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Comment by tim333 | Hacker News Reader

Economically it's much more like gold than a ponzi scheme:

Gold: Asset that goes up and down in price according to demand. No central body controlling it. Some utility as jewelry though we could get by without that. Massive dollar and environmental cost from mining the stuff.

Ponzi scheme: Fraud where insiders take money from investors and use it to pay other investors. Collapses and the fraudsters run off or go to jail. No mining no utility.

Bitcoin: Asset that goes up and down in price according to demand. No central body controlling it. Some utility as a payments system though we could get by without that. Massive dollar and environmental cost from mining the stuff.

Gold has a certain permanence as the only element in the periodic table that has properties that has made it the #1 jewellery metal for the last few thousand years and probably the next few thousand though while Bitcoin was invented ten years ago and may well get outcompeted by a better invention/currency.

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Gold is stable in isolation. If you bury gold in your backyard, and dig it up 20 years later, you will still have the exact same amount of gold. The exchange rate between gold and other things won't change that.

On the other hand, for btc to keep value, you need people to mine it from to the moment you buy it to the moment you sell it. This has a cost, which is currently paid by newcomers. But if btc becomes stable (i.e. there are no new entrants willing to pay a premium to get in), current holders have to accept depreciation to pay for mining costs. Since btc is not backed by any kind of real world asset, there is no other source of profit.

An investment that is only worthwile as long as it attracts newcomers is in essence a ponzi scheme.

Good point. The problem is that some people think it is a currency instead of an investment. Other people think it is an investment instead of a currency. It can't be both. Currencies have to be less valuable over time, otherwise no one would ever spend the currency. Investments have cost more overtime otherwise no would would invest. But both groups are buying and driving up the price.

Also, there is a 3rd group that thinks it is a hedge. With hedges you don't really care if the price is going up or down. You want it to give you options. For example, you may buy a stockpile of food or toilet paper, not because you are hoping to turn a profit, but to give you an option to avoid going to the grocery store during another panic buying situation.

> Currencies have to be less valuable over time, otherwise no one would ever spend the currency.

I don't have an opinion on BTC (or gold for that matter) but this widely-distributed meme is simply untrue.

1) If I have a bar of gold, and it will buy me 1% more bread loaves in a year's time, but I can invest it in something that will trade for 2% more bread loaves next year, then I will spend it because despite appreciation it is not my best source of appreciation.

2) I have living/operating expenses that I consider to supersede my need for financial return. If I don't pay for shelter and food, I won't be around in a year to enjoy the 1% more bread loaves I would get from appreciation.

3) Empirically/historically, over long time frames, gold appreciates in real terms (slowly). And yet people spent gold coins and gold-backed notes regularly.

Now, if a currency is appreciating much faster than anything else in the economy I agree you can have a deflationary spiral and a liquidity problem. But this is because the economy is collapsing — ordinary sources of growth have disappeared or reversed. This is a very special situation, and is not a general argument that currencies must depreciate.

Sure, people do have to buy food to live, but that isn't the point. Just replace "less valuable over time" with "not much more valuable over time" in my comment. The point isn't that gold went up or down by 1% between 1750-1850. The point is that people are buying bitcoin for opposite reasons. Is it a currency? If so like you said it shouldn't be going up quickly. Is it an investment? If so, where is the cashflow?

> Currencies have to be less valuable over time, otherwise no one would ever spend the currency

The purchasing power of a currency doesn't have to change, the government manipulators could target 0% inflations just as easily as they target 2-3%.

Most modern economies are driven by debt, thats what "creates" new wealth out of thin air. The main reason we target a low, steady level of inflation is to best incentivize lending and investing in debt. If currency value is allowed to swing wildly you can't put a predictable price on future money. If currency is allowed to lose value (deflation) you are incentivized to hold onto it rather than buy up debt. Noone buying debt means noone creating money out of nothing, meaning no GDP growth unless velocity increases.

> Currencies have to be less valuable over time, otherwise no one would ever spend the currency.

