What are the best arguments AGAINST Bitcoin? | Hacker News Reader

What are the best arguments AGAINST Bitcoin?

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19 pointshaunter37 comments

Bitcoin is essentially a Ponzi scheme. The only way to make a profit is to sell an asset whose added value only exists if more people buy into it.

Nowadays many bitcoin supporters refer to it as "digital gold", but that's just not the case. Gold is a natural element with some unique phisical a chemical properties that make it both attractive (e.g. jewelry) and useful (e.g. industrial applications). So those buying gold to speculate do not necessarily have to resell to speculators to make a profit. There are countless buyers that are willing to pay the price of gold for reasons other than investing.

On the contrary, those holding bitcoins can sell only to buyers that think that prices will go up. So they can only sell to other speculators (including of course the random buyer who saw an ad for bitcoins).

So, because today there's no real exit strategy from a bitcoin investment other than reselling to other speculators, there's really no difference between bitcoin and a Ponzi scheme.

A very common counter argument is that one day bitcoin will [insert _useful_usage_case]. However, once again, this is speculative, as it's based on the idea that the current value is determined by a future uncertain event.

Also the fact that with bitcoins it is possible to buy some goods doesn't change much. The actual ability to use bitcoins to buy things or pay for services is so limited that it doesn't make any difference. And, more importantly, it is inherently less efficient than FIAT (official currencies).

Having said all of that, I'd like to add that I am very very supportive of decentralized technologies, and bitcoin has certainly helped immensely to promote decentralization, so there's that. But my point is that bitcoin is only a speculative asset.

Because I truly support decentralization, I would very much like to hear different opinions in the comments, so do let me know if there's a different perspective I could see things from. Please though don't just say that the price of bitcoin is going up and that it has been around for years. This is not proof that bitcoin isn't a ponzi scheme. Think of Enron and for how long it was around before collapsing.

That's often the first question people asked in the early days. But where does its value come from? And I couldn't help but ramble on about the fact that its value isn't tied to anything but that simply there is a need for it... for some reason.

Yea in 2009 it was worth 1$ per bitcoin and there's no reason it can't be the same in 2029.

Bitcoin is a ponzi scheme, and as far as I know it's the best one ever created. That's why I'll drop my paychecks into it for as long as I live (or work).

Ponzi schemes are built on misplaced and misguided trust and designed to benefit early investors at the expense of those who follow.

Your simple minded strategy virtually guarantees that you will be a follower.

It also virtually guarantees me a lot of money. I see no reason for Bitcoin to stop growing. Cryptocurrency is a brilliant concept that has no equal.

"I see no reason for [Ponzi scheme] to stop growing" --- said everyone who has ever invested in a Ponzi scheme.

"an asset whose added value only exists if more people buy into it"

That's what money is.

I was always sympathetic to the argument that we underestimate how valuable having a centralized control is (when it doesn't go off the rails). We get a lot of fraud absorbed by banks right now so that end users aren't holding the bag. When there are bubbles, the fed tries to mitigate the affect of massive price crashes/economic downturns. The SEC limits the impact of market manipulation, and makes the game generally more fair. And on the tail end of all of that, being able to track money more effectively makes law enforcement's job easier.

All of those things have their own downsides, but I think they're all net positives. Though I do think modern monetary theory is a great example of why we might want something decentralized, and is a big reason for why bitcoin is gaining traction.

The system in place right now is meant to protect the corporations not the users. Credit card companies ask for too little proof of identification, and then blame the user in the name of “identity theft”. The problem is no, no one stole the person’s identity. No one was kidnapped or killed and then replaced with a look a like. Instead, the company was scammed, but they don’t care because they can pass the buck.

Honestly, a lot of it is the community. The strongest advocates for crypto tend to have a lot of wince factor.

* The most prominent actual merchants taking crypto first or only (as opposed to a novelty 13th choice between PayPal and money-order-in-an-envelope) are in it because no conventional financial platforms will touch them (Silk Road style stuff, ransomware, etc.).

