Is Bitcoin a Scam?
theguardian.com
theguardian.com
- The ever expanding blockchain is wasteful (in storage, computation, network).
- Having every transaction recorded forever is the opposite of anonymity ("pseudonymous" - come on!).
- The energy usage is insane.
- The throughput is way too slow.
While there may be an anonymous digital currency that doesn't use a lot of energy, it probably has to be based on something other than proof of work and blockchain.
The people that say this is a bit like a pyramid scheme may be onto something.
Bitcoins biggest threat may be the decriminalization of drugs, as that is the only use beyond hoarding "HODL"ing right now.
So does bank transfers though, and we have been able to work around that for quite some time now.
You could add a layer for fast transactions to BTC but IIRC it can't handle processing nearly enough of them into the blockchain per day.
Or have I completely misunderstood what you were saying?
In that sense, a decentralized trust-less exchange system needs to replace that value (trust) with another (in this caase, proof-of-work and the huge size of the ledger).
Not easy...
Gold, for instance, is extremely energy intensive/wasteful to mine, heavily tracked, and (until recently) had little utilitarian/industrial value outside of jewelry.
Transactions are settled instantly and without fees. Rent seeking miners are taken out of the equation. Developers of services are incentivized to run nodes to have access to the network.
If cryptocurrency isn't intended to be used as a currency, only traded on to others or used in some perpetually forthcoming usecase - then concerns about it simply being a finance scheme may be on target.
https://en.wikipedia.org/wiki/Nano_(cryptocurrency) https://docs.nano.org/whitepaper/english/
What I see value in for a blockchain is store of value (which arguably is basically a pyramid scheme), smart contracts for provable logic-based transactions, niche database uses, and as you brought up: drugs (or more accurately, private/anonymous payments). Bitcoin is really a poor choice for both the smart contracts and niche databases, which leaves it with store of value and drugs. Once law enforcement legislates it to the point where it becomes impractical for drugs, at that point it is just a store of value. It holds no use except to become more valuable the more people buy into it, which is just a pyramid scheme.
But it's a necessary evil for a _distributed_ currency. It's a way to protect payment validation from being controlled by a single operator by making a "hostile take over" very expensive. IMHO criticizing Bitcoin for its "proof of work" algorithm only converys a serious lack of understanding of how crypto currencies actually work.
There is an alternative, namely, the "proof of stake" scheme that Ethereum is going to switch over to but it has other short comings that might or might not outweigh the benefits of energy savings.
> - The ever expanding blockchain is wasteful (in storage, computation, network).
Well, the blockchain's current size is 323.54 GB. That's quite a lot but can be stored easily on a $100 SSD. Using $100 worth of storage to maintain an asset market of roughly 600 billion dollars is useful trade off, I would say. Of course, I know the blockchain is being replicated all over the planet but Google's cloud storage probably dwarves its storage requirements.
> - The throughput is way too slow.
Yes, 10 minutes is not very fast. However, compare that to inter bank transactions and this number seems blazingly fast again. However, in my opionion Bitcoin is emerging as an alternative to gold that's primarily used for storing value over long times. It's primary purpose will not be to maintain payment networks. This role will be taken by Ethereum or other alternatives like Stella Lumens, Loopring or Polkadot.
Near instant bank transfers have been available in a lot of countries for many years now. Or did you mean something else?
Of course, there are special purpose banking products to accelerate transactions but they are also more expensive than Bitcoin's miner fee.
Both methods are significantly cheaper (usually free) than Bitcoin transaction fees at the moment. As a concrete example, EUR withdrawals from Coinbase to a SEPA bank account are both faster and cheaper than BTC withdrawals to a wallet at this point.
If a transfer takes any more than two full business days (IIRC), one of the banks involved is out of SEPA compliance.
The only thing that _really_ slows down bank to bank transfers is when your payment gets flagged for review for security or compliance reasons, but arguably, both also benefit you (as a customer not wanting to lose money or a citizen not wanting to indirectly cover the effects of somebody else's tax evasion or money laundering). In my experience, this also happens very rarely, but performance of this can vary from bank to bank.
As of last year, most banks also offer instant (10 seconds) transactions for a small fee. This is planned to be made mandatory at the end of 2021. My bank is charging 0.50€ for such transactions which is significantly less than the median Bitcoin transaction cost (more than $1 in 2020 average, more than $5 currently).