Ah, that would explain why we abandoned the gold standard. No one ever spent those gold coins, and no trade existed before 1933.

>Currencies have to be less valuable over time, otherwise no one would ever spend the currency.

Isn't this only true with the removal of the gold standard?

It's part of the reason the gold standard was removed. Currency deflation made loans expensive, for two reasons: the time value of money was higher in 1933 than it was any point since; and since loans are in nominal dollars, deflation causes loans to be more expensive in real dollars, even disregarding interest. 1932 had -10.3% inflation -- this added an additional 10% interest to every loan, on top of the 17% prime rate (because why lend money?). A 27% effective loan rate is ruinous for business, especially agriculture. The gold standard was removed in 1933, interest rates dropped to 12%, inflation increased wildly to 0.3%, and people could borrow money again.

> Currencies have to be less valuable over time, otherwise no one would ever spend the currency

I'm not deeply steeped in macro-economics. Is this a theory, or an historical observation? Where can I find more about this?

Historically, there have been a wide range of items used in barter and markets. https://en.wikipedia.org/wiki/Currency#Early_currency. Some of those like livestock depreciated in value very quickly since they literally had a lifespan. Others, like rare coins have gone up in value.

In the context of Bitcoin we are talking about the modern world. The major forces in the modern world are Globalization and Technology. Assuming you don't want China to take over the world you need growth. Growth happens when investment and debts are created. Ray Dalio explains it well. https://www.youtube.com/watch?v=PHe0bXAIuk0&ab_channel=Princ... This is why successful countries like the USA target 2-3% inflation. It is theoretically possible to create a country where inflation was -1%, but technological growth, which is very hard to stop would create a deflationary spiral that would bring the economy to a halt.

Bitcoin will stay forever as long as someone has a copy of the blockchain (around 300GB now). The cost of which is negligible today.

Mining is only necessary for making transactions, and it doesn't have to be expensive. It only is because of the competition. That expensive competition is important for stability but in theory, the entire system could run on a smartphone.

And it could run without newcomers. If everyone in the world had bitcoins, making it impossible to have newcomers, it would still have value, in fact a lot more than it has now.

Bitcoin may be a bubble, but it is not a Ponzi scheme.

Gold has some value as a technical material and because of its (subjective) beauty, so it will never crash down to zero, but it could lose a lot of its value if we decided that it is not worth hoarding.

That "someone with a copy of the blockchain" is not going to be credible enough to rehydrate Bitcoin. Mining is not just for transactions, but for maintaining the ongoing legitimacy of the blockchain, which is where the real value of Bitcoin lies.

> Bitcoin may be a bubble

Also, what is not a bubble nowadays. Just look at the gold price, the housing price, etc.

https://en.wikipedia.org/wiki/Greenspan_put#Everything_Bubbl...

What about chain re-org attacks? Without miners the next blocks would be easy to attack and then you lose immutability along with creditability.

That's not really true. You could bury a bottle in the backyard with the address and private key written on paper and still have the bitcoins in 20 years. If no one is running the blockchain software you could get the most recent copy of the chain / software and start it up. With both gold or bitcoin if there are no buyers then you won't be able to sell it for much.

It might actually be entertaining to bury a bottle with $10 worth of bitcoin - it might be worth quite a lot when dug up like that guys hard drive in a refuse tip he wants to dig up. Or not of course.

("A man who says he threw away a hard drive loaded with 7,500 bitcoins in 2013 is offering his city $70 million to dig it up from the dump" https://www.businessinsider.com/man-offers-council-70-millio...)

Gold is a metal made in the burning core of dying stars. It doesn't really care about buyers and economy. We use gold for many purposes other than as a store of value, and that is exactly why it became a store of value. It is useful BESIDES being a store of value. Heck if you don't like gold, buy platinum or some other exotic material. Stores value just as well. Bitcoin is useless besides being a store of value. That makes it a bad store of value.

There have been buyers of gold for thousands of years though

I'm sympathetic to the argument that Ponzi schemes inherently have a small group propagating the fraud while presenting the illusion of a real business, so describing Bitcoin as a Ponzi scheme may be technically inaccurate.

