing paradoxical state. Blockchain and cryptocurrency is over a decade old. Several lifetimes in tech. So far the use appears to be speculation, fraud and burning through electricity as fast as possible. I hope they do crush it, for that last bit alone if nothing else.
  • ralston3 5y ago
    This was my take as well. A key feature of a Ponzi scheme is the deception needed to pass the scheme off as “legitimate”
• seibelj 5y ago
  Judging by the attitude on HN, cryptocurrency should be worth $0 and written off years ago. Instead it's bigger than ever and the most important people on earth are focusing on it. Somehow it's simultaneously an incredible, useless scam but is so powerful that we must ban it at all costs! HN doesn't know everything, do your own research, use your own logic.
  • Nursie 5y ago
    “Do your own research”, the tag line of quacks and kranks everywhere…
  • imsd 5y ago
    I love HN but have watched for years as much in the community have completely missed the boat on crypto and blockchain. It's a strange disconnect...
    • Karrot_Kream 5y ago
      Shrug whether or not they've missed the boat or are sanguine on the future of crypto and it's all a house-of-cards filled with hucksters doesn't matter. I just don't see why we need to beat this on the head over and over and over and over again, despite no new news. The anti-greenwashing is the one that really gets my blood boiling because of what a large distraction it is to real climate change issues. This whole thing is just bringing the level of discourse here down, and I've been on HN for a long time.
    • TigeriusKirk 5y ago
      And no one is going to change their mind at this point. People have far too much ego invested in their opinions of crypto now. I'm in favor of a blanket ban on crypto discussion here. It's all noise at this point.
    • zenbai 5y ago
      A lot of people on HN seem to have 'strong opinions strongly held' about things.
    • 5y ago
• blackoil 5y ago
  I was just now seeing the first video of https://a16z.com/crypto-startup-school/ https://a16z.com/crypto-startup-school/ . Whole video is about how blockchain is awesome because Computer, Internet and Mobile were awesome. Followed by some answers about how we don't know of any use case right now. Is there any non currency use case of blockchain?
  • Sargos 5y ago
    DeFi (Beyond a currency, a whole trustless financial system where no one can cheat) NFTs (Not just art but concert tickets like GET protocol, gaming like Axie Infinity, collectibles like Crypto Punks, etc) DAOs (Internet scale corporations/governments) Identity systems (ENS, BrightID, Proof of Humanity, etc which allow for supranational products that build on top of reputation and uniqueness. The Sign-In With Ethereum standard is bringing self-custody OAuth authentication to Web 2.0 applications) Enterprise interoperability (Baseline) There's a ton of stuff going on and it's almost impossible for any one person to keep up with everything. It's easy to write everything off as a scam but there's hundreds of thousands of really smart and high integrity developers working in this space and it's worth keeping an eye on.
  • tushonka 5y ago
    Yes, when you need certainty that data hasn't been tempered with. Logistics, being able to trace back where a certain item came from. How about trading cards, be certain that the trading card you are possessing is the only one and it is genuine. (NFTs)
  • readthenotes1 5y ago
    Why specify non-currency? Doesn't Bitcoin provide a more convenient/less expensive way to send money between countries (or both). Those are pretty powerful uses. (I don't know money laundering and drug dealing are still more convenient in Bitcoin)
    • sellyme 5y ago
      > Doesn't Bitcoin provide a more convenient/less expensive way to send money between countries The current bitcoin transaction fee is more than 100x what my bank charges, so no, not really.
• shimonabi 5y ago
  About two weeks ago a coworker came into my office and told me he bought a cheap motherboard so he could mine bitcoin with his graphics card. Is it theoretically still possible to make a profit with that kind of hardware nowadays? Please someone just tell me. I have no interest to do research into this. I just feel sadness for the crypto-bros.
  • dleslie 5y ago
    Most likely not, unless power is basically free where you are and the hardware they're using was surplus.
  • Nursie 5y ago
    AFAICT yes, but you mine ether or some other coin and either get paid in Bitcoin by a pool like ‘Nicehash’ or exchange it yourself. The others have become a proxy for Bitcoin.
    • shimonabi 5y ago
      You were right. I asked him. Thanks!
  • jmknoll 5y ago
    No, it’s not possible. All mining, for probably the past 4 or 5 years, is done on ASICs, typically in places selected for favorable energy or climate reasons.
  • duskwuff 5y ago
    Bitcoin? No. Not even a little bit. Bitcoin mining has been dominated by ASICs since 2012 or so. Some other cryptocurrencies can still be mined on GPUs, but the profit margins are rather narrow.
  • pcstl 5y ago
    You can still mine ETH on a (high-end) GPU and make a profit. BTC mining is way too advanced for that, it's done with mining-specific chips. Mining with a GPU gives you too little hash rate for it to be profitable. Going a bit more in-depth: Mining is a competitive activity. Your chance of being the person to mine a block is proportional to the fraction of the hash rate of all miners you hold. Therefore, if everyone is using super advanced mining hardware and you go in with a GPU, you hold an insignificant fraction of the hash rate and have next to no chance of actually mining a block, while you still spend on power and hardware maintenance - which will probably make mining a net negative for you. Nowadays BTC mining is advanced enough that the only way to make a profit is with big specially-designed rigs located in places with access to very cheap energy sources.
• kingo55 5y ago
  Is it still a Ponzi if you bought it to exit legacy finance with no view to sell back?
  • bigbob2 5y ago
    Likely depends on whether or not that's the reason most people are buying it.
• young_unixer 5y ago
  And knives are weapons.
  • EastOfTruth 5y ago
    knives are tools
    • young_unixer 5y ago
      If you define things by their "worst" use, then knives are weapons and Bitcoin is ponzi. If you define them by their "best" use, then knives are tools and Bitcoin is a currency.
• okwubodu 5y ago
  > Stocks have an external source of revenue, namely the profit that the company makes by selling its products and services to customers Hahaha somebody let GameStop, Tesla, and Virgin Galactic know about this rule.
  • schleck8 5y ago
    That's why they are called meme stock, two of them at least.
  • deleted 5y ago
    [deleted]
• TedShiller 5y ago
  You can say the exact same thing about investing foreign currencies, like the Euro.
• wyc 5y ago
  "By that definition, stocks too are ponzis. No. Stocks have an external source of revenue, namely the profit that the company makes by selling its products and services to customers..." This is a very simplistic view of equities markets and does not explain penny stocks, meme stocks (GME/AMC), TSLA, and other things that seem to escape traditional fundamental analyses.
  • onlyrealcuzzo 5y ago
    The vast majority of equities by value are not penny stocks or meme stocks.
