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Bitcoin is probably the first Ponzi scheme where everyone in it knows it is a Ponzi scheme. So I agree with your take here.

by podgaj 5y ago

sschueller 5y ago
Please explain to me how Bitcoin is a Ponzi scheme while USD after 1971 (going away from the gold standard) is not. More so explain to me how the USD is less of a Ponzi scheme when it is the super wealthy banks/institutions that are getting zero interest loans allowing them to make even more money while at the same time devaluating the currency.
- dtech 5y ago
  Bitcoin and other cryptocurrencies have ~zero inherent value, due to their non-speculation use-cases like payment being very limited or still early development (smart contracts). Unless you count BTC in black market I guess. USD has inherent value, it's the only currency where you can pay taxes in, and if you want to do business with government or government employees - who are ever only paid in USD - you must accept USD.
  - sschueller 5y ago
    But it's not a Ponzi scheme. It's a currency with small adoption like that of a third world nation.
    - dtech 5y ago
      I'd say Ponzi-scheme is a justified classification, since returns are funded by new entrants or additional purchases, instead of the asset producing value itself like a company stock or a house. Even something like gold with no value production - whose price is quite stable because of that by the way - has value because people want it for jewellery and industry.
      - sschueller 5y ago
        You could say the same for overvalued stock like TSLA but I don't think anyone would call Tesla a Ponzi scheme. Most of it's value is speculation not actual profits or sales.
        acdha 5y ago
        > Most of it's value is speculation not actual profits or sales. “Most” is the key difference: a share of Tesla is fractional ownership in a real business which has proven capable of selling real products which people want. Some fraction of that is definitely speculative but far from all of it, and there's no reason to think that the value would decline to zero under any feasible economic situation. A Bitcoin, in contrast, has no value other than what you can convince someone else to buy it for. Nobody needs it to conduct business, it's trivial to set up competing blockchains, and the deflationary model is designed to make you profitfrom everyone who starts buying later despite not having created any new value.
    - lupire 5y ago
      It's not a currency for anyone who is holding it long term, by definition.
      - tim333 5y ago
        Does that also apply to anyone who has money in the bank long term?
  - Fnoord 5y ago
    > USD has inherent value, it's the only currency where you can pay taxes in I don't know, I pay my taxes in EUR, I live in EU. But I get your point. Moreover, USD is the most dominant coin in the world. Even outside USA, a lot of people depend on it.
  - samarama 5y ago
    Bitcoin’s inherent value is 1. Immutability 2. Limited supply 3. Censorship-resistance 4. Independence of governments, nations, banks, institutions, corporations 5. Accessibility You can also pay your taxes in crypto in many countries. The dollar’s inherent value is very weak and not really tangible. It’s 2022 and people still don’t get that.
    - danaris 5y ago
      That's not "value". Those are "attributes". A person may value those attributes or not, but they do not have inherent monetary value. The currency of a nation has inherent monetary value because it is backed by the state; the details of what that means will vary from jurisdiction to jurisdiction, but except in states undergoing massive crises, you can still be sure that if you hold their currency, you have something of value and can transact business. Bitcoin is backed by nothing but other people holding Bitcoin. As for the attributes you list: 1. Immutability is a double-edged sword. There are legitimate situations where you want mutability. 2. Artificial scarcity of a digital thing is only beneficial if you are among those holding large amounts of it. 3 & 4 (basically the same). This is both a huge negative for many people, and only true until those institutions' policies, laws, regulations, etc catch up with Bitcoin and either fit it within their existing structures or ban it entirely. 5. It's really not that accessible unless you're already fairly wealthy and digitally savvy.
    - psyc 5y ago
      Bitcoin supply is not effectively limited until a satoshi is no longer adequate to express the price of a good. The 'supply' of Bitcoin doesn't only increase with mining, it effectively also rises with Bitcoin's price. Say I need to order one pizza per week. In late 2011, one BTC lasts me one week. At today's price, the same coin lasts me more than 50 years. There's no need to bid up the price of a whole coin in a (hypothetical) world where whole coins are scarce. You just buy less of it, because nothing is actually denominated in BTC - that would be unsustainable. Everything is still denominated in fiat.
    - CabSauce 5y ago
      All of those things are true (to varying degrees) of all of the thousands of crypto currencies. That's inherently the problem. As soon as another one comes along, the *value* of the earlier iterations gets reduced. There's no limit on the creation of new crypto currencies.
  - ulzeraj 5y ago
    There is no such thing as inherent value. Value is subjected to the individual who makes decisions on the margin.
    - Swenrekcah 5y ago
      Maybe there isn’t inherent value in currencies, which crypto is not. In assets there is can of course be inherent value (food, a sturdy house, land, etc.).
      - ulzeraj 5y ago
