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Comment by michaelochurch | Hacker News Reader

Bitcoin isn't a scam because it's "imaginary" (i.e. fiat) but because of how the currency is distributed: a proof-of-work system that is skewed heavily in favor of early adopters.

There are a lot of good ideas in Bitcoin, but the truth is that its raison d'etre is to enrich early adopters-- the definition of a pyramid scheme. (It's not a Ponzi scheme; that has a technical definition and Bitcoin doesn't qualify.)

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Interestingly, that may be an advantage of the system. It encourages early adoption and encourages early adopters to nurture the system.

Maybe it's unfair, I don't know. But, I don't see any perverse incentives.

If you want to know how this may be perverse, it mirrors a pump and dump. Get in really cheap, hype it and dump for lots of profit on something without any basis for its value.

Only the people who are doing the pumping are going to dump at that point. By the point it is valuable, there will be many more people who (probably) stay around - bitcoin will hopefully be well established by then.

I would be much more impressed if people who raised this point also suggested a fairer way of distributing the coins.

It is difficult to tell if they think the fundamental concept of bitcoin is bad or if they just have sour grapes because they aren't an early adopter.

But while we are at it, why shouldn't early adopters profit?, they took a risk early on.

And actually if you ask me I think the minting system is pretty good, mining costs electricity, while many miners are surely hoarding and speculating they all have to pay their electricity bill on a fairly regular basis.

This ensures there is always someone somewhere selling bitcoins and increases the liquidity of the market.

If bitcoins came from a central authority and were available at fixed exchange rates, relative either to an existing currency (dollars, euros) or commodity (gold, oil) that would be a lot more fair. But then they wouldn't be bitcoins.

Ideally early adopters should not need to be rewarded for taking a risk because there would be negligible risk.

If early adopters were not rewarded then there wouldn't be any.

It has been suggested that each block should create BTC proportional to the current difficulty, so BTC would be produced faster as the network grows.

This would cause inflation, because miners would be able to print money by throwing hardware at the problem.

The ideal system/algorithm would exactly match the amount of Bitcoin in circulation to the growth of the economy, which would keep prices stable. Bitcoin pioneered most of what you'd need to create such an algorithm in a new system, but what does "growth of an economy" look like in terms of transactions between anonymous addresses? You'd need some concept of identity to determine the number of unique players, and the value flowing between them.

A system that solves this problem at scale is the economic holy grail.

It's not a scam. You have to distribute the coins somehow. Proof-of-work is a method to ensure no cheating. You can be sure the early miners did in fact perform computational effort to get their coins.

But what of value was actually produced by that "computational effort"? What is the current total worth of the results for all of that computational effort? If effort produces nothing of lasting value, is it a valid basis for value?

Machine rights and slavery are being ignored as people blindly treat the work done by machine slaves as if it was done by "owners". Some publicly act as if slavery of machines or other humans should not be the basis for a currency, yet we still have slaves. The slavery still around isn't just about mining the materials for the capacitors in your tech toys. And it wasn't just a part of past colonies.

http://www.thenational.ae/news/worldwide/middle-east/men-sho...

How many hours of CPU work, or how many bitcoins does a slave cost? If some do decide or admit that slavery is acceptable, or just a fact of life, would the value of a slave be a more stable value for the basis of a currency? (measured in prime adult slave-years perhaps). Perhaps one should have to be a slave for a time to obtain bitcoins. However if one is born into debt, it might take some time to have a positive balance.

Does being born into a society where there is public debt associated with a national currency amount to defacto slavery?

The computation power secures the network from double-spending. Do security guards also produce nothing of lasting value?

Is this any different from an IPO being a pyramid scheme in that it is usually to enrich early adopters?

Then the stock of any company ever made is a scam because it is run with the intention to profit shareholders, of which early adopters will profit the most.

Well if their business was to sell more company stock, then yes. But generally the company actually produces something of value, not just itself.

Companies don't pretend their stock is a new, better currency. Companies admit they exist to profit their shareholders.

A scam as a currency, yes.

If FooCorp started trying to convince people to do all their buying and selling using FooCorp shares - of which the FooCorp owners naturally have a great many - then yes, obviously, it would be a scam intended primarily to enrich the FooCorp owners.

As a stock, FooCorp might be a perfectly fine investment.

Remind me again what the fundamentals for bitcoins are? What are their same store sales for last quarter?

The purpose of my comment was to establish that 'enriches early adopters' is not enough to classify something as a scam.

And I don't think anyone is really trying to convince people to do all their buying and selling using Bitcoin. However it may be useful to do some of your buying and selling with Bitcoin.

If FooCorp's stock was stable and easily transferrable enough to use as a currency, why would it be a scam to advocate its use as currency? If your answer is only 'because holders profit' then I guess I'll agree to disagree.

When you are born, you have no dollars. The early adopter have them all. Does that make the dollar economy a pyramid scheme?

"There are a lot of good ideas in Bitcoin, but the truth is that its raison d'etre is to enrich early adopters-- the definition of a pyramid scheme. (It's not a Ponzi scheme; that has a technical definition and Bitcoin doesn't qualify.)"

Kind of like how all monetary systems work? The closer you are to the source of the money the more it is worth because you can control the velocity.

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