    • exdsq 5y ago
      Still the value compared to profits are way off in traditional finance at the moment
    • Kranar 5y ago
      The average P/E ratio of U.S. stocks is 38, meaning if the value of a stock really is primarily based on its ability to produce an external source of revenue, it would take 38 years for an investor to recoup the cost of a share of a company. When you adjust for 2% inflation, it would take 117 years for someone to recoup the cost. Since that exceeds the lifespan of well over 99% of the population, it must follow that people are not investing in stocks because they expect the company to produce some external source of revenue that will eventually repay the principle. There are a host of complex reasons why people invest including wealth preservation, a desire to support a company they are interested in, speculation, a belief that investing is smart and the right thing to do... these are all fine reasons, but they have little to do with some kind of fundamental valuation that some people think stocks intrinsically have. The vast majority of gains from the stock market have next to nothing to do with external sources of revenue.
      • deleted 5y ago
        [deleted]
      • minitoar 5y ago
• ltbarcly3 5y ago
  Using this dumb definition of a ponzi scheme, every stock IPO that doesn't pay a dividend is a ponzi scheme. Bitcoin is valuable because people agree on using it as a form of money, and it is limited in supply. Nobody is making more bitcoins from nowhere to pay out existing bitcoin holders. Idiotic definition of a ponzi scheme crafted intentionally to include bitcoin, fails to include bitcoin, but does cover many valid economic activities.
  • smt88 5y ago
    > every stock IPO that doesn't pay a dividend is a ponzi scheme I agree with you in spirit. Stocks that will never pay a dividend (if you can see the future) are worth $0. Most stocks are effectively speculative assets. The difference is that a stock has a real, legal value: ownership of a company that has cashflows. If that company is liquidated, you have rights as a shareholder. You may also be able to vote on important decisions that the company makes. Bitcoin is an asset that, by definition, never will pay a dividend. It is a stock that we know with certainty is worth $0. Its only value is speculative. In that sense, Bitcoin is very much like fiat currency: its value is imaginary and based on how other people value it. But if we're comparing Bitcoin and, say, USD, then Bitcoin is by far the worse currency because it's deflationary and unbelievably expensive to transact. That's why, in places with unstable currencies, people mostly shelter their money in USD. If cryptocurrencies factor into it, it's because those currencies are seen as easier ways to transact USD. People who need their assets to be spendable on a daily basis don't hold them in Bitcoin.
    • ltbarcly3 5y ago
      What do you even mean when you say something is worth 0? How can a share of stock that you can sell at any time for an amount much larger than 0 be 'worth 0'? Things are worth what you can sell them for, and that is the only definition of value that isn't nonsense. You want currency you hold to be deflationary. Deflation is a systemic problem for economies, not individuals with cash in hand. Its not expensive to transact, it is extremely cheap. You go find a provider to let you accept payments from anyone in the world for a smaller % of the transaction and that will cover chargebacks. It doesn't exist, and you are not doing an honest analysis when you compare the transaction cost of walmart instead of yourself, or the cost of exchanging cash without the costs of moving people to the same location to exchange it. You have no practical legal right to anything as a shareholder. If a company is liquidated the shareholders get nothing in practice. Management controls the finances and expenditures of a company, and a majority of shareholders control management. This control is usually only given to special classes of stock that is for the most part impossible to buy. Why do you think people fight over control of companies? Management routinely steal huge sums by allocating it for the direct benefit of some shareholders over others.
• glenvdb 5y ago
  A lot of the "Common Objections" relate to the REASONS people choose to own Bitcoin and how those cases make it a Ponzi. There are many different reasons to own Bitcoin, however the author seems to only view it through the lens of someone living in a wealthy and developed country with financial stability. The properties of it being difficult/impossible to confiscate and its privacy make it valuable in oppressive regimes. A refugee could store their wealth in Bitcoin, leave their country, settle somewhere else, and access their Bitcoin without the risk of it being confiscated during the journey, because they can simply memorise the seed phrase (24 words). It's predictable issuance schedule also makes it valuable in countries suffering from high inflation or hyper-inflation. This is a good article to rethink the use cases of Bitcoin: https://bitcoinmagazine.com/culture/check-your-financial-privilege https://bitcoinmagazine.com/culture/check-your-financial-pri... Alex Gladstein works for the Human Rights Foundation and does lots of good work in Bitcoin advocacy. His other articles are worth checking out. And the data backs this up. Some of the biggest growth in Bitcoin users around the world have been in places around Africa and Vietnam who are subject to some of the situations mentioned above. Do you think these people see Bitcoin as a "Ponzi"? Do you think they care if such a definition doesn't change the properties they find useful/valuable?
  • qaq 5y ago
    Generally people participating in a Ponzi scheme do not view it as such. The tactics deployed by truly oppressive regimes make anything easy to confiscate including bitcoin.
    • glenvdb 5y ago
      Yes, the wrench technique will always ultimately win. https://xkcd.com/538/ https://xkcd.com/538/ But they have to know someone holds it in the first place. You can walk around with a seed phrase in your head and no one would know.
      • qaq 5y ago
        well you had to have something of value that you had to trade for bitcoin. Also in oppressive regimes the act of attempting to leave the country already makes you a suspect.
• dvt 5y ago
  People use BTC/ETH/etc. in exchange for goods. I mean, I'm not a fan of cryptocurrency, but calling it a Ponzi scheme is just wrong. There are plenty of shitcoins out there that are purely pump and dumps, but it seems like BTC is here to stay.
  • rmetzler 5y ago
    I think bitcoin is a ponzi scheme, but the article (and so far I haven't seen it mentioned in the discussion) doesn't mention the following reasons which capture value in bitcoin: As long as you don't steal the electricity you need to pay for it in fiat. And you not only need electricity to mine new coins, but also for transactions Ransomware creates demand in bitcoin and this demand keeps the value up.
  • muglug 5y ago
    A very very minute percentage of bitcoin is used in transactions. The vast bulk of it is seen by its users as an investment. And historically there have been Ponzi schemes that allowed people to cash out before the scheme fell apart — but it was always a small minority cashing out.
    • hanniabu 5y ago
      So no different than gold?
      • chowchowchow 5y ago
        It’s clearly argued that since a majority of demand for gold is from non-investors it doesn’t fit the definition..
        • sb057 5y ago
          Roughly 50% of gold's demand comes from private investors and central banks, with another 40% of demand being driven by (para-investment) jewelry. https://www.gold.org/goldhub/data/gold-supply-and-demand-statistics https://www.gold.org/goldhub/data/gold-supply-and-demand-sta...