* The "irreversibility" crowd. The people who are convinced that all their profits are going out the window because of the cost of honouring refunds and chargebacks, and if only we used a payment method that didn't support them... normal people tend to classify "the system will make you whole if stolen from" as a feature, not a bug.

* The "it's independent and self-governing" crowd. These are the same people who blame their gout on the Federal Reserve and 20 years ago were buying Liberty Dollars. Money is a tool, and it makes sense to have the tool be bendable to public needs, not dogmatically hard-coded into economic rictus.

* The FOMO/HODL crowd inherently keeps cryptocurrency from developing legitimacy. What is a dollar, rouble, or yuan worth? It's how much goods and services you can get for it, and that being relatively stable and predictable allows people to build an economy around it. Until we get a critical mass of actual commerce occurring in cryptocurrency, we can't say "what is a Bitcoin worth" in the same way, and instead we have speculators tossing the value wildly up and down from day to day.

For me, transaction times and cost. Paying $2 to send $100 over 15 - 30 minutes, feels expensive and slow to me as a buyer. Sellers are used to longer clearance times and higher fees it would be more like our modern system if the seller paid the fee.

I've been following crypto since 2012 (I work in the industry on an alternative cryptocurrency). I completely agree that this is the primary issue that Bitcoin and Ethereum have. Lightning and other second layer scaling solutions show promise but just haven't matured at the rate that I was hoping. Most applications just aren't feasible with such high transaction costs. I have a strong feeling that when second-layer solutions finally mature, the conversation will completely change.

I believe 2nd layer systems are failing because they're focussing too much on theoretical security, at the expense of usability.

Instead, they should go for whatever security they can get while still getting fees sub-1-cent, transaction times sub-1-second, and still vaguely decentralized.

The really secure transactions can be reserved for cases where paying a $2 fee and waiting 15 minutes is acceptable.

One problem is that Bitcoin has the most expensive energy cost for its consensus algorithm.

https://www.wired.com/story/bitcoin-mining-guzzles-energyand...

More generally, trust:

https://www.schneier.com/blog/archives/2019/02/blockchain_an...

1 - It's deflationary

2 - Worse, there is literally a finite amount with a surprisingly large floor on the smallest denomination (which exacerbates problem 1)

3 - slow, repudiatable settlement.

How could you use it to buy a pack of gum at the store? The cost of the transaction would be high and the shop owner would be pissed if 45 minutes later the transaction backed out.

Bitcoin does not scale as a medium of exchange. It has a hard transaction limit of 7 transactions per second. In contrast, the VISA network alone can process at least 47,000 tps. The entire Bitcoin system would be hard pressed to serve the retail transaction needs of a large shopping mall, much less a city, country, or the world.

The hard cap on the number of Bitcoins also makes Bitcoin a deflationary asset/currency. Deflationary currencies have been known to be actively harmful since at least the great depression.

Overall, Bitcoin is a technological curiosity that is only attractive to people who don't know much of anything about monetary economics and have no desire to learn.

A mild annoyance of mine is how the potential benefits of cryptocurrency (decentralized verification, cloud storage, etc) are often lost among discussions of why Bitcoin is bad, which it is. Many of Bitcoin's flaws (energy usage, easy to lose, slow transactions) have been solved by other cryptocurrencies, many of whom aren't even intended to be used as money, which is good because I don't think cryptocurrency's best application is as a form of money, at least not in the long term. For what it's worth, I am not a right libertarian, or a fan of the gold standard either.

The challenge of safeguarding your private keys and not falling victim to the many fraudulent schemes to separate the gullible from their bitcoin.

The wealth concentration resulting from emitting the majority all bitcoin that will ever exist in just the first few years. It's designed not as a peer-to-peer currency but a p2p speculative asset. Leaving just a fraction of a percent of all bitcoin to be mined in the last century (2040-2140) of its emission. And relying almost exclusively on transaction fees to provide security after 2040.