We’re getting mandated bank API access too, interestingly. Or we were. Dunno where that’s at now.
$2M transfer costs $1. From/to anywhere in the world.
As a comparison, my freelance fees regularly came $13 short, and the only explanation was "interbank transfer charges". Plus the sender had to pay his own fees. And then my own bank would charge me ~$15 for accepting deposits from outside EU.
I'll take Bitcoin over the traditional banking cartel any day.
Good luck paying your lunch with Bitcoin.
You‘re probably losing out much more than $13+$15 on bad exchange rates in the process too, so you should definitely shop around for options.
Chances are that the same transaction on Bitcoin, including conversion fees between your client‘s currency X and BTC, and BTC and your country’s currency Y (which you definitely will need, if not for food, then at least for income tax) is more expensive.
Other algorithms exist and further innovations are likely. I don't agree that BTC's design features are beyond criticism.
BTW: For others who have never heard of "proof of stake" and "proof of work" ...
"Proof of work" requires miners to solve a cryptographic puzzle taking the giant share of all computing time required to validate a block of transactions. This is to assure nobody gains complete control over the blockchain and, hence, keep it being a decentralized effort. On the other hand, by providing a miner fee and a reward (currently about 6 BTC) the system creates incentive for miners to keep on validating Bitcoin transactions despite the costs. It's a careful balance and probably the most difficult aspect of the Bitcoin system to grasp.
"Proof of stake" means the miner with the highest monetary stake receives the largest share of the mining fees. In this scheme a miner needs to deposit quite a lot of money to be allowed to compete in the creation of the next transaction block. So it's not computing power enabling a successful miner but his or hers prior investment in the crypto currency. I think you understand now, why such a scheme would have been impossible to implement in Bitcoin 12 years ago.
Ethereum is preparing to switch over to "proof of stake" at the same time as they're preparing to run multiple block chains at the same time. Ethereum 2.0 hopes to save a lot of cost in maintaining its block chain and at the same time to boost its transaction turn over significantly. But it's also a risky undertaking. Keep that in mind if you plan to invest in Ethereum.
https://docs.nano.org/what-is-nano/overview/#representatives...
If nano (or any other tech) achieves greater utility for transactions without using proof of work, then it is arguable that BTC's use of energy is wasteful.
However, to be specific I would defend the consumer/miner's choice to use energy in whichever way he subjectively feels brings him the most value. I'd say it is debatable whether BTC's proof of work is wasteful. Calling this claim naive appears as short sighted. Tech is a constantly evolving landscape. Increases in efficiency are arguably already here.
BTC development is RFC based, and users approve by running own nodes, and miners have to comply in between. Until a project comes along which doesn't try to swindle its user base BTC will stay dominant.
There's no swindle in my view. As a user of the technology perhaps I'm biased. Although because I approached it from purely to solve a problem and not as an investment, I don't think I am as biased as others.
XRP would be a good example of a swindle surrounded by hype and marketing. Altcoins are rightfully scrutinized, but I think in the case of Nano there's unfair generalization without actual investigation into the technology.
What is popular isn't always the best technology.
Bitcoin is an equity based currency. If you have some Bitcoin you "own" it much like you would own a physical thing, like a lump of gold. And indeed, you are right, to implement a permissionless equity based currency, you probably need something like proof of work to ensure that there is an objective ordering of transactions.
However....! You can also build a credit based currency, whereby anyone can issue IOUs which are agreements between a debtor and a creditor. In this regard you don't "own" an IOU but you are a participant in an agreement which is an IOU. That might be pedantic but it's a difference from an equity based money system. For a credit based system you don't need proof of work or an objective ordering of transactions as any transaction is just a bilateral agreement between two parties. You could make the IOUs bearer instruments by introducing some blockchain elements (unilateral ledger updates) but ultimately there isn't much point in this because you have to trust the issuer. The difficulty with this type of system is that it's tough to bootstrap it - how do you measure reputation in such a system? How do you determine who's credit is good and who's credit is bad?
