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> They do not pretend making your money work for you by some magical scheme. No. They instead take your money, buy coal, and burn it. Nothing is left. As you

by graeme 5y ago

> They do not pretend making your money work for you by some magical scheme. No. They instead take your money, buy coal, and burn it. Nothing is left. As you say, Ponzi schemers take money for themselves and keep it. Most of what Madoff stole was recovered, for instance. Whereas virtually 100% of all money invested into crypto has been burned by miners. This is pretty easy to model. So there’s nothing left to recover if new money collapses. Bitcoin is worse than a typical ponzi in this respect.

arcticbull 5y ago
Indeed this is a new form of Ponzi scheme, and I agree with the authors use of the "quacks-like-a-duck" model. > But if one wants to know whether bitcoin is a good investment, or just an old type of investment fraud with a new coat of paint, the legal definition is irrelevant. One must use a quacks-like-a-duck definition, that describes the mechanism through which fools and money are separated and the reasons why it is a fraud. It's the world's first decentralized Ponzi scheme, where each participant cell need not understand the whole picture to achieve the end result. It's a financial cancer.
naruvimama 5y ago
Where people choose to throw their own money should be left to them. However, I wish governments would ban regulated institutions from throwing peoples real money into non-governmental/undemocratic cryptocurrency. If banks/govts want to get in on the action, they should perhaps start their own cryptocurrency/blockchain.
- arcticbull 5y ago
  > ... Where people choose to throw their own money should be left to them. Yes, unless it causes harm to the broader economy. I explained this in a different reply lower down, but when enough people participate it can destabilize the entire financial system in the country. And if it takes down the USD, globally. Pardon the pasta, but in 1997, the entire economy of Albania collapsed because everyone started participating in Ponzi schemes. They even jailed their finance minister for trying to stop it, and it led to a civil war. The IMF had to air drop in big bags of money to bail the country out. [1] This is what is at stake. [edit] > At their peak, the nominal value of the pyramid schemes' liabilities amounted to almost half of the country's GDP. Many Albanians—about two-thirds of the population—invested in them. When the schemes collapsed, there was uncontained rioting, the government fell, and the country descended into anarchy and a near civil war in which some 2,000 people were killed. [1] [1] https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.htm https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.ht...
  - naruvimama 5y ago
    I agree with that. What I meant was the governments at the minimum stop banks and financial institutions from legitimizing these.
propesh 5y ago
So the blood washes away the diamond?
bb88 5y ago
> No. They instead take your money, buy coal, and burn it. Nothing is left. Interesting, I never thought of it that way, and it makes sense. Since money is not created or destroyed the balance sheet on inflows and outflows of BTC to dollars must be zero at all times. And some x% (which is variable) of it is transferred to miners which is the so-called "transaction" cost. I guess there must be a point at which the bubble bursts, and that's when a run on BTC happens. At which point it should go swiftly down as the value of BTC has been taken out by the miners.
- gunshai 5y ago
  If you're so certain short it. The amount of wealth you would gain by being correct is immense. You should be spending every waking moment attempting to predict it. Something about anti btcers I don't get you'll wax how smart you are and how everyone else is dumb. Just put your money where your mouth is.
  - ashwagary 5y ago
    Nassim Taleb pointed out that if you have no 'skin in the game' your opinion is actually less than worthless. Worth considering...
    - graeme 5y ago
      If you are long bitcoin, you hold bitcoin. If you are for some other asset vs bitcoin, you hold that asset and not bitcoin. Some things are simply tradeable, and his advice is not “throw money at the owners of a fraudulent casino to say you are short” Nassim Taleb himself wrote a paper arguing Bitcoin’s value is zero and sold all his Bitcoin. I do not believe he believes it is his moral duty to open a Binance account and make a short on a Tether Exchange
      - ashwagary 5y ago
        That's true and technically anyone that doesn't have bitcoin (or a bitcoin owning entity) in their portfolio has a short position open. So far, that 12 year short position has been a disaster for all of the people (literally every single person) on the planet.
feanaro 5y ago
> Whereas virtually 100% of all money invested into crypto has been burned by miners. This is pretty easy to model. People like Bitcoin's provable global ledger and this is where the value lies. The value is not burned, it's embedded into this ledger.
- fellellor 5y ago
