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Cryptocurrency Is a Giant Ponzi Scheme

70 points by messutied 5y ago

richardfey 5y ago
I didn't like this post because author is too short sighted. Yes, it can become dust. And it also cannot. And if it becomes dust it can start all over again. He's just making a prediction, as a novel Nostradamus, and not considering multiple scenarios.
jfreak53 5y ago
Yes, they all are!
andrewstuart 5y ago
Same as real estate.
- spraveenitpro 5y ago
- pavlov 5y ago
  Cryptocurrency is definitely very successful at exploiting the post-2008 mindset of many young people: everything that touches upon finance vaguely feels like a scam, so along comes crypto which strips out everything but the scam. "At least it's our scam if we get in early."
  - viscanti 5y ago
    > everything that touches upon finance vaguely feels like a scam Citation needed. The fact that there are lots of scams or projects of dubious value doesn't prove that everything is. It's not really different than looking at tech startups, most are bad ideas that won't ever work but some do work.
    - pavlov 5y ago
      I’m saying that the 2008 crisis led many people to believe that everything that counts as traditional finance is some kind of scam when you scratch the surface — real estate, stock market, etc. If that’s the base assumption, it doesn’t matter if crypto projects do anything at all because they’re still no worse than the traditional investments (in this way of thinking).
- BrissyCoder 5y ago
  You can't live in a Blockchain. You can't collect rent on a Blockchain.
spraveenitpro 5y ago
edf13 5y ago
Am I the only one getting tired of all these crypto scam calling posts appearing on the front page?
- BrissyCoder 5y ago
  No (even though I agree with the sentiment).
csdvrx 5y ago
And Dropbox was just a ftp, and the iPhone was just a lame mp3 player. And e-commerce just a fad, etc. We're blinded by what was, and wrongfully infer what will be. Also, we mix in our biases, Douglas Adams said it best: "I've come up with a set of rules that describe our reactions to technologies: 1. Anything that is in the world when you’re born is normal and ordinary and is just a natural part of the way the world works. 2. Anything that's invented between when you’re fifteen and thirty-five is new and exciting and revolutionary and you can probably get a career in it. 3. Anything invented after you're thirty-five is against the natural order of things."
- zepto 5y ago
  What about Laserdisk? You seem to be only choosing technologies that were exceptionally successful. An odd bias. Most of them aren’t.
  - csdvrx 5y ago
    An odd bias? Ok, let reality be the ultimate judge, and ask yourself: - What's the total valuation today of companies dealing with Laserdisk? - What's the total valuation today of companies dealing with crypto? You'll have your answer about who may have a bias there.
    - grendelt 5y ago
      You're putting value in the companies dealing with crypto simply because people have put money into the operation. Anytime I see "this is going to be successful because of all this money that backers have put into it", I roll my eyes. Investors are human too. There are plenty of failed investments. I live in the Houston area. Some heart surgeon decided to chase his childhood dream, bought a plot of land in Texas City (I-45 south of Houston) and got a couple other backers to build a mini amusement park. He bought the land for who-knows how much. He _immediately_ bought some whirly rides. ...and that was it. It sat like that for more or less 2 years then a metal building went up alongside the rides that have been sitting idle. About a year later a metal fence went up around the property. The waist-high weeds got mowed about every 6 months and it's all sitting idle today. This guy and his marks have surely dumped no small amount of money on it. Dude is a heart surgeon so he's not a complete moron --- he's just not good at project management _at all_. So don't use investment value as a bulletproof metric - and so far almost all of it has been speculative investment. (I'm not aware of any successful cryptocurrency businesses that have turned a profit yet. [and I could be totally wrong here, so plz tell me]) I think the real money to be made in crypto is "selling the shovels". A gold miner could've struck it rich in the California gold rush, but more often than not his costs exceeded his return on investment. The shopkeepers back in town that sold the gear made all the money. I think that's where there's money to be made. Selling hardware and consulting services to miner operations, taking sizable fees for lobbying and marketing efforts, and selling posh real estate to crypto startups.
