So basically, every currency is a pyramid scheme.
Bitcoin is different, not just because of the lack of government backing but also because the way it is structured meant the earlier people got into it the more bitcoins they got. (Fundamentally because mining rewards reduce over time).
But that's irrelevant to fact you've missed the point of his quote, that most people buying other currencies are doing it with purpose (such as hedging) and considering their value, whereas people buying bitcoins are doing it for speculative reasons and aren't making a judgement on where they think the price of bitcoin ought to be.
Ransomware forces people to buy bitcoin while at the same time making the bitcoins spent unspendable (because spending them will get you caught).
If you controlled all bitcoin, the way to make money with ransomware is selling your legitimate coins to people who need to buy them to fulfil their ransoms.
Each ransom paid decreases the bitcoin in circulation which further puts pressure on the price. Eventually the pool of legitimate bitcoin will be tiny, but ransoms will still get paid, so the ransom demands will be smaller and smaller in bitcoin denomination. If we assume the ransoms that people are willing to pay is steady in dollar value then that will push the price of bitcoin up.
There is tremendous inflationary pressure on a fragile bitcoin eco-system. It can withstand high inflation because no-one has their salaries or bills in bitcoin.
Where does deflationary pressure come from? It will have bubble cycles that will bubble and pop but overall even as it gets less popular by users, the actual price can rise and rise if the currency circulates slower and slower. The last few bag-holders might have huge paper wealth before they realise there's no one left to actually buy their coins.
I don't think it's a legitimate investment though, it's still a pyramid scheme by it's nature (Satoshi still owns a large proportion of all coins) and even without that investing in bitcoin is investing in cyber-terrorism and funding criminals. (Unlike the "if you download MP3s you're funding terror" bullshit this one is actually closer to the truth).
> Ransomware forces people to buy bitcoin while at the same time making the bitcoins spent unspendable (because spending them will get you caught).
There must be a way to "launder" those bitcoins, because otherwise, as a criminal, why would I want to get ransom in coins that I can't later spend on anything?
And keeping in mind very few people hold much currency. Usually you hold a deposit account, i.e. you lent to your bank. It is a low risk/low yield investment.
The concerning thing about bitcoin, and any cryptocurrency is that by nature, the larger it gets (as in total outstanding coins), the more difficult it is to create more currency through reconciliation. With traditional currencies, it's relatively easy to print money. Printing money is done mainly to keep an agreed upon healthy inflation rate of around 2%. Why this is important is when deflation happens, loans are no longer attractive because it's always better to wait because items increase in value relative to the currency. In other words, why would I borrow $1000 today when that same loan amount would buy $2000 worth of stuff next week. When people stop borrowing, it has nasty economic implications. (Money Multiplier effect and all that).
That's probably a horrible explanation by me, but the short version is crypto, since it's harder to create over time leads to a natural deflation that increases over time.
FWIW: I don't know a whole lot about crypto, but the things mentioned are concerning to me. I mean it might be a good time to follow the herd so to speak, as long as you know there will probably come a time when the herd runs off a cliff.
You actually can do that. It's only "legal tender for all debts", meaning that a restaurant would be required to accept the pennies after providing service, but my local bus line(that takes payment upfront) won't let you on if you try to give them pennies.
https://www.treasury.gov/resource-center/faqs/Currency/Pages...
And every ecommerce site out there doesn't allow USD, but only a derivative currency convertible to USD on-demand with complex rules attached.
Never heard of this. Care to elaborate? Are you just talking about PayPal?
"The pertinent portion of law that applies to your question is the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled "Legal tender," which states: "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues."
This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy."
https://www.treasury.gov/resource-center/faqs/Currency/Pages...
(Assuming the product or platform succeeds rather than fails)
Currencies that are not designed to lose value over time can never be stable.
Intrinsically worthless tokens engineered to have better than market risk adjusted, liquidity adjusted, real returns compared to real productive investment will always be unstable and fluctuate increasingly wildly as they get more popular. This is a result of physical limits of production. As people hoard worthless tokens, their price increases which causes more people to hoard them instead of investing in real businesses with real production capacity.
This eventually causes production capacity to drop. That's right, when enough people do it, token hoarding displaces investment in businesses and factories and lowers global production capacity. This means token hoarding causes a drop in things available to buy with these tokens.
Eventually there will be people who want to buy real things with their stock of tokens. The tokens will be chasing fewer goods which means prices for stuff will rise (tokens will lose value). This might happen suddenly when people with large stockpiles of tokens notice that value is dropping and that there are tons of other tokens waiting on the sideline to make it drop even further. Hoarders might rush to get rid of their stockpile all at the same time before they're worthless which will cause their fall to worthlessness. This drop will bring the tokens closer to their natural intrinsic value of zero. The cycle can then start again, such is aggregate economics.
The 1920s and 1930s suffered from this type of cycle but with gold tied currencies instead of cryptocoins. It happened to a lesser extent in 2007 when western world central banks failed to keep inflation rates high enough. It's important for the world's sake to not let deflationary currencies become too popular.
When savings or financial promises are insufficiently tied to future production or to accumulation of real goods, there will be disappointment when a lot of people try to exchange them for real stuff. That is true for crypto currencies as well as government currencies (that is why the system is designed to make banks invest people's money in real businesses and minimize the proportion of money that is stockpiled idly).