        Its more complicated than that. If you already have some maybe having more of that specific thing is more a hassle than a benefit. Or maybe you don't value that thing at all. What value has a premium steak to a vegan? If your house is on 0.5 acre of land and you add another acre it might great but if you had 500 acres of land and added another one you wound't even notice. Why people tend to value diamonds more than water which is essential to live? If you receive two copies of the same magazine you like to read does the second copy holds some value to you?
        Swenrekcah 5y ago
        Inherent value is real. Market value of the thing is dependent on a million things but an axe has inherent value in the same way a feeble banknote hasn’t. The steak has calories and nutrients, regardless of who holds it (until it goes bad). Those are inherently valuable to any human being. Your secondary point is about the law of diminishing returns, it’s a non-sequitur. Water is inherently valuable for obvious reasons. Diamonds have inherent value in their hardness although that has little to do with their market value, that isn’t based on inherent value. The magazine isn't inherently valuable. The information in it could be if one can decipher it. But additional copies of information don't make new information, so one or a hundred magazines, it makes no difference in inherent value.
  - DarylZero 5y ago
    By the same logic though, many internet drug dealers only accept BTC. "Inherent" implies independent of any individual buyer demanding it. Even if the buyer is federal govt.
  - ch4s3 5y ago
    A Ponzi scheme is a specific type of scam where new investors are lure in with the promise of great returns and portions of their deposits are used by the scammer to pay off early investors who ask to realize some of their returns. The central scammer pockets the difference and eventually runs off with all of the deposits. Crypto currencies if anything are a bit like distributed pump and dumps, but at that point you're just talking about asset speculation.
  - sunshinerag 5y ago
    “ who are ever only paid in USD - you must accept USD” Are you saying it’s inherent value comes from it being a protection racket.?
  - UnpossibleJim 5y ago
    I'm curious about one thing as far as this statement goes... it's a little bit of a nonsequiter though. When/if the US starts to tax crypto and crypto gains, does that show that they have more of a legitimate value?
- khuey 5y ago
  The USD is backed by the power to tax 330 million people. Bitcoin is not.
  - ethanbond 5y ago
    And, ultimately, the power to invade the other few billion people who can’t be taxed
    - sschueller 5y ago
      Switzerland's currency is quite strong and considered a safe heaven. Do you think Switzerland has the capability or would invade another country to collected tax from a few billion people?
      - jrochkind1 5y ago
        I am not an expert in how currencies work, but it's worth nothing that Switzerland, like most countries, keeps most of it's own reserves in USD (presumably treasury bills), and has around 1 trillion in USD in reserve. Which is not unrelated to the value of it's own currency and their ability to stabilize it. But I am not claiming to be able to explain the details myself. https://www.ceicdata.com/en/switzerland/official-reserve-assets/official-reserve-assets-usd https://www.ceicdata.com/en/switzerland/official-reserve-ass...
        khuey 5y ago
        That number you're looking at is "total Swiss foreign currency reserves in units of USD" not "Swiss foreign currency reserves that are USD". Switzerland, for reasons that are fairly obvious, holds large Euro reserves. At the end of 2020 USD was only ~35% of that total amount.
        jrochkind1 5y ago
        Good correction, thanks! Still 35% of reserves is plenty! I hadn't considered how many reserves have probably shifted to euros since the euro, that's actually a big deal for the US. Anyway...
johnebgd 5y ago
USA has natural resources, advanced technologies, and a standing armed forces that are stationed all over the world. These extract value and serve as utility. Bitcoin is better at laundering money than many fiat currencies but otherwise it’s only wide scale utility is a speculative investment asset that only increases in value if more people create demand for its limited supply.
- cm2012 5y ago
  Yeah, the floor value of bitcoin is probably its value in crime.
  - xtracto 5y ago
    Which I think is $0 . Monero has supplanted Bitcoin in the "crime" liquidity department.
tim333 5y ago
As an occasional bitcoin holder, I don't think it's a Ponzi scheme. Who's the Ponzi schemer? How come every time it collapses it comes back bigger in a year or two?
- podgaj 5y ago
  You are the Ponzi schemer. It is a combination of Pump and Dump and Ponzi. That's why it "comes back bigger".
  - tim333 5y ago
    I think it comes back bigger each time because more people get involved. From a handful of tech geeks at the start to maybe 100m people this time around.
- cuteboy19 5y ago
  70% of Bitcoin holders bought in last year. A continuous stream of greater fools is necessary for its price to even remain at the current level Also, every ponzi scheme gives amazing returns, before it inevitably collapses. For example Madoff was able to give decent returns to his investors for 17 years! 'Number go up' is not a refutation of a ponzi scheme.
  - tim333 5y ago
    Yeah but with a Madoff/Ponzi scheme the thing collapses, Madoff goes to jail, it ends. Bitcoin seems more like other assets that don't make things, stuff like fiat money, gold, fine art and so on.
    - DarylZero 5y ago
      It literally is just fiat currency. Bitcoin is a way to make fiat currency independent of government.
      - hypertele-Xii 5y ago
DSMan195276 5y ago
I don't think it really qualifies as a Ponzi scheme, functionally it's not all that different from any other speculative asset. You're not giving your money to the 'blockchain' expecting it to give back X amount of dollars, you're trading your money for bitcoins and that's the end of it. Whether you want to keep your bitcoins forever, or attempt to find someone else to sell them to is up to you.

