Hacker News Reader

> I do not understand how every time cryptocurrency comes up armchair HN users come along and comment when they, very apparently, have almost no understanding of the topic

This in itself is a meme - "All criticism is ignorance!"

Bitcoin is not a ponzi or a pyramid scheme, that's true, but it has aspects of both, with its declining emission and stacked rewards for early adopters.

And Bitcoin is for settlement now is it?

That's interesting, and a massive deviation from its original intent (see the white paper) as well as all the other purposes it's been ascribed over the years.

The truth is that bitcoin is an instrument of speculation. Little else.

> The truth is that bitcoin is an instrument of speculation. Little else

Right now it is because it's experiencing tremendous growth. When it becomes less volatile it may yet become more currency-like.

> The Nakamoto Scheme is an automated hybrid of a Ponzi scheme and a pyramid scheme which has, from the perspective of operating a criminal enterprise, the strengths of both and (currently) the weaknesses of neither.

https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/

Good article, but it could also be seen as a global poker game, with holders "bluffing" people to buy while they hold, looking for a top to sell at.

I think poker or another form of gambling is a good analogy. In my opinion, the article tries to construct a pretty strained analogy by listing all the myriad ways Bitcoin isn't like a Ponzi scheme or a pyramid scheme - which is what makes it so ingenious as a Ponzi-pyramid-scheme!, apparently.

It clearly does share aspects of Ponzis and pyramids, but, unfortunately, so do plenty of other things, like many companies' stocks. That doesn't necessarily make those companies fraud-schemers, though. That's just what speculation is. You can try to frame all speculation as a pyramid scheme, but I think it's a stretch. I personally dislike gambling and speculation (and finance in general), but there's still a distinction between speculation and scamming.

That said, of course in addition to this, lots of other cryptocurrencies/tokens are full-on fraud schemes. If you count all tokens (which anyone can make and sell in like an hour - many are being created daily), then > 99% of it probably is. In my opinion, all these scam tokens are very similar to malware. (And often are also literal malware, because many scam tokens are implemented as malicious/backdoored smart contracts.)

There are absurd amounts of malware variants created daily. It's easy for a single person to create dozens of malware variants or dozens of scam tokens in a day. If you're going by number of distinct software hashes, it could very well be that > 99% of all software is malware.

I certainly get why people are a tiny bit wary of an ecosystem that's > 99% fraudulent in terms of percentage of distinct assets. > 99% of activity on Tor is also likely illegal or malicious in some way. (There are some studies indicating this.) That doesn't mean I want a government to ban cryptocurrencies or ban Tor, and have police "raid Bitcoin meetups", as this author suggests in the article. Tor, Bitcoin, and especially some other cryptocurrencies have interesting technology to offer. I'd rather there be an attempt to address the externalities in a less crude way than just a blanket ban that makes the technology illegal.

> The truth is that bitcoin is an instrument of speculation. Little else.

I actually agree. Bitcoin has failed. It's useless as a coin. New coins have been created to address its shortcomings. Monero seems to be the closest one to the original cryptocurrency dream of decentralized and private currency. Despite this, bitcoin is still king and there seems to be no way to dethrone it.

Bitcoin “dies” like bubbles do, after a peak it can’t recover from people stop thinking of it as an investment.

Tulip mania didn’t kill off Tulip farming, and even a 99.9% crash won’t kill Bitcoin. It simply returned things to the fundamental value proposition amid significant competition. In theory Bitcoin could win in a direct head to head competition, though it seems unlikely that the first coin got everything correct and was never improved upon.

> This in itself is a meme - "All criticism is ignorance!"

No, as I pointed out to the OP I was appreciative of his reasoned criticism because for years the top comments say things like, "Bitcoin is a ponzi; bitcoin is used only for illegal activity; Bitcoin failed." All wrong, and the only way I learned those were wrong was by understanding it and learning from smart people who are involved in the industry.

> The truth is that bitcoin is an instrument of speculation.