  In some religious rituals, devotees offer luxury items to gods to appease them. These are items like new clothes, food, maybe even non-metallic jewelry. These are subsequently burned on a pyre by the way of offering them to the gods. Bitcoin is like that, only now you have a receipt on the blockchain. I like it.
- nuerow 5y ago
  > People like Bitcoin's provable global ledger and this is where the value lies. The value is not burned, it's embedded into this ledger. Aren't you just stating that Bitcoin has absolutely no intrinsic value?
  - feanaro 5y ago
    What is "intrinsic"? Nothing has intrinsic value.
    - randomswede 5y ago
      Gold has inherently good conductivity, extreme malleability and pretty good chemical resistance. I would call those intrinsically valuable traits. Likewise a whole slew of physical goods, who have built-in traits due to what they are that make them (on some level) valuable. Bitcoin only has value due to a shared hallucination.
      - feanaro 5y ago
        Most of the value of gold is not due to those properties. Yet even for those properties, if you look close enough, it is shared hallucinations all the way down. I think you'll also have a hard time explaining how "good conductivity" is fundamentally different from e.g. "resistance to tampering of historical records".
derangedHorse 5y ago
>No. They instead take your money, buy coal, and burn it. Nothing is left. Yes, miners “take your money” but only a portion of every transaction as a service fee for processing your transaction. This is a payment for a service, the value of which is predicated on a service immediately provided rather than a promise for future value. Also “nothing is left” is also a false statement as most of the bitcoin/money processed by miner’s isn’t going to them. Also, every time a miner processes a block of transactions they receive newly minted bitcoin from something called a Coinbase transaction. This transaction will not keep getting doled out since the protocol enforces that there can only be 21 milllion bitcoin minted, but it provides extra incentive for the money poured in for the time being. In other words, money is not “burned” it’s being exchanged into a different commodity. If this commodity fails to hold value over the long run then sure there’s nothing left in terms of value but I’d say the same risks exist and have been realized by government issued currencies. Look at countries like Venezuela for example. I have a lot more reasons on why it’s improbable Bitcoin will ever plunge to 0 in value but in the spirit of clearing up some misconceptions I’ll leave that for another comment.
- bb88 5y ago
  So unless you burn cash in a fire or counterfeit money, the only entity that can create and destroy money is the Federal Reserve. Everyone else can only create "value". So I can combine two widgets together to make a third widget and sell it for less than you could do it. That's "value" in a nutshell. So on an exchange balance sheet (stockmarket, coinbase, etc), dollars aren't created or destroyed, just transferred for something of perceived value. So I trade one dollar for a fraction of AMD Stock, e.g. But the dollar goes to whoever sold me AMD. The price of AMD stock can go up and down ("value") but the total dollars created or destroyed is always zero. Same is true with BTC. Right, makes sense? Good. So every transaction in BTC has a "cost" associated with it, where some "value" of BTC is transferred to miners. The miners spend money burning energy which removes "value" from the economy as a whole. Basically that means we had "X" many tons of fossil fuels left on Earth, but now we have slightly less because energy was "burned" for the transaction. If I give you a ton of coal you can burn that for heat. But that removes the coal permanently from the world. OTOH, if I want to make a cryptocurrency with 10^86 coins and if I do that a billion times over, well, I have a limitless supply of cryptocurrency. If you look at the situation as a flow of dollars you see an equation that looks like this: BTC bought in dollars = BTC Sold in dollars + Mining Costs in dollars. So while dollars flow back and forth, some have to go to the miners to burn physical energy. That incurs real world costs. So "value" has to be extracted and transferred to the energy companies to "burn" energy. Even if dollars aren't exchanged in the transaction, "value" has to be extracted regardless for confirmation. That value is "burned" by consuming non-renewable energy. You might say that's exactly what credit card transactions are, (which is not incorrect) but the burn rate of Visa per transaction is much less than BTC. This shows the cost of 1 BTC transaction vs 100K Visa transactions. https://www.statista.com/statistics/881541/bitcoin-energy-consumption-transaction-comparison-visa/ https://www.statista.com/statistics/881541/bitcoin-energy-co... What this means is that if you reduce the "burning" cost per transaction in BTC, you can keep the value in BTC, and I'll be less cranky about it, since you're not hurting the environment.
dapithor 5y ago
By this definition, isn't for example USD a ponzi? Afterall, it is a Fiat currency now and not backed by a commodity. If I received wampum back that would offset it no? How does taxes/gdp protect you if taxes are of their self made up of USD.