I think it would be exciting to see more research into distributed credit based monetary systems. Interestingly, our current monetary system is basically a pure credit system and that in this system we can view different types of credit as having a position in a money hierarchy. At the top you have central bank credit, next bank credit, next company credit, next credit issued by individuals. When an issuer's credit can be trusted enough such that people can use it as a medium of exchange (it can be endorsed from one party to another) then it _becomes_ money. That's quite cool. You can build a whole distributed monetary system from an endogenous money supply!
> Proof of work is inherently wasteful
This seems unavoidable for distributing new coins more fairly than just letting the creators print themselves a huge pile out of thin air, which would centralize coin ownership.
> The ever expanding blockchain is wasteful (in storage, computation, network).
Bandwidth costs are unavoidable for both transaction publishing (censorship resistance) and for verifying the transaction history in the Initial Block Download (decentralization requires widespread full verification), although the latter could in principle be mostly eliminated with a zero knowledge proving system.
> Having every transaction recorded forever is the opposite of anonymity
This is not necessitated by the design principles. Bitcoin chose to make amounts visible so that total supply could be transparently audited and because Confidential Transactions had yet to be developed (one variety of which is perfectly sound, needing no cryptographic assumptions to guard against inflation). Allowing address re-use seems like a design mistake that could have been avoided, e.g. with stealth addresses.
> The energy usage is insane.
This is a direct consequence of the high price of Bitcoin; i.e. needing to secure a high market map against double spending attacks. Which goes back to the top item.
> The throughput is way too slow.
Even with second layer solutions, we still need on-chain onramps and settlements. Low throughput is the price to pay for censorship resistance.
"Democracy", "freedom", "the law", "the economy"—all of these terms are in the realm of Philosophy and are subject to philosophical discussion, as they ought; none of these is not highly relevant in a universal, everyday, hands-on sense. Likewise, that meat production is wasteful doesn't mean it's a good idea to add yet another wasteful item to a place characterized by finite resources.
This is such a tired and over used trope.
How about being the best store of value humans currently have access to?
The world's reserve currency--the dollar--is being inflated by trillions and trillions of dollars, with no end in sight.
Savings accounts are paying essentially 0% interest; if you take inflation into account, people are losing money everyday they leave their money in these accounts. Countries in the EU have negative interest rates and it won't be too long before we have negative rates in the US.
Meanwhile, bitcoin is on its way to becoming a reserve asset and is being seen as a must-own asset by the best and brightest money managers and companies.
Bitcoin has been a lifeline in countries where the local currency has failed--like Syria, Venezuela, Argentina. It's allowed people to stay ahead of repressive regimes like in Hong Kong and Nigeria.
And it's going to allow people in the United States who's currency is being debased and where inflation is eating away at savings and retirement to have a fighting chance at being able to support themselves in the future.
You might want to understand how theft-by-inflation works [1].
Or how the dollar is gradually losing its status as the world reserve currency [2]. It's not going to be pretty.
[1] "Masters and Slaves of Money"—https://breedlove22.medium.com/masters-and-slaves-of-money-2...
[2] "The Fraying of the US Global Currency Reserve System"—https://www.lynalden.com/fraying-petrodollar-system/
There is real innovation here, but there are also many scams. It's up to the individual to take responsibility for their own finances. Or outsource that responsibility to companies and institutions in their own locality.
>the City regulator the FSA is concerned that crypto investment firms could be overstating potential payouts or understating the risks from investing in bitcoin and products related to the digital currency.
Wouldn't it be better to call it "are cyrpto investment firms a scam?" ?
The network is decentralized, permissionless, pseudonymous and cheap. It is a stable protocol and layer 2 solutions are being built upon it to address the downsides blocking every day use.
He who controls the money, controls the world. The control is slipping and the roaches are starting to run around in panic.
[citation needed]
I have seen Ethereum described as a scam many times for example, but in reality it just makes different tradeoffs than Bitcoin (some of them I like, but with other tradeoffs I'm not comfortable with).
Well considering that FBI, State of Bulgaria and a guy nobody ever saw (his alleged initials are SN) are 3 largest bitcoin holders I'd say that it's pretty clear who will have the control of the world!
Also, world population is around 8 billion. Number of bitcoin wallets is around 65 million, or a whopping 0.8% (not counting probably myriads of people having more than 1 wallet).
And Satoshi must be the alias name for some cryptography expert, or experts, inside the NSA itself.