kleer001 5y ago
What a bunch of words. Saying they're a Ponzi Scheme over and over again doesn't make them one. Blaming the group for the individual is certainly in the zeitgeist, but it's still BS. There's so many ways it's not a Ponzi Scheme. Maybe Tether is? But Tether isn't all cryptocurrencies. "... making unmediated online transactions securely in a trustless environment in this way is not without costs." Yea, sure, but it doesn't support the thesis. "Given that cryptocurrencies don’t produce anything of material value..." How is that a given? What defines material value? Is the author a Gold cheerleader? Do they expect us to eat dollar bills? "The 2008 financial crisis made clear why the financial sector must be brought under public control." What does public control mean? They are, that's what the SEC is.
- Vervious 5y ago
  Note, "The majority of Bitcoin trades are now conducted in Tether, 70 percent by volume. By comparison, only 8 percent of trade volume is conducted in real dollars, with the remainder being other crypto-to-crypto pairs."
  - kleer001 5y ago
    > The majority of Bitcoin trades are now conducted in Tether Ok, so that would suggest that Tether is a Ponzi scheme, if anything. Not all of crypto. smh
viscanti 5y ago
The proof that it's a ponzi scheme is that some blockchains use proof of work which requires electricity. It's left as an exercise to the reader to prove the claim that a distributed and decentralized database has no value (or better the reader should just take those unproven claims at face value). Lots of web3, NFT, DAO, decentralized gaming, metaverse, and DeFi projects are of dubious value but I find the lack of discussion about any of that in the article to be a pretty big red flag. This reads like the writer had a conclusion in mind and couldn't be bothered to actually look at any of the existing or potential future use cases and wrote off the entire thing as a scam. It's possible the conclusion is true but too many of the actually important details are missing and too much of the focus is on completely irrelevant things (like the fact that some blockchains are proof of work so even proof of stake blockchains would be Ponzi schemes) for this to even be worth reading for most people.
- gregjor 5y ago
  It isn't up to skeptics and critics to prove "blockchain technology" doesn't have any real value (or that it's not particularly innovative). It's up to the blockchain proponents or "community" to deliver value. Just calling something revolutionary and useful doesn't make it so. More than a decade after "blockchain" became a thing we have yet to see any value other than crypto, and the value from crypto is mainly in illegal financial transactions and fraud. If distributed, decentralized, append-only databases have wider applications (outside of crypto), what are those applications? When will we see the disruption? David Gerard showed that blockchain is wearing no clothes in Attack of the 50-foot Blockchain and nothing has happened since he published that book to make me think he was wrong.
  - viscanti 5y ago
    > It isn't up to skeptics and critics to prove "blockchain technology" doesn't have any real value The author isn't claiming they're skeptical. They're claiming it's a ponzi. The burden of proof is on them to demonstrate their claim has merit. They can't fall back on saying they're just skeptical. That's not what they're arguing.
jcburnham 5y ago
> Given that cryptocurrencies don’t produce anything of material value I've read this "crypto has no use-case" meme a lot recently, and it's always perplexed me. Crypto is clearly the easiest way to do international payments right now, particularly for countries with restrictive capital controls, like, for example, Argentina (https://www.bloomberg.com/news/articles/2021-08-13/argentina-tightens-capital-controls-ahead-of-midterm-elections https://www.bloomberg.com/news/articles/2021-08-13/argentina...). Sometimes this is qualified as "crypto has no use-case except crime", but what obligation do I, a US person, have to follow or respect corrupt Argentinian regulations?
- stillbourne 5y ago