Public companies have no business speculating except for R&D. By claiming it is an "instrument of speculation" you are claiming they are not living up to their fiduciary duties? And what sort of speculation has gone on for 11 years?

> And Bitcoin is for settlement now is it?

Yep. That's where it is currently headed. Could change, never know (edit: what I mean here is Bitcoin devs/miners could change/adopt the software so it works more like a currency). Brian Chesky, CEO of AirBnB, insisted breakfast be served at all AirBnBs. He was wrong. Didn't matter. Some original Bitcoin adopters, particularly Hal Finney, noted early on that Bitcoin could end up being more of a store of value than currency. Even if buying a coffee with Bitcoin directly doesn't make sense, the spirit of the original paper in wake of the 2008 crisis is still alive and well.

There are serious, devastating critiques of Bitcoin. There are no serious rebuttals to those critiques, but plenty of people "involved in the industry" are making a lot of money from BTC, so it's no surprise they've convinced themselves it's fine. I guess they suckered you in too.

Could you link a few of these? Genuinely interested in reading. Thanks in advance.

>Bitcoin pricing is on a log scale. Dropping to $36k from $50k is not a concern on this scale.

What is that even supposed to mean?

The poster you replied to is confused, I think they’re saying they chart Bitcoin with a logarithmic scale, which as we both know has nothing to do with how Bitcoin is priced, only how the price action is displayed on a chart.

This has to be one of the funniest financial things I've heard. "Uhhh, you know when your account dropped 50%? Actually that is only like 10% if you pretend it's a log scale."

Unfortunately for them, USD is not on a log scale and they'll be disappointed to discover that when they try to cash out.

I'm not discussing trading here, in which case you would be absolutely right. Trading using a log chart would be absurd.

I'm talking about long term positions. Cost averaging over time means you are immune to such a massive swing.

You’re talking out of your ass.

You just decided that "Bitcoin pricing is on a log scale"? Because it sounds cool to talk about logarithms? What does cost averaging have to do with it?

It means people don't care if it is a store of value because they don't care if their savings are locked up until the next bubble, they can afford to wait because they have savings somewhere else.

>2. Bitcoin pricing is on a log scale.

Time to report bitcoin pricing with decibels?

I suppose another logarithmic scale would work here as well: Richter scale; scaled so these "corrections" are in the middle of the scale. Then we could about a "magnitude 5 on the bitcoin Richter scale" correction, etc.

1.The term you're looking for is "naturally occurring Ponzi scheme" https://openknowledge.worldbank.org/handle/10986/19358

2. I literally don't know what this means. If it drops below 10, and you bought at 50k, you have an 80% loss. This might indeed induce "some nervousness".

3. Bitcoin is, per the title of the whitepaper, "A Peer-to-Peer Electronic Cash System". You don't have to read very far into the whitepaper to understand that being a currency is 100% the stated objective. As you pointed out: it has failed miserably at that.

4. No... if this is a "Ponzi", then _on average_ there are more fools than smart people. Smart (or lucky) people are in fact a requirement of a successful Ponzi scheme... where else would the money go?

> A lot of smart people are invested in crypto: a16z, USV, Paradigm. These aren't greedy VCs -- it's their job to make returns for institutional investors who are often pension funds or charitable endowments, so if it a "Ponzi" then they are fools.

(I wanted to say back in 1999) - a lot of smart people are invested in dot-com startups: Kleiner Perkins, Sequoia, Hummer Winblad. These aren't greedy VCs -- it's their job to make returns for institutional investors who are often pension funds or charitable endowments, so if it a "Ponzi" then they are fools. I'm sure Hummer Winblad's investment in Pets.com will work out great.

The vibe is the same: I worked at dotcom pre-crash and the owner used to give noob internet investors (like the "Small Plane Pilots Association" or some such) a tour of the company and say something like "Look at all those people creating value on the internet! The internet is changing the world"

“Why waste people's time with your vacuous comments?”

Because my opinions are not vacuous to me.