Bitcoin is probably the first Ponzi scheme where everyone in it knows it is a Ponzi scheme. So I agree with your take here.

by podgaj 5y ago

Bitcoin is probably the first Ponzi scheme where everyone in it knows it is a Ponzi scheme. So I agree with your take here.

sschueller 5y ago

Please explain to me how Bitcoin is a Ponzi scheme while USD after 1971 (going away from the gold standard) is not. More so explain to me how the USD is less of a Ponzi scheme when it is the super wealthy banks/institutions that are getting zero interest loans allowing them to make even more money while at the same time devaluating the currency.

dtech 5y ago
Bitcoin and other cryptocurrencies have ~zero inherent value, due to their non-speculation use-cases like payment being very limited or still early development (smart contracts). Unless you count BTC in black market I guess. USD has inherent value, it's the only currency where you can pay taxes in, and if you want to do business with government or government employees - who are ever only paid in USD - you must accept USD.
- sschueller 5y ago
  But it's not a Ponzi scheme. It's a currency with small adoption like that of a third world nation.
  - dtech 5y ago
    I'd say Ponzi-scheme is a justified classification, since returns are funded by new entrants or additional purchases, instead of the asset producing value itself like a company stock or a house. Even something like gold with no value production - whose price is quite stable because of that by the way - has value because people want it for jewellery and industry.
    - sschueller 5y ago
      You could say the same for overvalued stock like TSLA but I don't think anyone would call Tesla a Ponzi scheme. Most of it's value is speculation not actual profits or sales.
      - acdha 5y ago
        > Most of it's value is speculation not actual profits or sales. “Most” is the key difference: a share of Tesla is fractional ownership in a real business which has proven capable of selling real products which people want. Some fraction of that is definitely speculative but far from all of it, and there's no reason to think that the value would decline to zero under any feasible economic situation. A Bitcoin, in contrast, has no value other than what you can convince someone else to buy it for. Nobody needs it to conduct business, it's trivial to set up competing blockchains, and the deflationary model is designed to make you profitfrom everyone who starts buying later despite not having created any new value.
  - lupire 5y ago
    It's not a currency for anyone who is holding it long term, by definition.
    - tim333 5y ago
      Does that also apply to anyone who has money in the bank long term?
- Fnoord 5y ago
  > USD has inherent value, it's the only currency where you can pay taxes in I don't know, I pay my taxes in EUR, I live in EU. But I get your point. Moreover, USD is the most dominant coin in the world. Even outside USA, a lot of people depend on it.
- samarama 5y ago
  Bitcoin’s inherent value is 1. Immutability 2. Limited supply 3. Censorship-resistance 4. Independence of governments, nations, banks, institutions, corporations 5. Accessibility You can also pay your taxes in crypto in many countries. The dollar’s inherent value is very weak and not really tangible. It’s 2022 and people still don’t get that.
  - danaris 5y ago
    That's not "value". Those are "attributes". A person may value those attributes or not, but they do not have inherent monetary value. The currency of a nation has inherent monetary value because it is backed by the state; the details of what that means will vary from jurisdiction to jurisdiction, but except in states undergoing massive crises, you can still be sure that if you hold their currency, you have something of value and can transact business. Bitcoin is backed by nothing but other people holding Bitcoin. As for the attributes you list: 1. Immutability is a double-edged sword. There are legitimate situations where you want mutability. 2. Artificial scarcity of a digital thing is only beneficial if you are among those holding large amounts of it. 3 & 4 (basically the same). This is both a huge negative for many people, and only true until those institutions' policies, laws, regulations, etc catch up with Bitcoin and either fit it within their existing structures or ban it entirely. 5. It's really not that accessible unless you're already fairly wealthy and digitally savvy.
  - psyc 5y ago
    Bitcoin supply is not effectively limited until a satoshi is no longer adequate to express the price of a good. The 'supply' of Bitcoin doesn't only increase with mining, it effectively also rises with Bitcoin's price. Say I need to order one pizza per week. In late 2011, one BTC lasts me one week. At today's price, the same coin lasts me more than 50 years. There's no need to bid up the price of a whole coin in a (hypothetical) world where whole coins are scarce. You just buy less of it, because nothing is actually denominated in BTC - that would be unsustainable. Everything is still denominated in fiat.