  Some of us have an understanding of physics and have asked the question, if cryptocurrencies are a store of "value" what is the value that they are storing? If you break it down to its most basic unit of measurement the very concept of Proof of Work is that the "value" is entropy in for form of spent compute. That is all it is. The concept of "wastes energy" doesn't begin to cover it, the value is literally the sunk cost of the net energy used to "mint" a coin. Let me ask you a question, what is the value of used energy? There is none, entropy flows in one direction energy once spent, has no value. I can't get energy back from the spent compute, that power used is not producing anything useful other than a hash value on a ledger. Many of us are then anti-crypto because we're simply stating, The Emperor is wearing no clothes or The value of entropy is nothing. The entire thing is a purely speculative market on the cost of entropy, but entropy has no value.
  - baggy_trough 5y ago
    Is a hundred dollar bill just a piece of paper?
    - stillbourne 5y ago
      I love this question, the answer is obviously no. The value of the US dollar is determined by the credit of the issuer, its rate of exchange in conjunction with the value of labor. Just like all fiat. Yes, if any of these fluctuate the "value" of the dollar goes up or down but it still has a value that isn't just the paper its printed on.
GolfPopper 5y ago
#cryptocrash
gaara87 5y ago
How did this get to front page?
grendelt 5y ago
I'm still skeptical of blockchain as a whole and hoping someone can help explain this to me. Blockchains (and cryptocurrencies that ride atop them) keep track of all the transactions going back to its inception. Those blocks get passed around the chain. Some nodes archive them, but don't old blocks still circulate? How far back do blocks get circulated before they're no longer circulating (2, 3, 4, 5, 10 tranactions back, I'm sure it depends on the currency)? I've heard right now BTC is running at like 3 transactions a second. Astronomically far from the same number of transactions in fiat currency. What happens if crypto was to ever reach parity with fiat transactions? Every pack of gum, every donut, every Starbucks transaction gets circulated through all nodes the same way that every hedge fund movement, real estate closure, or business acquisiton does? It seems like all the history blocks would gum up the network traffic of circulating current/real-time transactions. The amount of overhead to process 3 transactions per second isn't enough to delay those 3 transactions, but as more traffic enters the chain it seems like the amount of supporting chatter will grow even faster. How do cryptocurrencies offload the administrative/archival overhead from the transactions in order to process transactions so you're not standing around waiting for your BTC to process payment before your coffee gets cold? In network terms, we don't all rely on root DNS servers. Those are there for other DNS servers to pull from a trusted source. Hitting up the root DNS servers is still bad etiquette, right? The local mirroring DNS servers are faster and provide lookups for the here-and-now. If it doesn't know, the DNS server will query the roots to locate the authoritative record keeper for the domain in question (and cache it for future reference). I see blockchain like that DNS but it requires all DNS servers to agree with the resolution before providing the results to the user. That seems like it will be incredibly slow and at some point all that administrative chatter will outstrip the capacity to process a transaction or "query". With fiat currency, we have localized transactions. Sometimes a credit card processor may go down, sometimes your bank cannot be reached. In those cases you can resort to paying with cash or gasp a check. Those transactions get processed at the lowest local level and there's no need to concern some bank in Pakistan or the US Federal Reserve that you just paid $3.50 for an overpriced soda at Jersey Mikes (which they are!) from your checking account. I'm very keenly interested in how these problems are to be solved when/if the dream of crypto being a truly global alternative to "cash"/fiat. Can someone fill me in?
- 5y ago
xiphias2 5y ago
The good news for the writer of the article about the ,,bad investment'' is that he can short it on regulated exchanges and he can be soon a billionaire if he's right.
syncerr 5y ago
It still floors me to see such bearish opinions like this. It demonstrates how intelligent people can be completely wrong about the future, and it signals how early we are in the adoption curve for crypto. The ability to print money and misrepresent the value of the dollar (i.e., CPI, GDP) combined with incentives for personal enrichment should be evidence enough that government-controlled currencies is not the scalable solution we thought it was. We're about to experience inflation like we've not seen in the US in a long time and the resulting transfer of wealth and increase in inequality will be a catalyst for the adoption of crypto. I hope to see you all there.
