6 ms·

Am I the only one to think Bitcoin is just a big Ponzi scheme benefiting the first users/creators who got all the first ones?

ghshephard 14y ago
Bitcoins are used quite a bit for buying/selling goods. I think the latest round of currency increases is mostly a function of people wanting to purchase goods, and needing to "bid up the price" in order to make their purchase. As vendors receive bitcoins, they usually immediately sell them to get back local currency. In the last 6 months, I've never held onto a bitcoin for more than about 30 minutes. Strictly use them for their utility as a currency.
- drivebyacct2 14y ago
  If you don't mind me asking, what do you buy with them? I know of only a few things that are only acquirable via Bitcoins, or that couldn't be acquired more cheaply using dollars.
  - redthrowaway 14y ago
    Lots of online services, from hosting to DNS to VPNs accept bitcoins. Several online stores accept them, and they're a good way to donate to, eg, Wikileaks or the Manning Defense Fund. As far as the cost of using them, while it is non-zero, some of us just want to do our part in establishing a currency and surrounding ecosystem that is free from gov't, corporate, and other meddling. Thus we accept the small hit in price.
  - ghshephard 14y ago
    My guess is that 99% of the non-speculative drivers for BitCoin currency are purchases from SilkRoad.
    - drivebyacct2 14y ago
      I lack the courage or foolishness to make such purchases.
      - ghshephard 14y ago
        Not everything on Silk Road is particularly illegal. And I'm sure the LEA have better things to do with their time than chase down some consumer of 1200mg of modafinil.
    - 385668 14y ago
      Several friends of mine prefer to pay for their VPNs anonymously, they get two VPNs, pay with bitcoin, don't give their name to the VPNs, and tunnel one into the other for pretty much complete anonymity online, provided they don't do something stupid like log into facebook from the VPN.
- polshaw 14y ago
  >I think the latest round of currency increases is mostly a function of people wanting to purchase goods, and needing to "bid up the price" in order to make their purchase. As vendors receive bitcoins, they usually immediately sell them to get back local currency. But because retailers will only hold onto them for probably seconds, using BTC as a transfer medium won't significantly affect the price: average selling and buying will be the same. The only way BTC can go up is if more people hold on to more of them (reducing the available money supply), which when they are rising happens more, causing a bubble.
sgornick 14y ago
Tell that to the people who bought at $15 or $32 even. The thing is, the first users didn't get all the first ones. Bitcoin was in Slashdot more than two years ago. It is open source, anyone could download the software and mine on their CPU. Mt. Gox has been open for even longer. Anyone, anywhere in the world could and still can buy on the exchanges. There's no members-only trading. If you bought after Slashdot you would have paid around a dime or less. But Slashdot readers called it a ponzi scam and didn't take it seriously. You could have bought thousands of bitcoins at a dollar when Steve Gibson talked about it in February 2011. But Leo poo-pooh'd it "Not government issued" he balked. Then again, you could have bought bitcoins at $30 after the July 2011 bubble, and today be down by 66% yet and still be bitter. That's the nature of speculation. Nobody knows if bitcoin will increase or decrease in value. But it definitely isn't a ponzi. Ponzi means paying dividends to early investors, using funds from later investors. Everyone who held bitcoins yesterday when they were $9.20 could have sold today at $11. Everyone, not just the early miners. Today, just like a year ago, mining will generate bitcoins at a little more than the cost of electricity to generate them. If you want bitcoins, then mine, buy, or stand on the sidelines. Just don't bitch when it hits $100.
pkulak 14y ago
No. 57 people say that in every Bitcoin discussion.
pixie_ 14y ago
Mining gold also benefits the 'first ones.' Over the next 5 years the number of bitcoins mined is going to double, and those coins will be very evenly distributed.
Andys 14y ago
How do you feel about the property market? With hindsight, people who get in at the start of any bubble always look like they made easy money for no work.
wmf 14y ago
It's not a Ponzi, but it does have built-in volatility due to the fixed rate of coin generation. Some even say that Satoshi designed Bitcoin as a bubble machine because it would generate the press coverage that Bitcoin needed to take off. I prefer to think that the volatility is an unforseen side effect of Bitcoin's naive economic policy.
jimktrains2 14y ago
Yes, the people who got it when it was cheap are making out now, but that doesn't preclude others from using it as a currency. I mean, the point is that it's a currency. It's designed to be a currency which isn't governed by any one person or group of people (except those that created it, but at that point it becomes governed by math and logic, not the whims of the creators).
Animus7 14y ago
This argument never made sense to me. If I were designing a Ponzi scheme intending to defraud people, I wouldn't base it on a 100% transparent network of open source software using public domain crypto functions, where the wealth creation is by design not only randomly allocated, but mathematically capped to a static trickle rate. It's like the most badly designed Ponzi scheme ever.
- Steko 14y ago
  It doesn't have to be intended or designed as a Ponzi scheme to end up as one. E.g a legitimate investment manager could cover up a bad month/quarter/year hoping to fix it down the road then wind up being flumoxed by compounding losses or seduced by the increased business they get by beating the rest of the market during a downturn.
- nhaehnle 14y ago
  It seems like people just throw around the term "Ponzi scheme" without any understanding of what it actually means, saying that "Bitcoin is a Ponzi scheme" or "fiat currencies are a Ponzi scheme", when those statements simply do not make any sense. A Ponzi scheme is when you offer an interest bearing or dividend paying investment, and you have to use the money obtained from new people buying into your investment to pay out the interest or dividends. That's a very clear definition, and Bitcoin obviously does not fit - and it wouldn't fit the definition even if Bitcoin weren't based on a transparent protocol and open source implementations.
corysama 14y ago
It's my understanding that being a Ponzi scheme was an explicitly stated feature in the design of Bitcoin. The idea was that setting up a very large first-mover advantage overcomes the chicken-egg problem of a currency whose entire value is based on network effects but initially has no users.
sliverstorm 14y ago
I'd bet the guys operating exchanges and mining pools have made more than the creators ever did.
javert 14y ago
Yes. Look up the definition of "ponzi scheme." There is no way for an open source currency to be a ponzi scheme, by definition.