• nnx 5y ago
  A bit ridiculous simplistic clickbait article... if the author had any intellectual honesty he would realize his arguments on gold NOT being a ponzi could be used exactly the same for Bitcoin: "First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour." Actually almost every other point he tries to make on things NOT a Ponzi could be made for Bitcoin too.
  • geysersam 5y ago
    Is it not fair to say most investing in Bitcoin expects large profits?
• mekarpeles 5y ago
  I think many people in these comments are bound to talk past each other when the real answer is: Yes, Bitcoin is a Ponzi scheme (by virtue of people making it so), but that does not, nor should it, imply that the only thing Bitcoin is, is a Ponzi scheme. Bitcoin is a Ponzi scheme in the same way that sociopaths exist in the game of geeks, mops, and sociopaths: https://meaningness.com/geeks-mops-sociopaths https://meaningness.com/geeks-mops-sociopaths It's part of the ethos but does not describe the whole ethos, and trivializing Bitcoin to a Ponzi scheme is the wrong answer. As, honestly, is trying to defend that Bitcoin is not a Ponzi scheme. Irrespective of how value is in practice (or volume) making its way through the system is different from the system itself. There are several promising elements of Bitcoin which contribute to its value. One is sheer access and connectedness (e.g. Metcalfe's law). People use facebook (its valuation reflects this) or pay for a phone plan because connecting to the Internet is a synecdoche for ubiquitous access. Creating a fabric where people in any country may work for a company, irrespective of its location, is a paradigm shift from what we had previously. Today, working for a US company from Taiwan is a legitimate challenge & deterrent. There are many such examples, where transparent ledgers for instance may increase trust between parties and give people more confidence in financial robustness. All of these things have intrinsic value, just as the architecture which is PageRank has value for Google. A common mistake I hear is for people to point to these advantages as if to suggest that it is without flaws or incapable of flaws, when we -- the people using the system -- are quite fallible and driven by prisoner's dilemma-type incentives which may by no means be long-term efficient or equitable (given we're all in the same boat). And I think these social challenges should be noted and not discounted on behalf of "technology being good enough". So, I think this is a case of "Yes and".
• dollydollar 5y ago
  I am reading these articles for 10 years now..
• eyeball 5y ago
  https://m.youtube.com/watch?v=NUSmi1Xz59M https://m.youtube.com/watch?v=NUSmi1Xz59M I like the idea of a network for money separate from an asset presented here.
• dollydollar 5y ago
  I have been reading these articles for 10 years now and i am happy to be reading them for the next 10 years.. sigh
• bugzz 5y ago
  > By that definition, gold too is a ponzi. No, gold clearly fails to satisfy that definition on two counts. > First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour. I believe Bitcoin has potential to become the "new" gold. It's better in many ways. Does that mean I can only buy Bitcoin if I want to use it as a hedge? No! I can buy it with the expectation of profit because I expect it to be commonly used as a hedge in the future, at which time it will have a much higher price and I'll have made money.
  • foolfoolz 5y ago
    gold has no value to typical people. i can’t walk into a store and buy with gold. i can’t use gold for any purpose in day to day life. it’s an asset
    • Eji1700 5y ago
      This is arguably the same for a majority of crypto users. I see crypto as a "digital asset". It's something you store funds in to hedge markets or get around transactional issues (either because you're doing something potentially illegal by some entities definition or because your currency is shot to shit), which basically makes it like golds or precious gems. I'm not totally sold it'll last long term, but I don't see the comparison as a huge logic leap.
    • smt88 5y ago
      > gold has no value to typical people. The whole point of an economy is that something has value if it's valuable to someone, not just the person who's holding it. I'm not going to use a chunk of gold for anything, but it has intrinsic uses that aren't tied to being an exchange of value. It can be used to make jewelry, electronics, food, and medical devices. In some of those applications, there is no substitute for gold. Contrast that with Bitcoin, whose only value is speculative (whether people think it will increase in price). It has literally no other use or value. If the internet crashed, you couldn't sell your Bitcoin to someone to make jewelry out of it.
• deleted 5y ago
  [deleted]
• Zamicol 5y ago
  Jorge Stolfi has been a bitcoin doomsayer for years. The author published these in 2014: https://ic.unicamp.br/~stolfi/bitcoin/bitcoin-beggar-1024.png https://ic.unicamp.br/~stolfi/bitcoin/bitcoin-beggar-1024.pn... https://ic.unicamp.br/~stolfi/bitcoin/2014-03-02-ShortHistoryOfBitcoin.html https://ic.unicamp.br/~stolfi/bitcoin/2014-03-02-ShortHistor... Bitcoin ended 2014 around $378. I think it's proved it's staying power. Let's move on.
  • skinnyasianboi 5y ago
    That must hurt.
  • shaklee3 5y ago
    Staying power has nothing to do with what the article is saying. Casinos also have staying power, but they're 100% gambling.
  • skinnyasianboi 5y ago
    "..bitcoin may be dead by the middle of 2014.." reminds me of https://99bitcoins.com/bitcoin-obituaries/ https://99bitcoins.com/bitcoin-obituaries/
• rektide 5y ago
  Since not a single comment agrees with the premise, I'll say: yes. Heck yes & obviously. A limited supply of increasingly hard to miner tokens is a clear & obvious indicator of a ridiculous scheme. There's very few examples in the world of the utility of a thing continually decreasing while the valuation ascends, yet Bitcoin has ascended pointlessly to a tens-of-thousands-of-dollars price-point. There was a time when bitcoin was a possible way to either encode data into the blockchain, or to make financial transactions. These uses are still possible but at vastly less available price points.
• satoshiiii 5y ago
  Bitcoin is nothing new. See Rai stones: https://en.m.wikipedia.org/wiki/Rai_stones https://en.m.wikipedia.org/wiki/Rai_stones It's the people invested in it that gives it value. Just like fiat, gold, art, stamps, useless antiques, etc. As long as it has value to someone, then it has value. I can't see it disappearing anytime soon. Yes, it might fall and rise in value but to disappear like any other Ponzi scheme? Don't hold your breath. Bitcoin is more than a decade old now. It will be the longest running "Ponzi" scheme. Be back in a decade to say I told you so. Bye!
  • russianbandit 5y ago
    Nice try, Satoshi...
• mrorbitman 5y ago
  > Thus the investors, as a whole, are always in the red, and their collective loss only increases with time How is this true of bitcoin investors? When bitcoin price action is near all time highs, most bitcoin investors are not in the red.
• varajelle 5y ago
  Yes, Bitcoin is a banana. 1. A banana is yellow 2. A banana starts with B Bitcoin is usually represented by a yellow coin with a b in it, and it starts with B, therefore bitcoin is a banana. ---- The article just redefine the word Ponzi so it loosely fit Bitcoin. But it is missing one key feature of the common interpretation of a Ponzi scheme: the fraudulent part.