- ForHackernews 5y ago
  Replying so I remember to come back to this thread in 3-5 years. If cryptocurrency is an inflation hedge, why are the cryptomarkets tanking when inflation is freshly high?
  - twelve40 5y ago
    If I follow this reasoning correctly, some ideal future version of "crypto" will be decoupled from corrupt governments, it will operate in a much more stable and equitable way than today's currencies, and the current imperfect state of things - when we are still too attached to fiat - is just a temporary transition. Just to entertain that idea. Sounds a bit too good to be true though.
Vervious 5y ago
Why is this flagged? The argument presented is very reasonable and requires a rebuttal. It is also an uncommon argument I haven't seen previously on the front page. The main argument is that Tether is acting like an unregulated central bank that holds all the power over the price of cryptocurrencies. Thus, crypto holders who are not in on the fraud are like a flock of Bison being driven off a cliff, if there is ever a run on Tether. The other comments on this thread are worthless and just shilling crypto.
- jcburnham 5y ago
  > The argument presented is very reasonable and requires a rebuttal. > The other comments on this thread are worthless and just shilling crypto. Let me try to present a rebuttal which hopefully you will not dismiss as a "shill" for crypto. To begin, Tether is obviously ridiculous and most people, even in crypto acknowledge this. However, Tether is not precisely an unregulated "central" bank, but rather a semi-regulated private bank. I say semi-regulated, because they do have some oversight (https://www.cnbc.com/2021/02/23/tether-bitfinex-reach-settlement-with-new-york-attorney-general.html https://www.cnbc.com/2021/02/23/tether-bitfinex-reach-settle...). It also has many competitors such as USDC, Binance USD, DAI, which are comparable in size: https://coinmarketcap.com/view/stablecoin/ https://coinmarketcap.com/view/stablecoin/. USDT is less than half of the stablecoin market by capitalization, but it is over 80% of the daily transaction volume of the stablecoin market. If we dig a little deeper though, you can see that the daily transaction volume of Tether often exceeds its market cap: https://nomics.com/assets/usdt-tether/history https://nomics.com/assets/usdt-tether/history. This suggests that most owners of Tether are only holding it for a short period of time, which make sense given that on centralized exchanges like Binance it many, if not most, markets are denominated in USDT as one half of a trading pair. So why, if Tether is generally understood by the market to be backed by nothing, and run by dubious individuals, is it still worth something? It's not because people are stupid, but because of a combination of 1. the enormous international demand for cryptocurrency assets, 2. the lack of sufficient "backed" digital dollars to efficiently lubricate the quantity of transactions people want to make and 3. Gresham's Law (https://en.wikipedia.org/wiki/Gresham's_law) https://en.wikipedia.org/wiki/Gresham's_law), which says given two kinds of commodity money, people will spend the less valuable one, and save the more valuable one. It's honestly a fascinating example of a money forming out of the matrix of exchanges in a barter economy, and yes, it's a dubious product that will likely break its peg and crash to nothing at some point. But because the total market cap is relatively small, there's not really any significant contagion or "bank run" risk here (BTC lost more than Tether's entire market cap today and mostly people just shrug and say "that's crypto"). The question I want you and all people who say "crypto is a fraud, ponzi scheme, has no value" to ask yourself is "If I'm right, why is there such demand to buy crypto?". Some crypto-critics argue it is because people are stupid and greedy, but to me that's a lazy and elitist answer. My interpretation is that crypto demand is driven by the same forces that cause people to buy condo's in New York City, London, Vancouver, etc. which then sit empty. It's mostly, right now, a combination of inflation and capital flight. But there is also a growing sector of the crypto-economy which is capable of doing things which are not feasible in traditional finance (e.g. crowd-funding like Gitcoin, anonymous payments like ZCash, or decentralized money like MakerDAO). I don't think current crypto-asset valuations are justified by that sector, but I am hopeful that in the coming years those use cases will grow and will create extraordinary value for the world.