ghshephard 14y ago

Bitcoins are used quite a bit for buying/selling goods. I think the latest round of currency increases is mostly a function of people wanting to purchase goods, and needing to "bid up the price" in order to make their purchase. As vendors receive bitcoins, they usually immediately sell them to get back local currency. In the last 6 months, I've never held onto a bitcoin for more than about 30 minutes. Strictly use them for their utility as a currency.

drivebyacct2 14y ago
If you don't mind me asking, what do you buy with them? I know of only a few things that are only acquirable via Bitcoins, or that couldn't be acquired more cheaply using dollars.
- redthrowaway 14y ago
  Lots of online services, from hosting to DNS to VPNs accept bitcoins. Several online stores accept them, and they're a good way to donate to, eg, Wikileaks or the Manning Defense Fund. As far as the cost of using them, while it is non-zero, some of us just want to do our part in establishing a currency and surrounding ecosystem that is free from gov't, corporate, and other meddling. Thus we accept the small hit in price.
- ghshephard 14y ago
  My guess is that 99% of the non-speculative drivers for BitCoin currency are purchases from SilkRoad.
  - drivebyacct2 14y ago
    I lack the courage or foolishness to make such purchases.
    - ghshephard 14y ago
      Not everything on Silk Road is particularly illegal. And I'm sure the LEA have better things to do with their time than chase down some consumer of 1200mg of modafinil.
  - 385668 14y ago
    Several friends of mine prefer to pay for their VPNs anonymously, they get two VPNs, pay with bitcoin, don't give their name to the VPNs, and tunnel one into the other for pretty much complete anonymity online, provided they don't do something stupid like log into facebook from the VPN.
polshaw 14y ago
>I think the latest round of currency increases is mostly a function of people wanting to purchase goods, and needing to "bid up the price" in order to make their purchase. As vendors receive bitcoins, they usually immediately sell them to get back local currency. But because retailers will only hold onto them for probably seconds, using BTC as a transfer medium won't significantly affect the price: average selling and buying will be the same. The only way BTC can go up is if more people hold on to more of them (reducing the available money supply), which when they are rising happens more, causing a bubble.