If I understand the tweets correctly, Taleb, et al, are basically saying that the mining pool functions as the insiders in a Ponzi scheme, by outcome if not intent.

The argument is that a Ponzi scheme isn't just zero-sum speculation, with some people winning and some people losing: it is negative-sum, for the speculators, because the insiders were siphoning off money the entire time.

In this situation, the siphoning comes in the form -- among other things -- of the 6.25 BTC / 10 minute block rewards [$20B / year at present], which the miners sell to pay their costs [$10B / year of electricity at present?] and their own paydays. Because these "insiders" have been taking out money the entire time, when all of the investors go to get their money back, there won't be anywhere near as much money as they put in left to get out.

> I'm sympathetic to the argument that Ponzi schemes inherently have a small group propagating the fraud

The existence of a group of insiders runing the scheme is really a detail when it comes to understanding how the market works. If it works like a ponzi scheme, does it really make a difference for the victims whether or not some people get arrested?

There's at least three ways you could ask the question.

There's ontologically, in the manner of pedants, where you're really asking "in this defined ontology of financial phenomena, schemes and frauds, where does Bitcoin fit in?"

There's descriptively, where you are asking if it is useful to model or think of Bitcoin as a Ponzi scheme, regardless of whether it is a fully accurate categorization.

And there's rhetorically, where you are really just using "Ponzi scheme" as a concise way to tell people, "Don't invest in it, people are trying to take advantage of you."

> I'm sympathetic to the argument that Ponzi schemes inherently have a small group propagating the fraud while presenting the illusion of a real business, so describing Bitcoin as a Ponzi scheme may be technically inaccurate.

Have you heard about the miracle of decentralization? :)

How is BTC mining a Ponzi scheme in a way that gold mining isn't? Neither require any insider information and new entities can join in the mining. In fact BTC mining has lower barriers to entry because it doesn't require license, land rights, etc.

Well for one, gold is a precious metal with great electro-conductivity properties, never rusts and can be worked at low (relatively speaking) temperatures. Kinda useful for all these chips we need and other electronics. Try to do that with Bitcoin.

That's not where its high value comes from though. And the vast majority of gold is not used in the industry.

That's right, but I think the OP was asking about differences in BTC from Gold as Ponzi schemes. I don't think it was "what makes Gold valuable"? I am just saying you can't use the BTC for anything but the scheme if it was a Ponzi scheme.

Just to put some additional data to this:

    Jewellery: 92,947 tonnes, 47.0%

    Private investment: 42,619 tonnes, 21.6%

    Official Holdings: 33,919 tonnes, 17.2%

    Other: 28,090 tonnes, 14.2%

    Below ground reserves: 54,000 tonnes

To answer that question, I would suggest that gold is valuable because it has uses. BTC as a payment instrument is useful, but how useful?

BTC also could be useful as a hedge against other assets, for example the stock market or the currency you save in. I view it as a possible hedge against the Euro. This is the currency I daily use, but I definitely keep the Greek Debt Crisis in mind.

The principle of hedging is that two assets hedge each other if their price demonstrably evolve in opposite directions. For instance, if a bank sells an equal amount of puts (the right to sell at a given time) and calls (the right to buy at a given time) on an action with the same strike price and the same maturity, it is hedged: both positions cancel each other.

Since BTC has no underlying asset, it's hard to demonstrate a correlation with anything. So if you buy btc as a hedge, you could pretend you're hedging against anything. In reality, the only significant factor is btc's popularity.

That means you could probably buy anything that isn't correlated with Euro and get the same result.

Correlation is a pretty fickle thing. Multiple hedges make for a nice diverse portfolio. So yeah, I consider gold a good component as well. Why add bitcoin as well? Because it makes for a nice bet.

We used to all rely on bonds and bills to stabilize our portfolios but central banks have killed that.

The fact that there's no way to fork gold.