70 points by messutied 5y ago

I didn't like this post because author is too short sighted. Yes, it can become dust. And it also cannot. And if it becomes dust it can start all over again. He's just making a prediction, as a novel Nostradamus, and not considering multiple scenarios.

jfreak53 5y ago

Yes, they all are!

andrewstuart 5y ago

Same as real estate.

spraveenitpro 5y ago
pavlov 5y ago
Cryptocurrency is definitely very successful at exploiting the post-2008 mindset of many young people: everything that touches upon finance vaguely feels like a scam, so along comes crypto which strips out everything but the scam. "At least it's our scam if we get in early."
- viscanti 5y ago
  > everything that touches upon finance vaguely feels like a scam Citation needed. The fact that there are lots of scams or projects of dubious value doesn't prove that everything is. It's not really different than looking at tech startups, most are bad ideas that won't ever work but some do work.
  - pavlov 5y ago
    I’m saying that the 2008 crisis led many people to believe that everything that counts as traditional finance is some kind of scam when you scratch the surface — real estate, stock market, etc. If that’s the base assumption, it doesn’t matter if crypto projects do anything at all because they’re still no worse than the traditional investments (in this way of thinking).
BrissyCoder 5y ago
You can't live in a Blockchain. You can't collect rent on a Blockchain.

spraveenitpro 5y ago

edf13 5y ago

Am I the only one getting tired of all these crypto scam calling posts appearing on the front page?

BrissyCoder 5y ago
No (even though I agree with the sentiment).

csdvrx 5y ago

And Dropbox was just a ftp, and the iPhone was just a lame mp3 player. And e-commerce just a fad, etc. We're blinded by what was, and wrongfully infer what will be. Also, we mix in our biases, Douglas Adams said it best: "I've come up with a set of rules that describe our reactions to technologies: 1. Anything that is in the world when you’re born is normal and ordinary and is just a natural part of the way the world works. 2. Anything that's invented between when you’re fifteen and thirty-five is new and exciting and revolutionary and you can probably get a career in it. 3. Anything invented after you're thirty-five is against the natural order of things."

zepto 5y ago
What about Laserdisk? You seem to be only choosing technologies that were exceptionally successful. An odd bias. Most of them aren’t.
- csdvrx 5y ago
  An odd bias? Ok, let reality be the ultimate judge, and ask yourself: - What's the total valuation today of companies dealing with Laserdisk? - What's the total valuation today of companies dealing with crypto? You'll have your answer about who may have a bias there.
  - grendelt 5y ago
    You're putting value in the companies dealing with crypto simply because people have put money into the operation. Anytime I see "this is going to be successful because of all this money that backers have put into it", I roll my eyes. Investors are human too. There are plenty of failed investments. I live in the Houston area. Some heart surgeon decided to chase his childhood dream, bought a plot of land in Texas City (I-45 south of Houston) and got a couple other backers to build a mini amusement park. He bought the land for who-knows how much. He _immediately_ bought some whirly rides. ...and that was it. It sat like that for more or less 2 years then a metal building went up alongside the rides that have been sitting idle. About a year later a metal fence went up around the property. The waist-high weeds got mowed about every 6 months and it's all sitting idle today. This guy and his marks have surely dumped no small amount of money on it. Dude is a heart surgeon so he's not a complete moron --- he's just not good at project management _at all_. So don't use investment value as a bulletproof metric - and so far almost all of it has been speculative investment. (I'm not aware of any successful cryptocurrency businesses that have turned a profit yet. [and I could be totally wrong here, so plz tell me]) I think the real money to be made in crypto is "selling the shovels". A gold miner could've struck it rich in the California gold rush, but more often than not his costs exceeded his return on investment. The shopkeepers back in town that sold the gear made all the money. I think that's where there's money to be made. Selling hardware and consulting services to miner operations, taking sizable fees for lobbying and marketing efforts, and selling posh real estate to crypto startups.