sgornick 14y ago

Tell that to the people who bought at $15 or $32 even. The thing is, the first users didn't get all the first ones. Bitcoin was in Slashdot more than two years ago. It is open source, anyone could download the software and mine on their CPU. Mt. Gox has been open for even longer. Anyone, anywhere in the world could and still can buy on the exchanges. There's no members-only trading. If you bought after Slashdot you would have paid around a dime or less. But Slashdot readers called it a ponzi scam and didn't take it seriously. You could have bought thousands of bitcoins at a dollar when Steve Gibson talked about it in February 2011. But Leo poo-pooh'd it "Not government issued" he balked. Then again, you could have bought bitcoins at $30 after the July 2011 bubble, and today be down by 66% yet and still be bitter. That's the nature of speculation. Nobody knows if bitcoin will increase or decrease in value. But it definitely isn't a ponzi. Ponzi means paying dividends to early investors, using funds from later investors. Everyone who held bitcoins yesterday when they were $9.20 could have sold today at $11. Everyone, not just the early miners. Today, just like a year ago, mining will generate bitcoins at a little more than the cost of electricity to generate them. If you want bitcoins, then mine, buy, or stand on the sidelines. Just don't bitch when it hits $100.

pkulak 14y ago

No. 57 people say that in every Bitcoin discussion.

pixie_ 14y ago

Mining gold also benefits the 'first ones.' Over the next 5 years the number of bitcoins mined is going to double, and those coins will be very evenly distributed.

Andys 14y ago

How do you feel about the property market? With hindsight, people who get in at the start of any bubble always look like they made easy money for no work.

wmf 14y ago

It's not a Ponzi, but it does have built-in volatility due to the fixed rate of coin generation. Some even say that Satoshi designed Bitcoin as a bubble machine because it would generate the press coverage that Bitcoin needed to take off. I prefer to think that the volatility is an unforseen side effect of Bitcoin's naive economic policy.

jimktrains2 14y ago

Yes, the people who got it when it was cheap are making out now, but that doesn't preclude others from using it as a currency. I mean, the point is that it's a currency. It's designed to be a currency which isn't governed by any one person or group of people (except those that created it, but at that point it becomes governed by math and logic, not the whims of the creators).

Animus7 14y ago

This argument never made sense to me. If I were designing a Ponzi scheme intending to defraud people, I wouldn't base it on a 100% transparent network of open source software using public domain crypto functions, where the wealth creation is by design not only randomly allocated, but mathematically capped to a static trickle rate. It's like the most badly designed Ponzi scheme ever.

Steko 14y ago
It doesn't have to be intended or designed as a Ponzi scheme to end up as one. E.g a legitimate investment manager could cover up a bad month/quarter/year hoping to fix it down the road then wind up being flumoxed by compounding losses or seduced by the increased business they get by beating the rest of the market during a downturn.
nhaehnle 14y ago
It seems like people just throw around the term "Ponzi scheme" without any understanding of what it actually means, saying that "Bitcoin is a Ponzi scheme" or "fiat currencies are a Ponzi scheme", when those statements simply do not make any sense. A Ponzi scheme is when you offer an interest bearing or dividend paying investment, and you have to use the money obtained from new people buying into your investment to pay out the interest or dividends. That's a very clear definition, and Bitcoin obviously does not fit - and it wouldn't fit the definition even if Bitcoin weren't based on a transparent protocol and open source implementations.

corysama 14y ago

It's my understanding that being a Ponzi scheme was an explicitly stated feature in the design of Bitcoin. The idea was that setting up a very large first-mover advantage overcomes the chicken-egg problem of a currency whose entire value is based on network effects but initially has no users.

sliverstorm 14y ago

I'd bet the guys operating exchanges and mining pools have made more than the creators ever did.

javert 14y ago

Yes. Look up the definition of "ponzi scheme." There is no way for an open source currency to be a ponzi scheme, by definition.