Gold is a scheme (not quite a ponzi scheme) in which we've all agreed to maintain the delusion that it's a good marker for totting up wealth. It happens to have nice material properties for that, and it's nearly unique in those properties. The main one being that you can't print more of it.

BTC has a lot of those properties... as does Doge, as does Ethereum, as does Bitcoin Cash, and every other cryptocurrency. BTC has the name recognition -- which it shares with gold -- and in doing so may or may not become Gold 2.0.

But once we've realized that there can be Gold 2.0, why not Gold 3.0, 4.0, etc.? Only gold can ever be gold 1.0. Even adding silver and platinum and such doesn't really substantially diminish that uniqueness. Whereas there's no one crypto... which means that the "you can't print more of it" goes away. The Dogecoin guy did it. So do thousands of others, every day.

Maybe BTC will become the one and only Gold 2.0 and it'll stop there, and if so it'll have a value of some sort -- hard to say what, but eventually it'll reach some kind of equilibrium. Until it reaches that point, it has only its hope to be The crypto, and for the moment that relies on a continuous flow of new investors.

Addendum: the sense in which gold isn't quite a ponzi scheme is that the initial beneficiaries are long since dead. Everybody alive has roughly the same buy-in to it, so we can trade gold among each other on equal terms.

Some original guy got rich by convincing others to take his lump of metal in exchange for goods and services. The fact that it's nice to look at helped. That happened thousands of years ago, and so we're all just living with it as a collective agreement. We could break it if we wanted to, but there's not much motivation to.

TIL that the original "the other gold", silver, is only 9x more common than gold, in terms of "how much have we ever mined". Platinum, we've mined about 1/20th as much as gold.

So that part of the D&D economy actually works pretty well; copper, on the other hand, is something like 3600x more common than gold.

I'll give you that is has Ponzi scheme like aspects to it.

https://en.wikipedia.org/wiki/Ponzi_scheme

1) require an initial investment and promise above-average returns

2) money cannot be withdrawn for a certain period of time in exchange for higher returns.

High investment returns with little or no risk.? Overly consistent returns?

Your argument is that if I buy an ETF for gold and they charge 2% to keep the gold safe and manage it. This etf is a ponzi scheme as they need have holders to keep the thing going.

As the transaction fees go to miners you could then argue VISA and mastercard are ponzi schemes?

> On the other hand, for btc to keep value, you need people to mine it from to the moment you buy it to the moment you sell it.

That's not correct. Once you receive your transaction within a block, they are there forever assuming you keep a copy of that blockchain. If miners stop mining, you'll be able to mine yourself within 14 days with a regular computer.

The value of Bitcoin is not just the blockchain. It is the distributed consensus on it being the correct blockchain. So, Bitcoin relies on others believing that this version of the blockchain is authoritative.

Nothing like this in gold. It is an atom which does not require any extra belief from the society.

It's not enough to simply bury the gold. You have to guard its whereabouts and that cost something

https://www.google.com/amp/s/www.bbc.co.uk/news/uk-wales-556...

Burying bitcoin in a garbage pit hasn't paid off yet but given time and patience. Who knows?

Do you have a sense of what that depreciation factor is?

If it’s nearly equivalent to overall population growth, it may not matter.

(For what it’s worth, I’m with you for the most part. Just curious. I’ve been short-term wrong on BTC since $102 and I’m trying to figure out if I’m long-term wrong as well.)

> For what it’s worth, I’m with you for the most part. Just curious. I’ve been short-term wrong on BTC since $102 and I’m trying to figure out if I’m long-term wrong as well.)

It has managed to outdistance both the dotcom bubble and the housing bubble at this point. Although the tulip bubble went from the 1590s to the 1630s, so there is some precedent for these boondoggles to run for a surprisingly long time before gravity catches up.

Someone else quoted $10B worth of electricity yearly, at current price. Given that number, and knowing that it evolves with market cap, that's about 1% depreciation/year.

The are trx fees for this exact reason. The network can continue to be profitable even without the mining of new bitcoins.

