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Comment by alecbz | Hacker News Reader

Isn't all currency more or less a "pyramid scheme" in the sense that Bitcoin is?

I wish we had more subtlety in our discourse. It feels like it's all either blind admiration or blind condemnation.

Bitcoin is trying to be a new currency. Currencies more or less operate on "collective delusion". I think many people scratching their heads at why Bitcoin is worth anything _are_ missing something, which is why any currency has any value at all, which is itself kind of surprising and unintuitive.

At the same time, I think it's fair to be a little more skeptical about what the value of a currency like Bitcoin is, precisely, and how much effort ought to be put into building it.

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When I say pyramid scheme, I don't mean it in the sort of philosophical way that you could apply to all fiat currency, but in the "OMG look at Tether" way.

Ah, I might be out of the loop. tl;dr?

Tether, which is the most used so-called "stablecoin" (As its value is pegged to the USD) is extremely seedy at best and has had brushes with the law already [0] or is outright a Ponzi scheme [1] and plenty of people arguing for/against crypto know and have said so already.

Personally, even though I'm a proponent of cryptocurrency in general, I wish it'd disappear in spite of any short and middle-term calamitous consequences on perceived value if that means one less "dumbed-down club" (Using dang's words) when it comes to discussing crypto.

[0] https://ag.ny.gov/press-release/2021/attorney-general-james-...

[1] https://www.singlelunch.com/2021/05/19/the-tether-ponzi-sche...

A not so insignificant part of me wishes Tether would crash already so it'd kill that argument dead for crypto detractors. It'd be interesting to see how Bitcoin's value would look after. I really doubt it'd be zero.

Fiat currency is backed by courts and regulation, which is backed by a literal army, and the threats of violence that army brings. If someone steals your fiat USD, there will eventually be someone with guns removing you from society if you don't return them.

Cryptocurrency has no such backing.

> If someone steals your fiat USD, there will eventually be someone with guns removing you from society if you don't return them.

That's true for any type of property, including cryptocurrency. US police have returned stolen cryptocurrency to its rightful owner.[1]

The wrinkle is that police can only recover property if they know where it went. Cryptocurrency makes that harder in some ways (pseudonymity/anonymity, mixers) and easier in others (transaction history on the blockchain, lots of electronic records in exchanges).

Over my life, I've had a half-dozen things stolen from me that were worth more than $1,000. Only in one case did the police recover my property (a motorcycle) and only because the thief committed other crimes while riding it. I had to pay $200 to get it out of San Francisco's impound lot. (It would have been $400, but the city gave me a 50% discount because I was a resident.) It was only after paying the money that I could see the bike. It was totaled.

1. https://www.nj.com/news/2019/09/nj-man-tried-to-send-apology...

USD is fungible. They don't have to recover your stolen dollars. They just have to get you an equal amount. And that's why it's far more useful than cryptocurrency. The government has lots of ways of giving you equal amounts, including simply creating it out of thin air.

Cryptocurrency is by definition non-fungible, and as you rightly pointed out, harder to recover.

But more importantly, if you are a US citizen you can use the services of the US government to recover your stolen cryptocurrency, but if you aren't a US citizen, you can't.

But no matter what country you are a citizen of, you can use the US government to recover your USD.

> Cryptocurrency is by definition non-fungible, and as you rightly pointed out, harder to recover.

Cryptocurrency is very fungible. When I withdraw BTC from Coinbase, it's the same as any other BTC. There are blacklists of BTC addresses (for scams, ransomware, blackmail, etc) but there are also blacklists of USD serial numbers (from robberies, ransom payments, etc). Also there's the issue of counterfeit bills.

> But no matter what country you are a citizen of, you can use the US government to recover your USD.

Where did you hear that from? There are plenty of nations that the US has shunned from banking infrastructure: Iran, North Korea, Cuba, etc. People in those countries will have no help from the US in recovering their stolen money. Also the US government isn't required to help anyone recover USD. They usually don't do squat when there's theft overseas. And by using the banking system, you open yourself to the whims of US authorities.

If anything it's closer to the opposite of your claim: For citizens of most countries, the US government can freeze your accounts and take your money.

>If someone steals your fiat USD

>Cryptocurrency has no such backing.

Unless someone steals your private key, I don't think it's very feasible for someone to steal _your cryptocurrency_ without going against the whole network

This is and is not true. The implicit value of a currency is backed by being able to tax the citizens. This is why there are federal but not state / province level currencies as the friction of conversion is a dead weight loss.

> The implicit value of a currency is backed by being able to tax the citizens.

Elaborate? Not sure why this would be true.

I'm pretty sure there are plenty of "commodity currencies" (shells, salt, even gold) that achieved value without some central agency controlling the currency that could also levy taxes.

All of the examples are currency because they can't be counterfeited. You can't print gold, silver or seashells.

"Trust is the raw material from which all types of money are minted".

You make a valid point, I do trust that our government will come to collect what's due from the citizens, but what about the corporations?

Worth noting there are quite a number of what are known as Community currencies still active in the US & Canada:

USA: https://en.m.wikipedia.org/wiki/List_of_community_currencies...

Canada: https://en.m.wikipedia.org/wiki/List_of_community_currencies...

No. Currency is guaranteed to be accepted for the payment of taxes in a particular jurisdiction, and that jurisdiction's courts will enforce judgments in that currency. These are material differences.

That's true but I'm very skeptical that a notable portion of the worth of a currency rests on that. Like I said in another comment, I think there have been plenty of "commodity currencies" (salt, shells, gold) that have attained value as currencies in spite of lacking these things.

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