  - CabSauce 5y ago
    All of those things are true (to varying degrees) of all of the thousands of crypto currencies. That's inherently the problem. As soon as another one comes along, the *value* of the earlier iterations gets reduced. There's no limit on the creation of new crypto currencies.
- ulzeraj 5y ago
  There is no such thing as inherent value. Value is subjected to the individual who makes decisions on the margin.
  - Swenrekcah 5y ago
    Maybe there isn’t inherent value in currencies, which crypto is not. In assets there is can of course be inherent value (food, a sturdy house, land, etc.).
    - ulzeraj 5y ago
      Its more complicated than that. If you already have some maybe having more of that specific thing is more a hassle than a benefit. Or maybe you don't value that thing at all. What value has a premium steak to a vegan? If your house is on 0.5 acre of land and you add another acre it might great but if you had 500 acres of land and added another one you wound't even notice. Why people tend to value diamonds more than water which is essential to live? If you receive two copies of the same magazine you like to read does the second copy holds some value to you?
      - Swenrekcah 5y ago
        Inherent value is real. Market value of the thing is dependent on a million things but an axe has inherent value in the same way a feeble banknote hasn’t. The steak has calories and nutrients, regardless of who holds it (until it goes bad). Those are inherently valuable to any human being. Your secondary point is about the law of diminishing returns, it’s a non-sequitur. Water is inherently valuable for obvious reasons. Diamonds have inherent value in their hardness although that has little to do with their market value, that isn’t based on inherent value. The magazine isn't inherently valuable. The information in it could be if one can decipher it. But additional copies of information don't make new information, so one or a hundred magazines, it makes no difference in inherent value.
- DarylZero 5y ago
  By the same logic though, many internet drug dealers only accept BTC. "Inherent" implies independent of any individual buyer demanding it. Even if the buyer is federal govt.
- ch4s3 5y ago
  A Ponzi scheme is a specific type of scam where new investors are lure in with the promise of great returns and portions of their deposits are used by the scammer to pay off early investors who ask to realize some of their returns. The central scammer pockets the difference and eventually runs off with all of the deposits. Crypto currencies if anything are a bit like distributed pump and dumps, but at that point you're just talking about asset speculation.
- sunshinerag 5y ago
  “ who are ever only paid in USD - you must accept USD” Are you saying it’s inherent value comes from it being a protection racket.?
- UnpossibleJim 5y ago
  I'm curious about one thing as far as this statement goes... it's a little bit of a nonsequiter though. When/if the US starts to tax crypto and crypto gains, does that show that they have more of a legitimate value?
khuey 5y ago
The USD is backed by the power to tax 330 million people. Bitcoin is not.
- ethanbond 5y ago
  And, ultimately, the power to invade the other few billion people who can’t be taxed
  - sschueller 5y ago
    Switzerland's currency is quite strong and considered a safe heaven. Do you think Switzerland has the capability or would invade another country to collected tax from a few billion people?
    - jrochkind1 5y ago
      I am not an expert in how currencies work, but it's worth nothing that Switzerland, like most countries, keeps most of it's own reserves in USD (presumably treasury bills), and has around 1 trillion in USD in reserve. Which is not unrelated to the value of it's own currency and their ability to stabilize it. But I am not claiming to be able to explain the details myself. https://www.ceicdata.com/en/switzerland/official-reserve-assets/official-reserve-assets-usd https://www.ceicdata.com/en/switzerland/official-reserve-ass...
      - khuey 5y ago
        That number you're looking at is "total Swiss foreign currency reserves in units of USD" not "Swiss foreign currency reserves that are USD". Switzerland, for reasons that are fairly obvious, holds large Euro reserves. At the end of 2020 USD was only ~35% of that total amount.
        jrochkind1 5y ago
        Good correction, thanks! Still 35% of reserves is plenty! I hadn't considered how many reserves have probably shifted to euros since the euro, that's actually a big deal for the US. Anyway...