kleer001 5y ago

What a bunch of words. Saying they're a Ponzi Scheme over and over again doesn't make them one. Blaming the group for the individual is certainly in the zeitgeist, but it's still BS. There's so many ways it's not a Ponzi Scheme. Maybe Tether is? But Tether isn't all cryptocurrencies. "... making unmediated online transactions securely in a trustless environment in this way is not without costs." Yea, sure, but it doesn't support the thesis. "Given that cryptocurrencies don’t produce anything of material value..." How is that a given? What defines material value? Is the author a Gold cheerleader? Do they expect us to eat dollar bills? "The 2008 financial crisis made clear why the financial sector must be brought under public control." What does public control mean? They are, that's what the SEC is.

Vervious 5y ago
Note, "The majority of Bitcoin trades are now conducted in Tether, 70 percent by volume. By comparison, only 8 percent of trade volume is conducted in real dollars, with the remainder being other crypto-to-crypto pairs."
- kleer001 5y ago
  > The majority of Bitcoin trades are now conducted in Tether Ok, so that would suggest that Tether is a Ponzi scheme, if anything. Not all of crypto. smh

viscanti 5y ago

The proof that it's a ponzi scheme is that some blockchains use proof of work which requires electricity. It's left as an exercise to the reader to prove the claim that a distributed and decentralized database has no value (or better the reader should just take those unproven claims at face value). Lots of web3, NFT, DAO, decentralized gaming, metaverse, and DeFi projects are of dubious value but I find the lack of discussion about any of that in the article to be a pretty big red flag. This reads like the writer had a conclusion in mind and couldn't be bothered to actually look at any of the existing or potential future use cases and wrote off the entire thing as a scam. It's possible the conclusion is true but too many of the actually important details are missing and too much of the focus is on completely irrelevant things (like the fact that some blockchains are proof of work so even proof of stake blockchains would be Ponzi schemes) for this to even be worth reading for most people.

gregjor 5y ago
It isn't up to skeptics and critics to prove "blockchain technology" doesn't have any real value (or that it's not particularly innovative). It's up to the blockchain proponents or "community" to deliver value. Just calling something revolutionary and useful doesn't make it so. More than a decade after "blockchain" became a thing we have yet to see any value other than crypto, and the value from crypto is mainly in illegal financial transactions and fraud. If distributed, decentralized, append-only databases have wider applications (outside of crypto), what are those applications? When will we see the disruption? David Gerard showed that blockchain is wearing no clothes in Attack of the 50-foot Blockchain and nothing has happened since he published that book to make me think he was wrong.
- viscanti 5y ago
  > It isn't up to skeptics and critics to prove "blockchain technology" doesn't have any real value The author isn't claiming they're skeptical. They're claiming it's a ponzi. The burden of proof is on them to demonstrate their claim has merit. They can't fall back on saying they're just skeptical. That's not what they're arguing.

jcburnham 5y ago

> Given that cryptocurrencies don’t produce anything of material value I've read this "crypto has no use-case" meme a lot recently, and it's always perplexed me. Crypto is clearly the easiest way to do international payments right now, particularly for countries with restrictive capital controls, like, for example, Argentina (https://www.bloomberg.com/news/articles/2021-08-13/argentina-tightens-capital-controls-ahead-of-midterm-elections https://www.bloomberg.com/news/articles/2021-08-13/argentina...). Sometimes this is qualified as "crypto has no use-case except crime", but what obligation do I, a US person, have to follow or respect corrupt Argentinian regulations?