Hah, and even if you rearrange the words, its acronym is NSA. Like, Nakamoto SAtoshi. I just noticed that.
And maybe the architect behind it, used a Japanese origin name, to throw people off their trail. To pin it to some foreign country, instead of the United States government.
After all, who else can keep a big secret like this? And laugh all the way to the bank. While trolling the entire world, at the same time.
Some ideas:
1. The Satoshi Nakamoto guy on the message boards, wrote in perfect colloquial American English. Even his sense of humor was American. His grammar was perfect, and similar to a Millennial/Gen-X aged American. Like, he grew up chatting on AIM and ICQ back in the 90s and 00s. And probably on BBS message boards back in the 80s and 90s.
2. Satoshi mined the originating Bitcoins, and they are incredibly valuable now, and worth around $8.8 billion dollars in mid 2020. Who wouldn’t cash out on it, and realize all the gains, or even some of the gains? How about some super secret organization, that specializes in cryptography. And especially an organization that doesn’t immediately need the money.
3. Bitcoin mining is consuming a ton of electricity. Increasing carbon pollution, and depleting natural resources. There is only one other country that is generating so much electricity, that a large percentage of it, goes straight into Bitcoin mining. You can guess for yourself which country this is.
I don’t think this was intentional, but maybe a side effect is that it will bankrupt other competitor countries that the USA does not like.
4. Maybe another strategic end goal is to trick others to put their money into Bitcoin, and wait until it becomes very very valuable. Like, 100 or 1000 or 1 million times more valuable than it is today, it’s a very long and patient wait, then the US Federal government will pass a law declaring the Bitcoins to be illegal tender. And will then pass another law to forcefully seize all private Bitcoin assets, like the way cops take candy from a baby, with their Civil Asset Forfeiture policy.
Who knows. All this is just fun conjecture. Maybe there really is a Satoshi Nakamoto out there. But, I’d probably believe Santa Claus is real, before I believe that cover story.
The tech may be far from ideal, but broadly labeling it as a scam is just poor journalism. How people use it can be scammy. How governments regulate it may be scammy (corrupt). But these statements can apply to cash, equities, and any other financial exchange.
This is something you need to be aware of if you’re using Bitcoin or any other crypto for investment.
It’s mightily useful for making payment in a zero-trust environment though.
Uh, no. Though fiat currency is definitely a scam.
Fiat currency also has the nice property of being able to be used as money (payment for goods and services). So no, a well managed fiat currency can be extremely useful.
They also add and remove items from the CPI index, to remove ones that inflate and add ones such as consumer electronics that deflate.
Check out the chapwood index or a different unbiased inflation metric.
That's very much how I feel about Bitcoin. The more I see and the more I understand the less I believe any of the peoples explanations. Not least because if you ask 5 different Bitcoin proponents, you'll get 5 completely different answer about why it's valuable - from the unlikely (USD is going to inflate like we're living in Venezuela), to the untrue (BTC is decentralized), to the unprovable (BTC is digital gold).
Sometimes the reason the explanations don't make sense is because they're not right - and the alternative that BTC is a bubble or manipulated, atleast needs to be considered.
The Regression Theorem, first proposed by Ludwig von Mises in his 1912 book The Theory of Money and Credit, states that the value of money can be traced back ("regressed") to the goods and services it obtains. In other words, money is backed by some commodity that has intrinsic value.
Recently, there has been a debate about applying Regression Theorem to Cryptocurrency such as Bitcoin.[1] Since Bitcoin (for instance) is not backed by any commodity, it appears to fail the definition of a currency according to the Regression Theorem. Others hold the view[2] that Bitcoin does fit the definition as it is at once a payment system and money, with the source of value being the payment system.
Well, in US and Europe this is certainly true. I've yet to see a reasonably large shop accepting bitcoins. But my vision is blurred by the fact I am living in a wealthy Western country that has a comparably free banking system.
In other parts of the world, South America for example or Asia the situation is difficult for the average Joe to earn savings either due to galloping inflation or tight banking regulations. In those countries street markets are practically run by crypto currencies or derivatives.
Here's a fact though, Bitcoin is the hardest form of money ever created. With "hardest", I mean the most difficult to mint new quantities of it. That's why some people call it digital gold, because up until now, gold was the hardest form of money available.