johnebgd 5y ago

USA has natural resources, advanced technologies, and a standing armed forces that are stationed all over the world. These extract value and serve as utility. Bitcoin is better at laundering money than many fiat currencies but otherwise it’s only wide scale utility is a speculative investment asset that only increases in value if more people create demand for its limited supply.

cm2012 5y ago
Yeah, the floor value of bitcoin is probably its value in crime.
- xtracto 5y ago
  Which I think is $0 . Monero has supplanted Bitcoin in the "crime" liquidity department.

tim333 5y ago

As an occasional bitcoin holder, I don't think it's a Ponzi scheme. Who's the Ponzi schemer? How come every time it collapses it comes back bigger in a year or two?

podgaj 5y ago
You are the Ponzi schemer. It is a combination of Pump and Dump and Ponzi. That's why it "comes back bigger".
- tim333 5y ago
  I think it comes back bigger each time because more people get involved. From a handful of tech geeks at the start to maybe 100m people this time around.
cuteboy19 5y ago
70% of Bitcoin holders bought in last year. A continuous stream of greater fools is necessary for its price to even remain at the current level Also, every ponzi scheme gives amazing returns, before it inevitably collapses. For example Madoff was able to give decent returns to his investors for 17 years! 'Number go up' is not a refutation of a ponzi scheme.
- tim333 5y ago
  Yeah but with a Madoff/Ponzi scheme the thing collapses, Madoff goes to jail, it ends. Bitcoin seems more like other assets that don't make things, stuff like fiat money, gold, fine art and so on.
  - DarylZero 5y ago
    It literally is just fiat currency. Bitcoin is a way to make fiat currency independent of government.
    - hypertele-Xii 5y ago

DSMan195276 5y ago

I don't think it really qualifies as a Ponzi scheme, functionally it's not all that different from any other speculative asset. You're not giving your money to the 'blockchain' expecting it to give back X amount of dollars, you're trading your money for bitcoins and that's the end of it. Whether you want to keep your bitcoins forever, or attempt to find someone else to sell them to is up to you.