• jliptzin 5y ago
  Bitcoin is a lot of different things to a lot of different people. The fact that it satisfies a certain set of conditions of a Ponzi scheme does not invalidate the myriad current and future applications of crypto. The social security administration could also be considered a Ponzi scheme, but it still provides tremendous value to a lot of people.
  • bb88 5y ago
    > The social security administration could also be considered a Ponzi scheme, but it still provides tremendous value to a lot of people. Government runs a debt and finances it on the bond market with US Treasuries. That's not a ponzi scheme. Edit: Not sure why the downvotes, but it's true and will continue to be true in the forseeable future.
  • whateveracct 5y ago
    LuLaRoe is a lot of different things to a lot of different people. The fact that it satisfies a certain set of conditions of a pyramid scheme does not invalidate the myriad current and future applications of MLM.
    • russianbandit 5y ago
      You are not wrong, but neither is MLM in and of itself.
  • zacmps 5y ago
    I'm sorry, what applications? Besides accelerating global warming there doesn't seem to be anything it's good at.
    • BrianHenryIE 5y ago
      Commerce.
      • cemerick 5y ago
        Among whom, and for what? Average transaction fees were substantially above $5 - $10 for nearly a year, and have now settled around $2 - $3. No one was looking to transact in BTC before that spike, and that goes double now.
• coz131 5y ago
  At some point, hacker news needs to accept that crypto is here to stay. Maybe not now, but you can't deny it forever if it is successful.
• LudwigNagasena 5y ago
  A Ponzi scheme is when someone gave you money and you gave them back more because someone else came and gave you money, and now you need to give money to this new person so then you get another person and their money and so on. This is absolutely not in any way similar to Bitcoin. These "five features" author suggests are completely random and have little to do with a Ponzi scheme.
• rufus_foreman 5y ago
  >> People invest into it because they expect good profits OK yeah that's called an investment. Most people don't invest in stuff they think will be unprofitable. Maybe you're different? >> that expectation is sustained by such profits being paid to those who choose to cash out Profits aren't paid out from Bitcoin. There are no profits being paid out. That's sort of the key difference. Bitcoin doesn't send you a check if you own it. >> the operators take away a large portion of this money If there were "operators" of the Bitcoin scheme, they left billions of dollars on the table. Which...I hope they did! But sadly, unlikely.
  • newacct583 5y ago
    > Profits aren't paid out from Bitcoin. There are no profits being paid out. That's sort of the key difference. Bitcoin doesn't send you a check if you own it. That's a pedantic evasion. You're conflating profit ("making net money") with dividends or other rent mechanisms. Selling an investment is colloquially "profit taking" too. And you can only sell, on balance, to those entering the bitcoin system.
    • rufus_foreman 5y ago
      No it is not a pedantic evasion, with a Ponzi scheme, you get sent money. On a regular legally defined basis. That money has to come from somewhere. Bitcoin doesn't have to send you a check every month or it collapses.
      • newacct583 5y ago
        > with a Ponzi scheme, you get sent money Still pedantry. You're arguing that it's not a Ponzi scheme NOT because it funds promises to existing players with money coming in from new players (which is pretty much the standard definition), but because TECHNICALLY they have to "sell" their coins to get paid. That technicality doesn't change the direction the money is flowing. It's just not relevant.
        • rufus_foreman 5y ago
• nightski 5y ago
  People do not invest in USD because they expect a gain? Anyone holding cash is doing exactly this. Because the only rational reason to hold USD instead of spending it or converting it to some other asset/investment is because you think it's value is going to either hold or grow more than other options. If people expected no gain in USD (or inflation) then they would not hold USD and instead choose assets or other investments. If one does expect profits they can achieve that not just by BTC going up in value, but other currencies being inflated. I myself hold bitcoin as a store of value and do not necessarily expect profits. I simply feel that it will hold it's value better than other things. I could be wrong, but that doesn't mean it is a Ponzi.
  • arcticbull 5y ago
    Nope, people do not hold USD because they expect a gain. They are willing to pay the inflation penalty because holding the dollars in question provides them something. Generally that means either a sense of security or liquidity on short notice. Holding dollars is paying a fee for liquidity.
    • deleted 5y ago
      [deleted]
    • nightski 5y ago
      Does it really make sense to hold USD if your only goal is liquidity? Maybe if you need it immediately, but honestly stocks and some other investments can usually be sold with the money accessible in seconds (or you can use credit). Really what I feel the value prop is for cash is low volatility (aka security as you mentioned). With low inflation like we have seen in the past, risk adjusted it might be a better spot to hold that money relative to other investments. So yes, I hold a small portion of my portfolio in USD for that gain. If it was not providing that low volatility (inflation spikes like crazy), then I'd be much less inclined to keep my money in USD outside of the minimum I'd need for immediate spending. Because returns are low. So the "gain" is in the risk adjusted return relative to other assets (which could ultimately be slightly negative).
• MelonTree 5y ago
  So basically he believes bitcoin is a ponzi because bitcoin investors "expect good profits" yet also believes "few if any gold investors have expectations of profits". I laughed a little, but then I realized he was serious.
• CryptoJunky1122 5y ago
  Bitcoin is a ponzi Bitcoin is fraud Bitcoin is a bubble Bitcoin is OpenSource
• lrvick 5y ago
  By this criteria basically all speculative investments from Pokémon cards to many/most stocks are Ponzis. Gold is worth more than metals far more rare because of hoarding and resulting scarcity, etc. Historically those who buy early accumulate more value.
• jaimex2 5y ago
  By those definitions so is the dollar and real estate yet here we are. As far as I'm concerned cryptos are backed by cocaine and at a much higher tangible rate than fractional banking the dollar is.
• andreygrehov 5y ago
  Just an FYI. This is from the guy who predicted the death of Bitcoin by mid 2014: https://ic.unicamp.br/~stolfi/bitcoin/2014-03-02-ShortHistoryOfBitcoin.html https://ic.unicamp.br/~stolfi/bitcoin/2014-03-02-ShortHistor...
  • system2 5y ago
    I wonder if he invested those days because he would be a millionaire by now. Clearly he really didn't believe in crypto because he wouldn't be talking like this today. He must be a little butthurt to come up with this type of article.