Gold has a lot more intrinsic value than bitcoin will ever have. It’s quite reasonable to explain a large part of gold’s price as speculation on continued demand for jewellery.

There’s a 5000 year history of gold. But only a few grams per person in this world; and a great number of people feel some sort of pressure to buy a few grams for their spouses.

Obviously what I’m saying is an oversimplification. But if we imagined a world where gold did not have its lustrous history, it might still be sold at the same price. In this world, gold would still cost around 800 dollars an ounce to mine; but the only difference would be the market cap for gold would be very small and would serve its niche applications (comparable to the market for terbium or platinum).

Gold might be overpriced a little bit. But the debate about bitcoin is if it’s worth anything at all.

Disclosure: I work for a bitcoin trading firm.

I’d contend that money(any fiat), like Bitcoin, like gold has no intrinsic value.

Historic precedence doesn’t exist... till it does.

No one wants to carry around chickens to trade.

The value of a monetary asset is in its interoperability, and backers of Bitcoin are working to enable that to a high degree.

I think you’ve misunderstood me.

Gold has its niche applications where you need a malleable and nonreactive metal (like dentistry). If this was the only use for gold, it would still be at least 800-900USD an ounce, because it that’s what it costs to extract.

The market cap for gold would be like 1 billion USD, rather than 11 trillion USD.

Ironically in a world where gold wasn’t ‘lusted’ after, it might even be more expensive because the market would be illiquid. And a small oligopoly of suppliers would be able to gouge buyers.

This is what happens in the rare earth metals market.

If you couldn’t exchange gold for fiat it would still have value. Bitcoin would plummet in value.

An investment asset must have a cash flow and/or intrinsic value. Otherwise you do not have a way to recuperate your money, so it is not an investment. They also provide basis for value of the asset. Bitcoin has neither. That is why Bitcoin is a Ponzi scheme regardless of all the rosy pictures the believers try to paint. This is very important: Bitcoin has neither cash flow nor intrinsic value. The only way to recuperate money from Bitcoin is for another person to pay for it - the very definition of a Ponzi scheme. Gold does not have a cash flow, but it has an intrinsic value.

How much does it cost to move 17 tons of gold? What is the risk involved in transfer?

I can answer that question for BTC. To transfer the USD value equivalent of 17 tons of gold, it's currently around $27.50[1]. This transaction can be made anywhere you can broadcast a hash string.

If you want to get fancy, you can trade wBTC on ethereum for, as of this moment, ~$8[2]. If even that is too high a fee for you, you could bridge over to xDAI and trade for orders of magnitude less than the value of a penny[3]. Again, you can do this anywhere you can broadcast a hash string.]

All of this is EXCHANGE, transaction, alone. Zero mention of the amazing utility of the financial instruments that are IMPOSSIBLE with legacy protocols. To go over which is not a comment or a blogpost but a detailed textbook or equivalent of a MOOC.

How's that for intrinsic value?

[1]https://ycharts.com/indicators/bitcoin_average_transaction_f...

[2]https://etherscan.io/gastracker

[3]https://jaredstauffer.medium.com/what-is-xdai-how-do-i-use-x....

A pittance for the Gold transaction if your facilitor is feeling generous. Leave the Gold where it is, and issue a writ on the change of ownership. Rely on the Fiat system to ensure your value moves the way you need to.

Everyone who tries to make the argument that moving physical Gold is the same as a Bitcoin transaction is deluding themselves. They're conflating the logistics of commodity transfer with transfer of ownership. These are completely different things.

>How much does it cost to move 17 tons of gold? What is the risk involved in transfer?

How much does it cost to verify 17 tons of gold is not counterfeit? How long would that take?

You can comfortably bet your family's life that Bitcoin is not counterfeit about an hour after a transaction.

Intrinsic value has nothing to do with cost of transaction.

All value is tied to scarcity and gold is less scarce than bitcoin.

If we find a million tons of easily mineable gold tomorrow the price will dip below copper's. This can't happen to Bitcoin.

So VISA and MasterCard have zero intrinsic value as companies. Does not pass the sniff test.

