Satoshi's Bitcoin and many of the crypto-currencies that have followed create and distribute the supply that effectively creates a decentralized pyramid-ponzi scheme. Semantically, a more accurate term is needed;
Bitcoin is a Satoshi scheme,
.. or a "Nakamoto Scheme" https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/
Imagine an economic policy that uses a "limited" amount of pie as "currency". Bitcoin gave half of this pie away to the first few users who arrived in exchange for the least amount of work/effort possible. Any user arriving later will need to waste more hashing power (computational work) in exchange for a smaller sum of newly generation coins for a successfully mined block reward. or the user might be convinced to purchase a previously produced coin from one of the early adopters. Buying a Bitcoin is worse than zero-sum, as money from buyers is exchanged for previously generated coins, the network must increasingly waste computations and energy.
Satoshi's economic model creates a system where participation is only beneficial if you can exploit the ignorance of another new user who enters the network after you. Bitcoin effectively relies on psychological manipulation though deceptive marketing claims like
"Bitcoin is deflationary"
"Bitcoin is rare"
"Bitcoin is a store of value"
If you understand the computer science behind Bitcoin, you'll realize how ridiculous the false equivalency to gold is.
1. The claim of "rare" doesn't exactly hold true.
Consider the 10,000 BTC pizza - how did this happen? This was the direct result of Satoshi's economic policy, granting vast sums of BTC to mint out very quickly very early for a short duration to the very small pool of people who ran the software. Satoshi's algorithm produced BTC in plentiful quantities enabling the 10,000BTC pizza - thus it wasn't rare if you were Satoshi and the dozen other early whales hording as much as possible, until the algorithm begins cutting off the production and limiting later users from producing coins, starving the economy. Now there's a psychological game being played, where public relations and marketing must convince new users to buy in. Because the exchanges are unregulated, they can manipulate the spot price though wash trading and painting the tape [2] (where trades are falsified and you just sell the same item back and forth to your friend for a higher and higher price).
The supply was created by running a piece of software. It's not magic. Most of the supply was produced very early on and as much as 30% of all Bitcoins are owned by less than 100 people.
Best estimates are that there are about one million
holders of Bitcoin; 47 individuals hold about 30 percent,
another 900 hold a further 20 percent, the next 10,000
about 25% and another million about 20%, with 5% being
lost. So 1/10th of one percent represent about half the
holdings of Bitcoin and 1 percent close to 80 percent
(http://www.businessinsider.com/927-people-own-half-
of-the-bitcoins-2013-12). The concentration of Litecoin
ownership is similar
(http://litecoin-rich-list.blogspot.com).
Most of the big wallets have been in place from early on,
so sitting back and watching your capital grow has been a
very successful strategy.
The distribution of Bitcoin holdings looks much like the
distribution of wealth in North Korea and makes the
China’s and even the US’ wealth distribution look like
that of a workers’ paradise
3. Bitcoin network requires ASIC miners, largely centralized in China [3]. Assuming the inveitable surpassing of a more advanced cryptosytem making Bitcoin obsolete, as the market is informed there will be a decline in BTC's spot price and once this falls below the cost of OPEX for miners, the hardware goes offline and the network will cease to function. Maximalists will attempt to offer an emergency fork, in any attempt to save their "investment", just as they have developed the lightening network to create centeralized payment hubs, so "investors" can act as liquidity providors and take fees, instead of miners.
4. Electricty usage is unsustainable, GOTO 3
5. [4]
Bitcoin value is make-believe just like money. But even
though there is bitcoin-sphere governance, there are no
bitcoin-sphere assets. Taxes are not paid in bitcoin.
There is no FDIC, only hackers that lift a million here
and there. And when nation-states decide its a nuisance,
what are the guns of bitcoin? It’s anonymity? From the
same government that created PRISM and then used
mind-magic* to make everyone forget about PRISM? Please.
You may think crypto-currencies that require more power
than a small country to run can fly under the radar, but
somehow I think not indefinitely. After all, becoming the
next big thing would mean its a threat to the American
dollar, do you really think the US Gov will shrug and say
“shucks bitcoin went from a ponzi-novelty to something
that will totally usurp this hegemony we worked so hard to
make. Guess we’ll have to call it a day.” (If you think
this, sell your Bitcoin and buy an imagination.)
The day you can pay tax bills to a government in Bitcoin
is probably the day you can rest easy. Until then dear
Bitcoin holders, you do have something of value, just like
the Louisiana territory has value. But in this 1800’s
metaphor, what makes you so sure you’re America?
Monopoly money is good to have, while the game is still
running.
http://www.businessinsider.com/bitcoin-inequality-2014-1
[2] https://www.youtube.com/watch?v=6r04gfWfRkE
[3] https://qz.com/1055126/photos-china-has-one-of-worlds-larges...