• tyrfing 5y ago
  Bitcoin is a store of value. Why is it a store of value? Because people believe it is, much like gold. You can gesture vaguely at the minor utility that gold has, the ability to be made into things of commercial value, but that's a fig leaf as much as it is to point to Bitcoin's potential use for payments. Hashrate and mining investment is a reflection of that belief. Don't take this as advice to buy Bitcoin at 50k. Normal currencies like USD are, in the end, also based on trust. They're just pieces of paper, and the value is in the belief that those pieces of paper will represent approximately the same thing tomorrow. Trillion dollar pieces of paper could be made worthless tomorrow, but everyone trusts that they won't due to the dire physical consequences. Even those currencies, that we consider normal today, were bootstrapped over a very long period by originally representing physical metal that could be redeemed.
  • dehrmann 5y ago
    > Bitcoin is a store of value. Possibly. It is an asset, after all. The problem is that people are buying it because they expect it to appreciate significantly, hence "when lambo." There's a difference between believing something will retain its value and believing it will appreciate.
    • tyrfing 5y ago
      Definitely true, retail trading of all sorts is basically gambling, and crypto has a lot of gamblers. I think this is a really bad thing. However, even the typical lambo-dreamer sustains the effect: it would be rare for them to cash out completely, unless that dream is suddenly dashed. What if they miss out on future growth? Rephrasing: how much bitcoin do you think the average bitcoin-billionaire owns? It's belief that stops them from selling, and belief that sustains the value. If you think that sounds like a ponzi, you're missing one thing: all else equal, dollar (and equivalent) denominated value will rise, because those currencies slowly devalue by design.
  • bb88 5y ago
    People tend to "invest" in bitcoin. I don't "invest" in a bank account.
• G3rn0ti 5y ago
  In a Ponzi scheme, a fraudulent perpetrator takes your money (and the money of many others), gives some of that to early dropouts but takes the rest for himself. Ponzi schemers profit from lying to you where your money goes. With a decentralized digital asset there is no sole person or company that profits from just lying to you about where your Dollar goes in exchange for digitals. Sure, miners and exchanges make profits based on fees when Bitcoin is created or sold, respectively — but they are only being rewarded for their legitimate efforts required to maintain and sell a digital currency. They do not pretend making your money work for you by some magical scheme. This whole confusion stems from a rather vague understanding of what the subjective theory of value means: Goods and services provided by humans have no intrinsic value but become precious simply there being demand by other humans. Gold can become worthless if nobody wants or needs it anymore. A stupid trading card may cost thousands of dollars costing pennies to make but is sought after by enough collectors. Edit: Yes, Bitcoins are just numbers stored in a computer memory around the world but so is software. And software ain’t cheap. While Bitcoin‘s value might be grossly overestimated due to rampant speculation but even then, these speculators are no victims in an investment fraud but they truly believe that Bitcoin will become much more useful in the future. They may be wrong but, currently, nobody knows. Only the future will show. Edit: Typos.
  • bb88 5y ago
    > With a decentralized digital asset there is no sole person or company that profits from just lying to you about where your Dollar goes in exchange for the digitals. Ponzi schemes don't have to run by single individuals, but perhaps by multi-person organizations like the mafia. The mob was the reason the RICO laws came to be. And undoubtedly, the mafia organizations would collaborate to break up their crime into regions. Mafia group A would take the West, etc. Since they're a criminal organization, anti-trust laws were meaningless. There wasn't a requirement that the different mob bosses had to compete with each other.
    • DeathArrow 5y ago
      That's interesting. Can mobs sue each other for anticompetitive practices?
• system2 5y ago
  I haven't met a single human buying bitcoin or crypto just for "technology" and believing in it. Everyone wants to make quick cash and that's the only reason. Maybe 0.001% uses it for some reasons that are plausible but I haven't met that one person really uses bitcoin for daily expenses.
• darawk 5y ago
  > First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour. Lol. Bitcoin is exactly comparable to gold. Plenty of people buy gold expecting it to appreciate...because other people use it as a hedge. Even if it were true originally that Gold's only purpose was as a hedge (protip: it's not), its very utility as a hedge would make it useful as a source of alpha for those wanting to bet on the demand for hedges. This article is just stupid and pointless. It's attempting to take a label that has a strong negative valence, deconstruct its attributes and apply them to something else, and then port that valence over to the new thing. The negative valence ascribed to "ponzi scheme" is because it is a scam intended to defraud its investors. A ponzi scheme that is not an attempt to defraud its investors, even if it fits some "technical" description of a ponzi scheme, does not deserve to have the valence of "ponzi scheme" assigned to it. I certainly don't believe Bitcoin meets the technical definition of a Ponzi scheme. But even if it did, this article would still be a stupid and pointless attempt at valence hijacking. An activity that the world already has far too much of.
  • graeme 5y ago
    > Plenty of people buy gold expecting it to appreciate...because other people use it as a hedge. Long run? I think not. Gold hasn’t really risen over millenia, just stayed in a certain band. Buffett made a good argument that you could either buy a giant gold cube and fondle it, or a large number of productive assets in the states and collect the revenues. He’d bet on the assets being worth more over the decades, and over the long run he was right. Bitcoin proponents expect bitcoin to soar long run, unlike gold, which doesn’t.
    • darawk 5y ago
      > Long run? I think not. Gold hasn’t really risen over millenia, just stayed in a certain band. I said they expected it, not that it did. I know plenty of people who buy gold expecting it to appreciate. Whether or not it does appreciate is irrelevant. > Buffett made a good argument that you could either buy a giant gold cube and fondle it, or a large number of productive assets in the states and collect the revenues. He’d bet on the assets being worth more over the decades, and over the long run he was right. No he wasn't. If you invested all your money in the medieval equivalent of an index fund, it'd be worth far less today than if you had invested in gold. You can't just cherry pick the last century.
• brtknr 5y ago
  By that logic, buying a piece of land or real estate or gold is a ponzu scheme.
  • system2 5y ago
    Ponzu tastes good though.
• luka-birsa 5y ago
  Why are such articles constantly popping up on HN? It's clear that the HN crowd does not like Bitcoin. So why keep reiterating similar arguments all over? There is zero utility in the article shared. It states some anti crypto views and that's it. Even the author concedes that this is according to his own definition and not based on real life legal tests (which have of course shown that Bitcoin is not a ponzi). Just let Crypto users be. I get it. You don't like Crypto, but at this point it's not like an opinion piece can change the their views. Users transacted in the trillions of USD over last month. Crypto got institutions, countries, wealthy individuals, poor individuals using it every day. It's clear it has some utility to them. It's time to reflect and consider that your anti Crypto position might be wrong. Edit: clarity
  • kaczordon 5y ago
    By this articles definition WeWork is a Ponzi scheme, as would most startups.
    • cerved 5y ago
      wework is
    • arcticbull 5y ago
      WeWork is, startups are not. This is also covered in the article.