It is incorrect to take the average transaction fee and use that number to say it would equal the transaction fee placed on a transaction placed at 1b+ of value. It's fine to be a vocal proponent of cryptocurrency, but there's no need to use disingenuous information to prove that point.

Sure we could "get by" without gold jewelry, but it is a _real_ tangible thing.

The problem with Bitcoin is that it is "international" in nature.

Yet, China holds the largest share of Bitcoins and thus ownership is unbalanced.

https://www.investopedia.com/news/bitcoin-wont-win-worldwide...

https://www.schneier.com/essays/archives/2021/03/bitcoins-gr...

I think there is more value in Blockchain at the municipal or federal level of a country to improve transparency and such. Or somehow even the issuance of currency. Given geopolitical unrest and contention, or differing political views (USA vs. China), I can't see how this decentralized coin will continue over a 20 year period.

It’s a decentralized Ponzi scheme. It’s why Bitcoin owners are so aggressive in convincing others to buy Bitcoin.

What investment is not a Ponzi scheme? Real estate and stocks rely on a greater fool that was later to the party to come buy them at a later date. Stocks have appreciated in value so far past what they are worth for a dividend that we have had to give up that charade long ago.

From the wiki for Ponzi scheme-

> The scheme leads victims to believe that profits are coming from legitimate business activity (e.g. product sales and/or successful investments), and they remain unaware that other investors are the source of funds.

TSLA has a P/E of 1,181 right now. Peloton is 1,660. Amazon is even 80. How is it any different right now?

Stocks have dividends, loans have interest, land has either rents or utility from using it. It’s that income stream beyond the initial capital that turns something into an investment.

Bitcoin lacks that, it only has money from new investors and it loses money from mining. Which means without new investment it’s value must crash which creates incentives for people that own Bitcoin to convince others to buy Bitcoin.

The only way to argue Bitcoin has long term value is it must provide inherent utility like land. Increasing the number of transactions per second would be one way to demonstrate that value, but talking about future value doesn’t.

Something is valuable if you'd be more than happy to own it even if you, or your heirs, could never sell or exchange it.

Currencies aren't inherently valuable, but a measure of value and a medium of exchange. If you couldn't buy things, or settle your debts (taxes), with US dollars tomorrow they'd be worthless.

Something that is valuable, and is either subjectively or objectively going to become more valuable, is an investment.

You can make a case for almost anything being an investment, since value can be subjective and speculation is rife

Utility covers a lot of stuff, a painting you enjoy looking at or water that you drink etc. As you point out USD has built in utility and thus demand because the IRS doesn’t accept potatoes.

The issue is crypto currency is a digital asset so you need a buyer to do anything with it. That buyer could be a 3rd party uninvolved in the transaction, but someone needs to hold it after the sale even if it’s just to look for the next buyer.

>Stocks have dividends

when was the last time TSLA paid out a dividend?

Growth is optimizing for future dividends. If you know a stock will never issue a dividend, buyback, etc the it’s value is 0. That’s why people talk about future cash flows.

Not only that but companies keep buying back their own stock to make the price go higher. If this isn’t Ponzi I don’t know what is. The companies realized they don’t even have to wait for an investor to pump the price they can just do it themselves. Spend the money that should have been spent on keeping planes from falling out of the sky on the stock. Genius! Goodhardt’s Law in full effect.

>Boeing, which has been struggling for the past year with the safety of its 737 Max jet, has spent over $43 billion buying back stock over the past decade. The six airlines—Southwest Airlines, Alaska Air, Delta Airlines, United Airlines, American Airlines and JetBlue—have spent about $47 billion over the same period.

https://www.newsweek.com/boeing-airlines-under-fire-90-billi...

I think you’re misunderstanding what a buyback does, it returns value to shareholders.

If you own X% of a company and it buys back 20% of it’s shares, congratulations you now own 1.25X% of the company. If you don’t want 1.25% of the company sell 1/5th and it’s equivalent to a dividend. Alternatively, if it does this for long enough without you selling then you end up owning 100% of the company and the next buyback is again equivalent to a dividend.