I think it's actually the most difficult for people in rich western countries to see the value proposition of Bitcoin, since they're used to having strong, stable currencies and rule of law.
If you live in a country with 20% inflation and/or expropriation of assets, then Bitcoin is a way out.
Bitcoin does have a payment system, but IMO people who compare it to Visa or think that it should scale to handle everyday transactions are misguided. Eventually only very large and very valuable transactions will be made directly on the blockchain, and other transactions will be done on higher layers, like the lightning network.
Concerning Bitcoin being decentralized, it is, but I guess you dispute that due to a lot of hash power being in China. The Chinese miners are however individuals and not some uniform block who all think and act the same. Also, the mining pools are made up of individuals who can fairly easily switch to other pools at a moment's notice. Of all the cryptocurrencies, BTC appears to me to be the most decentralized.
This is a very concise summary of most of the crypto/blockchain projects out there. Ideas are cheap, and calling out that you understand the CAP theorem and basic distributed systems theory doesn't mean you will be able to effectively solve problems as they practically arise.
However, it makes a lot of sense if you consider who the target audience of such whitepapers is. (I'd argue it's not engineers.)
I also don't think this generalization applies to all projects out there, but at this point, it seems like it's become more than a full-time job to see beyond the cargo culting, shiny landing pages and jargon-filled "whitepapers".
"Fiat" at this point is just a loaded term used to try and dismiss all the things that actually make money worth something. Regulation, governance, monetary policy, and enforcement.
The second someone finds a repeatable double spend attack in bitcoin, the whole market cap crashes to zero and everyone will be screaming "why isn't anyone stopping this???"
It was an idea for a monetary revolution that got sidetracked by those with large enough capital. You can barely buy bitcoin without an ID and a credit card these days except if you wanna do it insecurely via transacting with an unknown party that contains bitcoins via cash.
Why do people evangelize it that much?
1. They want the monetary gains.
2. They are deep into sunk cost fallacy.
3. It fuels their ego by letting them think they understand the topics of distributed computing, encryption and global monetary politics at the same time while.
4 and the rarest. They understand it and are still super delusional about its potential.
Worse than that. But there is a dimension hinted at in the article that makes this not a good asset either. That is, the fact that a dozen or two large syndicates have deployed specific specialized hardware located in Iceland, Iran, Venezuela, and China etc., is not a reasonable guaranty of the future security of compute and network power in the system. Simply having computer power now linked in a global Internet does not bestow real world power. The U.S., E.U., have strong currencies backed by real world strength. Bitcoin on the other hand is a commercial ledger for drug, fraud, gambling, extortion, and money laundering transactions. It's the modern day Barbary Pirates, or take your pick of any other geographically-centralized pirate community. As pirates learn, when they achieve a sufficient notariety, entity-decentralization ceases to be a true protection.
It's been 10 years, Bitcoin still is as useless as it was in 2010, but it steadily is gaining notoriety.
2) I go on localbitcoins.com and buy bitcoins from an "independent miner"
3) I use the bitcoins to order drugs from Tor
4) The seller now has bitcoins, but would prefer cash
5) The seller goes on localbitcoins.com, pretends to be a small independent miner and sells their bitcoin for cash
I'm happy (I got drugs for my cash), the seller is happy (they got cash for their drugs), localbitcoins.com is very happy (they made a cut on both bitcoin transactions).
It's an excellent business model, but I don't understand how localbitcoins and it's ilk are able to stay online.
https://twitter.com/smdiehl/status/1349307219318345728
Though I wish he hadn't disabled comments
Hey! look at this (maybe a) truck far off in the distance that might hit you while a different truck is 5 feet away from hitting you from behind.
That was painful to listen to and a stark reminder of Gell-Mann amnesia.
The UK's FCA took the right step in banning consumer investments in crypto derivative products, which isn't remotely the same thing as purchasing the underlying assets without leverage.
There's plenty more to nitpick about the simplifications he uses losing fundamental aspects that undergird the system and make it work.
It's fascinating to watch naïve journalists and the HN crowd wring their hands year after year about a new technology that enables a cohort of low-trusting individuals and institutions to defect in a game theoretic sense from the unwritten rules of Western society and economics. A possibility that simply didn't exist before, and which Bitcoin first enabled.