  • deleted 5y ago
    [deleted]
  • bb88 5y ago
    > It's clear that the HN crowd does not like Bitcoin. So why keep reiterating similar arguments all over? When we take a closer look at crypto it appears to be as corrupt or even more as the institutions it was trying to replace. Tether, of course, is the poster child of crypto corruption.
  • BelenusMordred 5y ago
    You can go back 5 years and find all the exact same arguments in the comments on any bitcoin article. It's basically a HN circlejerk at this point and incredibly rare to find something new actually added to the conversation.
• anonporridge 5y ago
  Every long term store of wealth is a Ponzi scheme. Prove me wrong.
• scottyp21 5y ago
  > Nevertheless, investing in gold at the current price seems unwise, since its price is many times its "natural" price as commodity and so it is more likely to go down than up. This is a misconception and a fundamental misunderstanding of gold's primary utility for thousands of years. While it is true that gold's price reflects a significant premium beyond the "natural" market price, this has been the case for millennia. Since ancient times, most demand for gold has not been for industrial uses or jewelry, but rather as a store of a value. This results in gold having a "monetary premium". It's also worth mentioning that it is no coincidence that humans happened to chose gold as money. Among all chemical elements, gold has a favorable combination of chemical properties and rarity in the earth's crust that make it a suitable choice for storing value over long periods of time. In fact, nearly all gold mined in human history is still around today. We've been hoarding it since the time of the pharaohs. I'm sympathetic to crypto skepticism, but I'm afraid many people are missing the forest for the trees. I'm curious for those that still truly believe Bitcoin is a ponzi scheme or a bubble - at what price point and time would you start to consider that you may be tragically wrong?
  • jspaetzel 5y ago
    Take away the Bitcoin miners and speculators and see how much a Bitcoin is worth.
    • scottyp21 5y ago
      You are correct that bitcoin is heavily dependent on miners. That said, I don't think you can simply "take away the Bitcoin miners". An excellent example of this is China's recent ban on bitcoin mining, which quickly dropped the network hash rate by >50%. Today, only a few months later, the hash rate has returned[1], and those miners are back online on the other side of the world. Don't underestimate the power of incentives. [1] https://www.blockchain.com/charts/hash-rate https://www.blockchain.com/charts/hash-rate
  • frozenport 5y ago
    I also think investing in gold compared to let's say stocks is a sort of ponzi scheme in the sense of OPs article. So no price point. Until bitcoin intrinsically generates value I'm not putting money in it.
• abecedarius 5y ago
  Cute passage: > bitcoins can be earned and spent, not just bought and sold. That makes no difference for the purpose of this discussion. If you buy a $2000 laptop directly with bitcoin, for financial analysis it is the same as if you had sold the coins for $2000 and bought the laptop with that. The core of the post seems to be a claim that demand for Bitcoin is a recursion with no base case. But then this passage gets to the base case and just dismisses it as irrelevant -- since it could counterfactually transit through dollars. If you think a state currency is the only logically possible currency, that needs an argument (and an difficult one, given history). The rest I'd call rhetoric and side issues.
• DeathArrow 5y ago
  >A Ponzi scheme, or "ponzi" for short, is a type of investment fraud with these five features: >People invest into it because they expect good profits, and >that expectation is sustained by such profits being paid to those who choose to cash out. However, >there is no external source of revenue for those payoffs. Instead, >the payoffs come entirely from new investment money, while >the operators take away a large portion of this money. This seems to perfectly fit financial markets.
• EastOfTruth 5y ago
  I don't know how /r/hn is so out of touch for some tech things
• mey 5y ago
  I think the author misses one service that Bitcoin provides (that is referenced many times) which is to transact. The movement of transactions on the ledger is the value that Bitcoin (and others like it) provide. Now it is absolutely shit at that job. Cost per transaction, transaction throughput, time to assurance a transaction won't be rolled back, all make Visa/Mastercard look amazing except for certain business domains. As such people offer it up as an investment, and that is the reality the average person engages. Like the gold rush, the people making money are the ones selling shovels (as pointed out in the article). Does that make it a Ponzi scheme? I am not an economist, but I don't think so. A horrible investment? I refuse to deal with crypto, volatility and environmental concerns are my primary reasons.
• DeathArrow 5y ago
  >By that definition, stocks too are ponzis. No. Stocks have an external source of revenue, namely the profit that the company makes by selling its products and services to customers (not investors); and these profits eventually return to the investors through dividends or cash buybacks. There are companies that never made any profit yet their shares increased in value. There are companies who made some small profits but their shared increased much more because there are high expectations. By the definition in the article any asset which can be speculated is part of a Ponzi scheme: land, stocks, bonds. If you buy and sell land, increasing its price, without other means to derive value of that land, such as agriculture or rent, it fits the definition of a Ponzi scheme.
• theurbandragon 5y ago
  If we go by this logic some could claim that the "Dollar" is a Ponzi scheme 1. People invest thier time/effort for "Dollars" 2. When someone "buys" something they are effectively cashing out the worth of the "Dollar" through trade (someone else's time/effort) 3. "Dollars" do not nessarily create more labor (time/effort) 4. "Dollars" are just effectively pieces of paper or digital bits if people stop actually working. It is worth something because people are willing to work, invest time/effort, for "Dollars". 5. Printing money effectly dilutes the existing pool of labor, etc. "taking away money".
  • graeme 5y ago
    No one view a dollar as a speculative investment asset they expect to rise in value though. That’s the whole point of a ponzi scheme, and also why most people buy bitcoin: they expect it to go up. You can reliably expect a dollar to decrease in value, by contrast. People may hold it as a hedge but no one expects a dollar to 10x. You have hit on something useful: dollars are just a claim on the real economy, but if the economy stops dollars are worthless. But this isn’t the same as the dollar (or any type of savings) being a ponzi
• melomal 5y ago
  Currency evolved from barter > to bartering with set mediums of exchange > to coins representing exchangeable goods > to coins stamped in precious metal > to paper representing coins > to notes representing gold or silver > to being redeemable exclusively for gold > to the end of the gold standard. Money’s value has been dictated by how much of something a currency can buy – which is dependent on inflation and economic performance. I would love to have seen/heard the conversations that were had around the changes that people had to go through and if the conversations were similar to this day. Because I would imagine that back then, considering that money is just an agreed upon invisible force a la Bitcoin, people probably hard a very hard time understanding the intrinsic value of this metal coin/paper money.
• 314 5y ago
  Oh wow. This is unbelievably bad. Bitcoin may be a scam on so e level, but it is not a Ponzi scheme. The linked article seems to miss the most important property of such a scheme: Incoming capital is misrepresented as returns and passed back to investors. Bitcoin does not pay dividends. There are no returns in Bitcoin, only pure capital speculation. As there are no returns, there is no misrepresentation of capital inflow as returns and no Ponzi scheme. Bitcoin is more like a tulip...