by graeme 5y ago

arcticbull 5y ago

Indeed this is a new form of Ponzi scheme, and I agree with the authors use of the "quacks-like-a-duck" model. > But if one wants to know whether bitcoin is a good investment, or just an old type of investment fraud with a new coat of paint, the legal definition is irrelevant. One must use a quacks-like-a-duck definition, that describes the mechanism through which fools and money are separated and the reasons why it is a fraud. It's the world's first decentralized Ponzi scheme, where each participant cell need not understand the whole picture to achieve the end result. It's a financial cancer.

naruvimama 5y ago

Where people choose to throw their own money should be left to them. However, I wish governments would ban regulated institutions from throwing peoples real money into non-governmental/undemocratic cryptocurrency. If banks/govts want to get in on the action, they should perhaps start their own cryptocurrency/blockchain.

arcticbull 5y ago
> ... Where people choose to throw their own money should be left to them. Yes, unless it causes harm to the broader economy. I explained this in a different reply lower down, but when enough people participate it can destabilize the entire financial system in the country. And if it takes down the USD, globally. Pardon the pasta, but in 1997, the entire economy of Albania collapsed because everyone started participating in Ponzi schemes. They even jailed their finance minister for trying to stop it, and it led to a civil war. The IMF had to air drop in big bags of money to bail the country out. [1] This is what is at stake. [edit] > At their peak, the nominal value of the pyramid schemes' liabilities amounted to almost half of the country's GDP. Many Albanians—about two-thirds of the population—invested in them. When the schemes collapsed, there was uncontained rioting, the government fell, and the country descended into anarchy and a near civil war in which some 2,000 people were killed. [1] [1] https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.htm https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.ht...
- naruvimama 5y ago
  I agree with that. What I meant was the governments at the minimum stop banks and financial institutions from legitimizing these.

propesh 5y ago

So the blood washes away the diamond?

bb88 5y ago

> No. They instead take your money, buy coal, and burn it. Nothing is left. Interesting, I never thought of it that way, and it makes sense. Since money is not created or destroyed the balance sheet on inflows and outflows of BTC to dollars must be zero at all times. And some x% (which is variable) of it is transferred to miners which is the so-called "transaction" cost. I guess there must be a point at which the bubble bursts, and that's when a run on BTC happens. At which point it should go swiftly down as the value of BTC has been taken out by the miners.

gunshai 5y ago
If you're so certain short it. The amount of wealth you would gain by being correct is immense. You should be spending every waking moment attempting to predict it. Something about anti btcers I don't get you'll wax how smart you are and how everyone else is dumb. Just put your money where your mouth is.
- ashwagary 5y ago
  Nassim Taleb pointed out that if you have no 'skin in the game' your opinion is actually less than worthless. Worth considering...
  - graeme 5y ago
    If you are long bitcoin, you hold bitcoin. If you are for some other asset vs bitcoin, you hold that asset and not bitcoin. Some things are simply tradeable, and his advice is not “throw money at the owners of a fraudulent casino to say you are short” Nassim Taleb himself wrote a paper arguing Bitcoin’s value is zero and sold all his Bitcoin. I do not believe he believes it is his moral duty to open a Binance account and make a short on a Tether Exchange
    - ashwagary 5y ago
      That's true and technically anyone that doesn't have bitcoin (or a bitcoin owning entity) in their portfolio has a short position open. So far, that 12 year short position has been a disaster for all of the people (literally every single person) on the planet.

feanaro 5y ago

> Whereas virtually 100% of all money invested into crypto has been burned by miners. This is pretty easy to model. People like Bitcoin's provable global ledger and this is where the value lies. The value is not burned, it's embedded into this ledger.