Think about what you wrote more and then come back later.

Never rely on those stuck on the financial abstraction to dig themselves out. Economics has a way of rotting the connection between real life and price movement.

The point is that the company is pumping share price, not through actually creating value, but by tweaking but by engineering scarcity, and othogonal to the corporation's reason to exist. GP is conflating the end to which buybacks are a means with the actual goal of what Boeing was colloquially for; baking safe airplanes.

This more pervasive than anyone in the business world wishes to admit.

Buybacks may be more effective than dividends. If you consider your bought stocks as a source of income, then you get more control and better taxes with buy-back stocks.

With dividends you can't really rely on a future amount, i.e. you can receive more (or less) than you actually need. Also it can come at a different date that you want. Plus creates a tax event event when you maybe don't want to have it. And so on.

So it become more convinient to just have stock which you sell when you want and you sell exact amount as you need to. Also the tax rate on dividends is usually higher, especially if you hold the stock long enough.

You cite real estate and stocks:

You can buy real estate and generate returns by renting it out. A smart real estate investment can generate money for y you regardless if its market value.

Stocks are the same: they represent a real piece of a company. If the company doesn’t issue dividends, the value is retained in the price of the stock. Warren Buffet almost never sells stock, his whole strategy is to hold forever.

Stocks and real estate are zero sum in the short term. In the long term, they are not

>> A smart real estate investment can generate money for y you regardless if its market value.

Unless it loses 50%+ of value suddenly. Then it may take you 10+ years to return back to profit.

>> If the company doesn’t issue dividends, the value is retained in the price of the stock.

Unless your company go bankrupt. You may lose the whole investment.

>> Unless it loses 50%+ of value suddenly. Then it may take you 10+ years to return back to profit.

You didn't understand what I said. It doesn't matter about short term fluctuations of market value. If you are pulling in rent (or not paying rent because you are using the house) then it doesn't matter what the market price is right this minute. Flipping assets in a hot market is a zero sum game, and is more akin to gambling than capitalism. Traditionally capital generates profit by producing real value, in this case by providing shelter to you, or to someone paying you. Ownership of a company is the same thing (that's what a stock is). It produces value or provides a service.

This is a thread about bitcoin. Which is a virtual (read intangible), currency whose value is determined entirely by other people's belief that it is worth something. It can't be used for anything except as an incredibly unstable store of value. It can't provide shelter, people won't give you real value to temporarily hold it. Bitcoin as an algorithm is unkillable. As an investment it is, very, very fragile.

Yes, and it's not only stock market misvaluation. Perpetual growth economics itself functions like a Ponzi scheme insofar as it renders the planet more challenging for future humans to live on.

You can’t live inside a Bitcoin.

While you can be tempted to define Bitcoin in that way, the Ponzi scheme definition doesn't apply [1]. As the parent comment: in Bitcoin no investor has the precise information of when to exit to defraud others.

[1] https://www.investopedia.com/terms/p/ponzischeme.asp

I think the Tether people know quite well when to exit, because their implosion will bring Bitcoin down.

Why? There are other stablecoins, with better reputation. Could people just switch to them?

Tether mediates a lot of the BTC/USD-exchanges. At the same time there are rumours that tether has insufficient USD backing, so if there is ever a bank run, exchanges will be unable to pay. At that point it will be too late for a tether alternative. And after the "big tether crash", regulation will be a lot harsher on exchanges and possibly all crypto currencies, which will continue to depress courses. And I really don't know if the alternatives are any better.

Yeah, I totally get the concerns about Tether's solvency. I guess what I don't get is why Tether remains popular, as a product that isn't unique. Is it just that it's too dangerous for everyone to admit that the emperor has no clothes, because it would crash the whole system? Is it not a liquid market?

If I were sitting on a bunch of USDT, but I wanted to be holding USD stablecoins, just generally speaking, why not swap them into a different stablecoin?

Maybe another question I should be asking is what proportion of Tether is being used to collateralize leveraged long positions in other crypto assets? Maybe that's why this is a tinder box?