• stevev 5y ago
  That’s incorrect. One btc = One btc. Its value relative to fiat or usd is irrelevant. No one takes your btc away from you to give to another when you have custody of it.
• DeathArrow 5y ago
  It doesn't matter if it's a Ponzi or not. Cryptocurrencies will live as long as people put trust in them. The same as the currency of country X, stocks of company Y and works of artist Z. The question is: how long is the public going to place trust in cryptocurrencies?
• rank0 5y ago
  People in the crypto debate have very short memories. BTC is up like 1000% in the past 18 months and everyone is so quick to point at the current price declaring that "crypto is here to stay!" I mean christ in what world is 18 months long enough to declare that crypto is eating the world? It's clear as day from my perspective that everyone is jumping on the speculative mania bandwagon. It used to have some utility in facilitating cheap illicit transactions, but those days are long gone. For the record I believe that enabling criminal activity is REAL utility, whether one agrees with the moral implications or not. Almost nobody is using bitcoin as a currency. It's all speculative investment. This is coming from someone who has made quite a bit of money off crypto and has actually used it countless times as a currency to buy physical goods. To those of you pointing out that other markets like equities are also detached from reality, I agree with you and don't think it means bitcoin is any less bullshit. At least ETH has some utility as gas for distributed applications.
  • gunshai 5y ago
    An entire country is using btc as their currency of exchange. Is it a major economy no but now its your turn to move the goal post.
    • rank0 5y ago
      El Salvador’s recent decision is a Hail Mary attempt at solving a tiny impoverished country’s crippling financial situation. They make their citizens use a government approved wallet where they process transactions off chain. This is the antithesis of what crypto used to stand for. The worlds largest country just banned Bitcoin too. I don’t think either event is indicative of btc’s intrinsic value.
      • gunshai 5y ago
        I meant to say it is not a major economy, so thank you for not being pedantic on that point. But, can you give me a source on how their transactions are being processed off chain. I know that they use a government backed wallet. It was my understanding that any transactions handled in this way eventually have to be settled back into the main chain.
• larsiusprime 5y ago
  > By that definition, real estate too is a ponzi. No. Like stocks, real estate creates value while it is being owned, namely the sheltering service it provides to those who live in it. That value returns to the investor (owner) either by him living in the property, or by renting it to others. Actually holding land out of use so you can speculate on its increased value, which comes from the activity of the community around you (and not any actual hard work or investment you yourself did), is an unproductive speculative activity that is a drag on the whole economy and the cause of our housing crises. I'm not sure if I'd call it a ponzi specifically, but it's bad and we shouldn't encourage it.
• jcbrand 5y ago
  In fact, while bitcoins are created in a fixed amount only when the miners have expended a large amount of work, the creation of those bitcoins costs nothing. The reward per block is defined by two lines of code in a program. By changing those lines, the reward could be sixty or six million bitcoins per block, with no extra work being required from the miners. This sentence is proof enough that this person doesn't get bitcoin. You're welcome to change those two lines, start mining and then see what happens. Your mined blocks will be rejected by other nodes in the network and you'll be spending energy costs without getting anything in return. The whole point of bitcoin is that you can't just change the source code and thereby the properties of the emergent network. You need to get a majority of nodes (not just miners) to support your change. This is not easy to do, and won't happen if your change is detrimental to the majority of network participants.
• syngrog66 5y ago
  pump and dumping, front running, money laundering, and risk hedging are all more accurate descriptions than Ponzi
• dusted 5y ago
  While I agree that crypto[speculation] generally seems to have the structure of a Ponzi scheme, I don't see any problem with that, as I assume everyone participating has the same idea. It's just a matter of who has the guts to stay on for long enough to cash out big, who gives up too early, and who does not get off before the train crashes into the mountain.
  • DeathArrow 5y ago
    You describe a gambling game.
    • dusted 5y ago
      That's literally what investment is. A first definition of gambling, is games of pure chance. The second definition is taking a risk in hope of a future reward. No investment has ever been made that was not a gamble. Sure, some are better than others, and the mechanism for providing wealth differs, but they are all gambles in either the first or second sense. Crypto speculation is not a first-example gamble, it is not pure chance what happens, there is not an explicit randomness component. The market may be hard or impossible to understand, it may be undeterministic (I don't claim to know either way), but so is all other markets, every other stock.. Sure, it is probably more risky to speculate crypto than EUR, it may be more risky to buy bitcoin than Microsoft stock, but in the end, you're doing the same thing, you're making some more or less informed gamble that the market do whatever you need it to do.
• gunshai 5y ago
  There are plenty of places and ways to bet against bitcoin best of luck to you.
• ur-whale 5y ago
  > Bitcoin is a ponzi If reading that kind of delusion (this guy Jorge Stolfi has been at it since 2014), here's some additional fuel to kindle your fire: https://www.reddit.com/r/CryptoReality/comments/o7v5xs/is_bitcoin_a_ponzi_scheme_a_detailed_analysis/ https://www.reddit.com/r/CryptoReality/comments/o7v5xs/is_bi...
• democracy 5y ago
  Not sure about Ponzi (which it probably is) - but I am looking at crypto as a "24/7 world-wide semi-legal horse-races". It is absolutely useless for 1st/2nd/3rd worlds. I can see its benefit for illegal activities - fair enough - but it's standing apart from the gambling potential. But by understanding that it is a gambling machine - I can make a "reasonable" choice, buy some token, sell it at a "small" profit of 10-25% and move on. The crypto is here, it's fact. It's not going anywhere soon. No one loud is out there with an agenda to deliver the message of its uselessness. Most people don't understand how crypto works - and not even trying - and I personally got over screaming "the emperor has no clothes" and now just quietly do some trades from time to time. Just a bit of reality to the "lens of someone living in a wealthy" blah-blah-blah. I did a SWIFT transfer of 30k USD from an eastern European country to a 1st world country. It cost me 20 USD to send and 10 USD to accept the cash within 3 working days. Yes I had to go the bank and it took some time - fair enough - BUT the fees were much lower than I would've paid to the exchanges. I had an ability to reverse the transaction (to an extent), it was an open and legal non-commercial transaction (and I don't have to explain it later to the tax man). C'mon crypto, try to beat that :) "Bank the unbanked", "inflation", "poor immigrants" - you know it's all BS. We lived through crazy inflation periods - basically you either convert your local cash to USD/EU as soon as you can or buy some local products (that you can resell) if the currency is not available. Thus people buy fridges/TVs, etc. There is probably a local village smart-ass who would use crypto for it, sure. But it's just an exception. These people have zero trust in anything, including their governments, so crypto is even lower in this chain of trust. Immigrants and refugees have 101 ways to transfer their money. There are so many companies/networks that it makes your head spin. And their amounts are so small so very often it all goes under the radar anyways. Basically all the crypto-mania as is is a big joke AND a great opportunity to make a quick buck :)
  • koonsolo 5y ago
    > C'mon crypto, try to beat that :) Nano has instant transactions and 0 fees. Try to beat that.