fellellor 5y ago
In some religious rituals, devotees offer luxury items to gods to appease them. These are items like new clothes, food, maybe even non-metallic jewelry. These are subsequently burned on a pyre by the way of offering them to the gods. Bitcoin is like that, only now you have a receipt on the blockchain. I like it.
nuerow 5y ago
> People like Bitcoin's provable global ledger and this is where the value lies. The value is not burned, it's embedded into this ledger. Aren't you just stating that Bitcoin has absolutely no intrinsic value?
- feanaro 5y ago
  What is "intrinsic"? Nothing has intrinsic value.
  - randomswede 5y ago
    Gold has inherently good conductivity, extreme malleability and pretty good chemical resistance. I would call those intrinsically valuable traits. Likewise a whole slew of physical goods, who have built-in traits due to what they are that make them (on some level) valuable. Bitcoin only has value due to a shared hallucination.
    - feanaro 5y ago
      Most of the value of gold is not due to those properties. Yet even for those properties, if you look close enough, it is shared hallucinations all the way down. I think you'll also have a hard time explaining how "good conductivity" is fundamentally different from e.g. "resistance to tampering of historical records".

derangedHorse 5y ago

>No. They instead take your money, buy coal, and burn it. Nothing is left. Yes, miners “take your money” but only a portion of every transaction as a service fee for processing your transaction. This is a payment for a service, the value of which is predicated on a service immediately provided rather than a promise for future value. Also “nothing is left” is also a false statement as most of the bitcoin/money processed by miner’s isn’t going to them. Also, every time a miner processes a block of transactions they receive newly minted bitcoin from something called a Coinbase transaction. This transaction will not keep getting doled out since the protocol enforces that there can only be 21 milllion bitcoin minted, but it provides extra incentive for the money poured in for the time being. In other words, money is not “burned” it’s being exchanged into a different commodity. If this commodity fails to hold value over the long run then sure there’s nothing left in terms of value but I’d say the same risks exist and have been realized by government issued currencies. Look at countries like Venezuela for example. I have a lot more reasons on why it’s improbable Bitcoin will ever plunge to 0 in value but in the spirit of clearing up some misconceptions I’ll leave that for another comment.

bb88 5y ago
So unless you burn cash in a fire or counterfeit money, the only entity that can create and destroy money is the Federal Reserve. Everyone else can only create "value". So I can combine two widgets together to make a third widget and sell it for less than you could do it. That's "value" in a nutshell. So on an exchange balance sheet (stockmarket, coinbase, etc), dollars aren't created or destroyed, just transferred for something of perceived value. So I trade one dollar for a fraction of AMD Stock, e.g. But the dollar goes to whoever sold me AMD. The price of AMD stock can go up and down ("value") but the total dollars created or destroyed is always zero. Same is true with BTC. Right, makes sense? Good. So every transaction in BTC has a "cost" associated with it, where some "value" of BTC is transferred to miners. The miners spend money burning energy which removes "value" from the economy as a whole. Basically that means we had "X" many tons of fossil fuels left on Earth, but now we have slightly less because energy was "burned" for the transaction. If I give you a ton of coal you can burn that for heat. But that removes the coal permanently from the world. OTOH, if I want to make a cryptocurrency with 10^86 coins and if I do that a billion times over, well, I have a limitless supply of cryptocurrency. If you look at the situation as a flow of dollars you see an equation that looks like this: BTC bought in dollars = BTC Sold in dollars + Mining Costs in dollars. So while dollars flow back and forth, some have to go to the miners to burn physical energy. That incurs real world costs. So "value" has to be extracted and transferred to the energy companies to "burn" energy. Even if dollars aren't exchanged in the transaction, "value" has to be extracted regardless for confirmation. That value is "burned" by consuming non-renewable energy. You might say that's exactly what credit card transactions are, (which is not incorrect) but the burn rate of Visa per transaction is much less than BTC. This shows the cost of 1 BTC transaction vs 100K Visa transactions. https://www.statista.com/statistics/881541/bitcoin-energy-consumption-transaction-comparison-visa/ https://www.statista.com/statistics/881541/bitcoin-energy-co... What this means is that if you reduce the "burning" cost per transaction in BTC, you can keep the value in BTC, and I'll be less cranky about it, since you're not hurting the environment.

dapithor 5y ago

By this definition, isn't for example USD a ponzi? Afterall, it is a Fiat currency now and not backed by a commodity. If I received wampum back that would offset it no? How does taxes/gdp protect you if taxes are of their self made up of USD.