My gut sense is that if people had a wider world view, grew up with and truly knew people from across the spectrum of humanity, and perhaps were keener students of world history they would hold an appreciation and fascination of Bitcoin rather than reflexively ostriching at new technology that questions the status quo. You don't have to love it or like it, but unemotional fascination is warranted.
At any rate I desperately wish the level of discourse on Bitcoin was higher here. It's embarrassing to read HN threads on Bitcoin, arguably fremdscham inducing.
It has no legal, ethical use case. The only reason to buy bitcoin is you hope some bigger fool will buy it from you later.
Not quite a pyramid scheme is the best thing anybody can say about it
“Everybody thinks the worst of me. The only thing I’m happy about is I was able to help people recover … There’s nothing for me to change from. It’s not like I ever considered myself a bad person.”
https://www.politico.com/story/2014/03/bernie-madoff-intervi...
"The facts were that the majority of my individual clients were net winners."
https://www.cnbc.com/2015/04/07/in-new-emails-madoff-says-fr...
I'd love to be corrected on this but as it is every value system humans participate in appear to be very pyramidal.
Yes, you are wrong. The US dollar is not a ponzi. To quote from the Bitcoin is a Ponzi article:
National currencies too fail to fit the definition, because people do not "invest" in them with the expectation of gain. In fact, governments make their currencies slightly inflationary precisely to discourage hoarding.
The rug will be pulled from under Bitcoion, and when it happens, the disruption will be revolutionary as well. Until then ride the tiger with caution.
I think it's the disingenuity masquerading as curiosity. You're not actually pondering that question, I should not expect an insightful dialectical exploration of the topic. You've made your mind up and you're exploiting my open mindedness to trojan your one-sided conclusion in there.
Is it time for X to Y? No.
Should X be Y? No.
Is X actually Y? No.
"Learn X in Y".
People not only learn at a different pace, they also learn in different ways that take shorter or longer. And in most cases, this is just an introduction anyway and in no way enough to really learn X.
But I think we're at a point where clickbait has been too normalized. Content creators have to do it to be competitive and get their content seen at all. And consumers have just accepted that.
The best example of anti-clickbait I've seen is concluding/explaining the title directly in the thumbnail of a video.
The real answer is that these titles are just click bait and don’t really provide evidence one way or another.
A 2016 study of a sample of academic journals that set out to test Betteridge's Law and Hinchliffe's Rule (see below) found that few titles were posed as questions and of those, few were yes/no questions and they were more often answered "yes" in the body of the article rather than "no".[13] A 2018 study of 2,585 articles in four academic journals in the field of ecology similarly found that very few titles were posed as questions at all, with 1.82 percent being wh-questions and 2.15 percent being yes/no questions.[14] Of the yes/no questions, 44 percent were answered "yes", 34 percent "maybe", and only 22 percent were answered "no".[14] In 2015, a study of 26,000 articles from 13 news sites on the World Wide Web, conducted by a data scientist and published on his blog, found that the majority (54 percent) were yes/no questions, which divided into 20 percent "yes" answers, 17 percent "no" answers and 16 percent whose answers he could not determine (all percentages rounded by Linander).[15]
Bitcoin had better buy some nukes to protect itself. It’s about to get a big stick shoved down its throat.
It's understandable though, it was first and drives on the network effects and its name ever since.
At least considering an exchange like coinbase. Perhaps there is a way to send/buy/sell bitcoin at nearly no cost that I am not aware of.
There was a time when Bitcoin was a promising digital currency! I had some back then, around 2010. This is not that.
It's very strange to see someone choose to come up with lies like this. I would prefer widespread monero adoption too, but we're far from that.
Bitcoin to finally become cash equivalent needs to be untraceable, the transactions shouldn't have known inputs and outputs and energy efficient.
AFAIK, a lot of people that worked on Bitcoin found solutions to most problems and some of those solutions were reused in other currencies.
1. Take one $50 bill, five $10 bills, or ten $5 bills (I wouldn't recommend change - stay with paper money).
2. Go to the bathroom.
3. Lift the lid of the loo.
4. Throw money in.
5. Flush down water.
Congrats! You just purchased $50 worth of Bitcoin - without fucking the planet!
-- Trolly McTrollface
Find more best of crypto (bitcoin) quotes @ https://github.com/openblockchains/crypto-quotes