stillbourne 5y ago
Some of us have an understanding of physics and have asked the question, if cryptocurrencies are a store of "value" what is the value that they are storing? If you break it down to its most basic unit of measurement the very concept of Proof of Work is that the "value" is entropy in for form of spent compute. That is all it is. The concept of "wastes energy" doesn't begin to cover it, the value is literally the sunk cost of the net energy used to "mint" a coin. Let me ask you a question, what is the value of used energy? There is none, entropy flows in one direction energy once spent, has no value. I can't get energy back from the spent compute, that power used is not producing anything useful other than a hash value on a ledger. Many of us are then anti-crypto because we're simply stating, The Emperor is wearing no clothes or The value of entropy is nothing. The entire thing is a purely speculative market on the cost of entropy, but entropy has no value.
- baggy_trough 5y ago
  Is a hundred dollar bill just a piece of paper?
  - stillbourne 5y ago
    I love this question, the answer is obviously no. The value of the US dollar is determined by the credit of the issuer, its rate of exchange in conjunction with the value of labor. Just like all fiat. Yes, if any of these fluctuate the "value" of the dollar goes up or down but it still has a value that isn't just the paper its printed on.

GolfPopper 5y ago

#cryptocrash

gaara87 5y ago

How did this get to front page?

grendelt 5y ago

I'm still skeptical of blockchain as a whole and hoping someone can help explain this to me. Blockchains (and cryptocurrencies that ride atop them) keep track of all the transactions going back to its inception. Those blocks get passed around the chain. Some nodes archive them, but don't old blocks still circulate? How far back do blocks get circulated before they're no longer circulating (2, 3, 4, 5, 10 tranactions back, I'm sure it depends on the currency)? I've heard right now BTC is running at like 3 transactions a second. Astronomically far from the same number of transactions in fiat currency. What happens if crypto was to ever reach parity with fiat transactions? Every pack of gum, every donut, every Starbucks transaction gets circulated through all nodes the same way that every hedge fund movement, real estate closure, or business acquisiton does? It seems like all the history blocks would gum up the network traffic of circulating current/real-time transactions. The amount of overhead to process 3 transactions per second isn't enough to delay those 3 transactions, but as more traffic enters the chain it seems like the amount of supporting chatter will grow even faster. How do cryptocurrencies offload the administrative/archival overhead from the transactions in order to process transactions so you're not standing around waiting for your BTC to process payment before your coffee gets cold? In network terms, we don't all rely on root DNS servers. Those are there for other DNS servers to pull from a trusted source. Hitting up the root DNS servers is still bad etiquette, right? The local mirroring DNS servers are faster and provide lookups for the here-and-now. If it doesn't know, the DNS server will query the roots to locate the authoritative record keeper for the domain in question (and cache it for future reference). I see blockchain like that DNS but it requires all DNS servers to agree with the resolution before providing the results to the user. That seems like it will be incredibly slow and at some point all that administrative chatter will outstrip the capacity to process a transaction or "query". With fiat currency, we have localized transactions. Sometimes a credit card processor may go down, sometimes your bank cannot be reached. In those cases you can resort to paying with cash or gasp a check. Those transactions get processed at the lowest local level and there's no need to concern some bank in Pakistan or the US Federal Reserve that you just paid $3.50 for an overpriced soda at Jersey Mikes (which they are!) from your checking account. I'm very keenly interested in how these problems are to be solved when/if the dream of crypto being a truly global alternative to "cash"/fiat. Can someone fill me in?

5y ago

xiphias2 5y ago

The good news for the writer of the article about the ,,bad investment'' is that he can short it on regulated exchanges and he can be soon a billionaire if he's right.

syncerr 5y ago

It still floors me to see such bearish opinions like this. It demonstrates how intelligent people can be completely wrong about the future, and it signals how early we are in the adoption curve for crypto. The ability to print money and misrepresent the value of the dollar (i.e., CPI, GDP) combined with incentives for personal enrichment should be evidence enough that government-controlled currencies is not the scalable solution we thought it was. We're about to experience inflation like we've not seen in the US in a long time and the resulting transfer of wealth and increase in inequality will be a catalyst for the adoption of crypto. I hope to see you all there.