Philosophically? As an investment? I don't think this question has any meaning without being qualified.

Assuming you are saying as an investment, I think a plausible worst case scenario is that a major government, let's say the US, makes it illegal to move their currency on to crypto exchanges and kills all legitimate on ramps.

Bitcoin would survive this but I would guess it's price would go down somewhere between 10 and 100x . Potentially more.

The worst case scenario for "investment" is if government doesn't do anything but ignore bitcoin and allow it to fail under it's own weight --- taking your "investment" with it.

Ok, there are existing avenues to short bitcoin. So no need to tell the internet about it. Go become unbelievably rich if you know this for a fact while other's don't understand.

I'll be happy to take the other side of your bet.

LOL! The concept of "fail" clearly eludes you.

When it is discovered that Chinese interests have assumed functional control of bitcoin mining and are using it to perpetrate widespread fraud, all bitcoin trading and contracts will be frozen. Just one possible failure scenario.

It will be impossible to extract anything from the "marketplace" because it will evaporate back into the ether from which it sprang.

Your "faith" in bitcoin is based on an unfounded assumption --- that crypto "exchanges" are financially stable, reputable and trustworthy institutions similar to the regulated securities markets. They are none of the above in my judgement. They regularly engage in what would be considered illegal fraud in more reputable markets. And they are fully prepared to fold up shop and disappear in an instant if need be.

Global warming, for one. Useless as a currency... Electronic Transactions should be faster than credit cards or exchanging cash.

Think of Bitcoin like your savings account, moving the entire account happens within an hour. 2nd layer networks (lightning) work on top of it and have very cheap transaction costs.

The energy spent on securing the network makes it antifragile and eliminates the need for many functions of the finance sector.

Bitcoin is a fraud.

It is totally ineffective as a currency --- for a long list of reasons.

It's main utility is speculation. But this too is a fraud due to the fact that the speculation is managed, controlled and manipulated by unregulated exchanges which operate without oversight or transparency and with blatant and inherent conflicts of interest in some cases.

I think we can all agree that after the last few weeks we are sick of people yelling “fraud” and not showing any proof. Please show proof.

The fact that bitcoin is a lousy currency is inherent in it's design. Transactions simply cannot be processed quickly or cheaply in large volumes. Don't take my word for it, look it up.

The fact that crypto "exchanges" are unregulated black boxes is well known but feel free to look this up too. If fraud is easy, someone will do it. To wit, a case pending in Supreme Court of the State of NY.

https://cryptobriefing.com/tether-bitfinex-must-stand-trial-...

A chain is only as strong as the weakest link and in the bitcoin marketplace, the weakest link is what happens in these "exchanges". Not just my opinion but also that of the Attorney General for the state of NY.

Its market cap is still so small that a couple of rich people can completely manipulate its price

What happens when rewards for mining a block halt or the price of Bitcoin drops to a point where it’s no longer economically viable to pay for electricity and mining rigs?

Fewer people buy rigs. Fewer people mine. The remaining people get paid more. It's a self balancing system.

I guess the follow up question would be, how much would Bitcoins hash rate have to drop before a 51% attack is viable?

Is it self balancing or self defeating? Time will tell but the answer should already be obvious. Mining fees decrease over time and eventually disappear --- taking security with it.

It is not only possible but also likely that at some point, the majority of remaining miners will be controlled by one entity.

global power consumption

I like to think of BC as simple "printing yourself money in your basement". Normally when you do it you go to jail and there are couple of good reasons for that to happen.

One argument against Bitcoin is Bettercoin. Why should anyone bother with Bitcoin when there's Bettercoin? And then again, why should I use Bettercoin rather than just launching my own Evenbettercoin? Or maybe just wait until Bestcoin comes out.

Coins are rarely better than bitcoin in all regards. Instead they simply offer trade-offs, making some things better and others worse. They often harm the very thing that justified bitcoin's existence: being decentralized and uncensorable. Or being able to fully validate the transaction history with limited resources.

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