Sorry for all of the questions, but legitimately trying to understand what people are talking about.

Tether is also backed by other stable coins and crypto assets. And that is not even a rumor, it's a fact that they are not denying. I have a strong suspission that Tether is used to pump the price of crypto.

Your link never states that early investors have to know when to exit for the definition to apply.

No one has denied that Bitcoin is an innovator when it comes to new ways to scam and defraud people.

I honestly never experienced that. Its not like any crypto investor is running around converting others.

There are people promoting it on youtube - I was watching some last night (What Bitcoin Did https://youtu.be/Pw6tfNh8DAk) but most seem to be recommending it sincerely rather than trying to sucker some fools in so they can cash out.

It's an interesting time in the history of bitcoin as we are starting to see a move from small speculators (number go up) to institutions buying in (it's sensible to diversify 5% of your portfolio into crypoassets as they have historically high returns and low correlations).

Sure i do talk positive about crypto too. But i would never tell anyone where to put their money.

Its just wrong to think all people in crypto are evangelising others into their ponzi investments

How many crypto investors have you been around? I’ve had many, many coworkers trying to convince me to buy Bitcoin over the last decade. This is across different companies, teams etc. And I have definitely witnessed the same thing online.

I mean I wish I had listened because BTC was $50 a coin the first time someone tried to convince me to buy in.

It was $50 at the time precisely because people failed to convince others.

I see lots of people fall into the "If I only had done X back in year Y, then I would be rich." fallacy. No, you wouldn't be rich, because the information available at the time didn't justify such a decision. If that information were available, Bitcoin would have been worth $60k in 2009.

Right now nobody can tell you what will happen to Bitcoin, because all available information is already priced in. At this point it might go up but it might go down as well.

That wasn’t my argument but Ok.

Plenty. However maybe thats a cultural thing but i rarely have people insisting on any kind of investing advice. We might talk about stuff, but both sides know risks are involved. I never experienced evangelism IRL and i even spent some time in ctypto meetups

The entire crypto art movement is a marketing campaign designed to turn artists into crypto evangelists, i.e. convert others.

Source? Couldnt it be that some artists are just super happy they found a way to dsitribute their art lucratively?

I’m not saying that all artists are in on it (probably very few of them are). But the truth is that the artists who are getting paid are the ones pushing NFTs as “the future of art” and who have the influence to rope in newcomers. Collectors in the space refer to this as “engaging with the community”.

The crypto-famous NFT collector “Silver Surfer”, known for dropping hundreds of thousands of dollars on NFTs [1], tweets “celebrities that fail to get engaged with their communities will continue to have weak secondary [NFT] sales.” [2] That’s weird, I wonder why the money would stop flowing if the artist stopped tweeting about NFTs? Doesn’t their art still have value?

The truth is, if you spend enough time around the crypto art community, you realize that there aren’t any “real” art collectors in the space. There are crypto speculators, and there are artists who feel obliged to “engage with the community”. The lack of real money flowing into the space is what leads me to label this as a marketing campaign, as opposed to a completely organic movement. It’s a somewhat decentralized marketing campaign, but it’s a marketing campaign nonetheless.

[1] https://twitter.com/makersplaceco/status/1359654252944105473

[2] https://twitter.com/7Surfer7Silver7/status/13827818844433367...

Gold mining through the centuries has probably caused much more environmental pollution than bitcoin, and bitcoin ~~mining~~ minting is programmed to end.

Bitcoin can be transferred around the world easily, The way gold achieves permanence is partially by being extremely hard to move around and store.

Gold can be outcompeted too, aluminum used to be more expensive than gold.

Bitcoin mining is not programmed to end. It has two functions: issuing of new coins and safeguarding transactions. From these two only mining of new coins will eventually end but it still is likely to stay profitable for many decades. Safeguarding transactions, with reward from transaction fees, is programmed to go on indefinitely.

I second this comment. Glad to see someone knows the actual protocol rather than speculating.

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