ForHackernews 5y ago
Replying so I remember to come back to this thread in 3-5 years. If cryptocurrency is an inflation hedge, why are the cryptomarkets tanking when inflation is freshly high?
- twelve40 5y ago
  If I follow this reasoning correctly, some ideal future version of "crypto" will be decoupled from corrupt governments, it will operate in a much more stable and equitable way than today's currencies, and the current imperfect state of things - when we are still too attached to fiat - is just a temporary transition. Just to entertain that idea. Sounds a bit too good to be true though.

Vervious 5y ago

Why is this flagged? The argument presented is very reasonable and requires a rebuttal. It is also an uncommon argument I haven't seen previously on the front page. The main argument is that Tether is acting like an unregulated central bank that holds all the power over the price of cryptocurrencies. Thus, crypto holders who are not in on the fraud are like a flock of Bison being driven off a cliff, if there is ever a run on Tether. The other comments on this thread are worthless and just shilling crypto.

jcburnham 5y ago
> The argument presented is very reasonable and requires a rebuttal. > The other comments on this thread are worthless and just shilling crypto. Let me try to present a rebuttal which hopefully you will not dismiss as a "shill" for crypto. To begin, Tether is obviously ridiculous and most people, even in crypto acknowledge this. However, Tether is not precisely an unregulated "central" bank, but rather a semi-regulated private bank. I say semi-regulated, because they do have some oversight (https://www.cnbc.com/2021/02/23/tether-bitfinex-reach-settlement-with-new-york-attorney-general.html https://www.cnbc.com/2021/02/23/tether-bitfinex-reach-settle...). It also has many competitors such as USDC, Binance USD, DAI, which are comparable in size: https://coinmarketcap.com/view/stablecoin/ https://coinmarketcap.com/view/stablecoin/. USDT is less than half of the stablecoin market by capitalization, but it is over 80% of the daily transaction volume of the stablecoin market. If we dig a little deeper though, you can see that the daily transaction volume of Tether often exceeds its market cap: https://nomics.com/assets/usdt-tether/history https://nomics.com/assets/usdt-tether/history. This suggests that most owners of Tether are only holding it for a short period of time, which make sense given that on centralized exchanges like Binance it many, if not most, markets are denominated in USDT as one half of a trading pair. So why, if Tether is generally understood by the market to be backed by nothing, and run by dubious individuals, is it still worth something? It's not because people are stupid, but because of a combination of 1. the enormous international demand for cryptocurrency assets, 2. the lack of sufficient "backed" digital dollars to efficiently lubricate the quantity of transactions people want to make and 3. Gresham's Law (https://en.wikipedia.org/wiki/Gresham's_law) https://en.wikipedia.org/wiki/Gresham's_law), which says given two kinds of commodity money, people will spend the less valuable one, and save the more valuable one. It's honestly a fascinating example of a money forming out of the matrix of exchanges in a barter economy, and yes, it's a dubious product that will likely break its peg and crash to nothing at some point. But because the total market cap is relatively small, there's not really any significant contagion or "bank run" risk here (BTC lost more than Tether's entire market cap today and mostly people just shrug and say "that's crypto"). The question I want you and all people who say "crypto is a fraud, ponzi scheme, has no value" to ask yourself is "If I'm right, why is there such demand to buy crypto?". Some crypto-critics argue it is because people are stupid and greedy, but to me that's a lazy and elitist answer. My interpretation is that crypto demand is driven by the same forces that cause people to buy condo's in New York City, London, Vancouver, etc. which then sit empty. It's mostly, right now, a combination of inflation and capital flight. But there is also a growing sector of the crypto-economy which is capable of doing things which are not feasible in traditional finance (e.g. crowd-funding like Gitcoin, anonymous payments like ZCash, or decentralized money like MakerDAO). I don't think current crypto-asset valuations are justified by that sector, but I am hopeful that in the coming years those use cases will grow and will create extraordinary value for the world.