    • democracy 5y ago
      Yeah, just like a MYSQL database :)) Now let's calculate how much I am going to pay to BUY crypto and SELL crypto in fees . Have you ever done it, seriously?
• DeathArrow 5y ago
  What are the differences between Ponzi schemes and gambling? Both are negative sum games. In both someone is going to profit from people's greed and stupidity and take part of their cash. Both casinos and Ponzi schemes operators create high expectations in some people's minds.
• sva_ 5y ago
  So by that definition, isn't Uber a Ponzi scheme too? I think all they ever did was burn investor money. And plenty of other tech companies similarly.
• null_object 5y ago
  … and now the bitcoin pushers have censored HN again
• xtat 5y ago
  This describes any currency.
• rlt 5y ago
  Ponzi implies fraud. Bitcoin, by definition, can't be fraud. The protocol and code are open source. We know how it works. If you lose money because it's a speculative bubble that eventually pops, that's because you made a bad bet, not because you were defrauded.
  • oliwarner 5y ago
    In the "guns don't kill people" category of arguments, it's the pump and dump influencers that are literally everywhere hyping it so they can sell theirs. You get rich from crypto by selling, not HODLing.
• noxer 5y ago
  Its a self-feeding system since it prints its own money which is used to buy "real money" which is then destroyed. This might be questionable and thankfully we have non-PoW/PoS systems that dont do this but the whole Ponzi thing is just nonsense. Its entirely irrelevant if it matches some (your/anyones) definition of a Ponzi or not. Just to usual click-bait "bitcoin very bad" title that gets the HN people all existed to up-vote it. Yes, bitcoin is garbage tech, but all the hate posts will only push it further. People should focus on systems that do the same as bitcoin but without the "bad". There is a multi billion dollar demand that does not go away. A little bit education about FBA systems would reduce the resource wasting from PoW by a lot and all without taking away the peoples freedom to gamble with "digital money".
• pixelgeek 5y ago
  It is an interesting read and I want to go back and read it a bit more carefully (now that the server is finally back up) but one factor in a ponzi scheme is that there is ultimately a limit on suggestible investors. This isn't part of the definition of a scheme but seems to be an obvious limitation of them. Seems the smart operator plans for that drop in ability to pay out. Most long-term MLMs work out this revenue drop as well. There is an upper cap to the ability to generate bitcoins [1] which acts as a similar cap on the long-term viability of the system. [1] https://news.ycombinator.com/item?id=28780925 https://news.ycombinator.com/item?id=28780925
• kjrose 5y ago
  It's not a Ponzi. It's a speculative asset and one that people are buying hard into, some because they think they can avoid being the bigger sucker and some because they genuinely believe it will be useful in the future either as a store of value against inflation or a possible usable currency (right now I somewhat believe that certain properties of certain crypto currencies fundamentally make them bad in the long term). However, a Ponzi is very different from a speculative bubble. Silver or gold in a speculative bubble behaves just the same as crypto right now but they are not Ponzi schemes. They are simply a property of how markets work when speculation gets over energized
• Paradigma11 5y ago
  https://en.wikipedia.org/wiki/Ponzi_scheme https://en.wikipedia.org/wiki/Ponzi_scheme "A Ponzi scheme (/ˈpɒnzi/, Italian: [ˈpontsi]) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.[1] The scheme leads victims to believe that profits are coming from legitimate business activity (e.g., product sales or successful investments), and they remain unaware that other investors are the source of funds. A Ponzi scheme can maintain the illusion of a sustainable business as long as new investors contribute new funds, and as long as most of the investors do not demand full repayment and still believe in the non-existent assets they are purported to own." So, no it is not a Ponzi scheme. It might be something similar to a https://en.wikipedia.org/wiki/Pump_and_dump https://en.wikipedia.org/wiki/Pump_and_dump
• errantmind 5y ago
  Something can be overvalued without being a Ponzi scheme. The repeated bashing of cryptocurrency on HN of all places is tiring. There is a lot of innovation in the space outside of BTC. What about DAOs? What about lending products? The space is booming in interesting ideas and all I ever see on HN are posts about BTC being some kind of scam. Where did the 'hacker' mindset go on this site?
• justshowpost 5y ago
  No, its not. Amending the definition to make Ponzi Scheme merely a slur will get ones nowhere. And also can possible bite back on eg Brazilian Rupees as well ;)
• kangnkodos 5y ago
  By that definition US Treasury bonds will be a ponzi. Currently, the US Treasury pays old bond holders by a combination of tax revenue and by issuing new bonds. However, each year, a bigger fraction of old bonds are paid by issuing new bonds. Over time, this will lead to almost 100% of old bonds being paid by issuing new bonds, and then they will be a true ponzi.
• sktrdie 5y ago
  Does this mean that also owning gold is a ponzi? I don't see how Bitcoin differs from gold in this regard.
• aklemm 5y ago
  How do BTC believers explain the very suspicious fact that the creator of bitcoin hid away?
• KETpXDDzR 5y ago
  Looking which country mined most coins and who purchased them, it's a big money transfer from the USA to China. And the US buyers fool themselves that it's a good investment by driving the price up. [0] https://www.statista.com/statistics/1195753/bitcoin-trading-selected-countries https://www.statista.com/statistics/1195753/bitcoin-trading-... [1] https://www.statista.com/statistics/1200477/bitcoin-mining-by-country/ https://www.statista.com/statistics/1200477/bitcoin-mining-b...
• deleted 5y ago
  [deleted]
• Tricky_Troll 5y ago
  This comment section is a classic case of engineers who think they understand crypto because it's digital, not realizing that Crypto is primarily an economic innovation. It's ok to admit you don't fully understand something sometimes.
• husamia 5y ago
  bitcoin might be a ponzi but BTC is not
• d10r 5y ago
  Bitcoin would have remained the obscure crypto-economic experiment it was 10 years ago if it weren't for the rotten monetary system we have creating strong incentives to look for alternatives. I'm holding some Bitcoin for quite a while now - in terms of value it has overtaken all my Fiat holdings - yet I would actually welcome if it became worthless. That's because I believe that it can become worthless only if we get back to a sound monetary system, something I'd value more than individually "winning" in an alternative scenario.