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Comment by G3rn0ti | Hacker News Reader

In a Ponzi scheme, a fraudulent perpetrator takes your money (and the money of many others), gives some of that to early dropouts but takes the rest for himself. Ponzi schemers profit from lying to you where your money goes.

With a decentralized digital asset there is no sole person or company that profits from just lying to you about where your Dollar goes in exchange for digitals. Sure, miners and exchanges make profits based on fees when Bitcoin is created or sold, respectively — but they are only being rewarded for their legitimate efforts required to maintain and sell a digital currency. They do not pretend making your money work for you by some magical scheme.

This whole confusion stems from a rather vague understanding of what the subjective theory of value means: Goods and services provided by humans have no intrinsic value but become precious simply there being demand by other humans. Gold can become worthless if nobody wants or needs it anymore. A stupid trading card may cost thousands of dollars costing pennies to make but is sought after by enough collectors. Edit: Yes, Bitcoins are just numbers stored in a computer memory around the world but so is software. And software ain’t cheap.

While Bitcoin‘s value might be grossly overestimated due to rampant speculation but even then, these speculators are no victims in an investment fraud but they truly believe that Bitcoin will become much more useful in the future. They may be wrong but, currently, nobody knows. Only the future will show.

Edit: Typos.

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> They do not pretend making your money work for you by some magical scheme.

No. They instead take your money, buy coal, and burn it. Nothing is left.

As you say, Ponzi schemers take money for themselves and keep it. Most of what Madoff stole was recovered, for instance.

Whereas virtually 100% of all money invested into crypto has been burned by miners. This is pretty easy to model.

So there’s nothing left to recover if new money collapses. Bitcoin is worse than a typical ponzi in this respect.

Indeed this is a new form of Ponzi scheme, and I agree with the authors use of the "quacks-like-a-duck" model.

> But if one wants to know whether bitcoin is a good investment, or just an old type of investment fraud with a new coat of paint, the legal definition is irrelevant. One must use a quacks-like-a-duck definition, that describes the mechanism through which fools and money are separated and the reasons why it is a fraud.

It's the world's first decentralized Ponzi scheme, where each participant cell need not understand the whole picture to achieve the end result. It's a financial cancer.

Where people choose to throw their own money should be left to them.

However, I wish governments would ban regulated institutions from throwing peoples real money into non-governmental/undemocratic cryptocurrency.

If banks/govts want to get in on the action, they should perhaps start their own cryptocurrency/blockchain.

> ... Where people choose to throw their own money should be left to them.

Yes, unless it causes harm to the broader economy.

I explained this in a different reply lower down, but when enough people participate it can destabilize the entire financial system in the country. And if it takes down the USD, globally. Pardon the pasta, but in 1997, the entire economy of Albania collapsed because everyone started participating in Ponzi schemes. They even jailed their finance minister for trying to stop it, and it led to a civil war. The IMF had to air drop in big bags of money to bail the country out. [1] This is what is at stake.

[edit] > At their peak, the nominal value of the pyramid schemes' liabilities amounted to almost half of the country's GDP. Many Albanians—about two-thirds of the population—invested in them. When the schemes collapsed, there was uncontained rioting, the government fell, and the country descended into anarchy and a near civil war in which some 2,000 people were killed. [1]

[1] https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.ht...

I agree with that.

What I meant was the governments at the minimum stop banks and financial institutions from legitimizing these.

So the blood washes away the diamond?

> No. They instead take your money, buy coal, and burn it. Nothing is left.

Interesting, I never thought of it that way, and it makes sense.

Since money is not created or destroyed the balance sheet on inflows and outflows of BTC to dollars must be zero at all times. And some x% (which is variable) of it is transferred to miners which is the so-called "transaction" cost.

I guess there must be a point at which the bubble bursts, and that's when a run on BTC happens. At which point it should go swiftly down as the value of BTC has been taken out by the miners.

If you're so certain short it. The amount of wealth you would gain by being correct is immense. You should be spending every waking moment attempting to predict it.

Something about anti btcers I don't get you'll wax how smart you are and how everyone else is dumb. Just put your money where your mouth is.

This is dreadful advice that nobody should follow.

(1) Shorting has a completely different risk profile than going long. If you're short, you can lose an infinite amount of money. If you're long, the most you can lose is what you put in. Unless you're familiar with what it means to take a short position in traditional markets, for the love of God don't do it in crypto.

(2) The market can remain irrational longer than you can remain solvent, and Herbalife has been chugging along since 1980 - in spite of the widely publicized 5-year-long short Bill Ackman took. Even if the shorts are right, timing it is extremely hard, and chances are you'll lose your shirt before then.

(3) Most exchanges that permit short positions are criminal enterprises, all the major non-US ones are under investigation. Binance is under investigation by every major world financial authority including the Cayman Islands. They'll require you post collateral in crypto as well, which adds yet another layer of counter-party risk. Even if you're right, and you time it right, a collapse would likely wipe out Binance (or your collateral) - or it wouldn't and they just wouldn't pay you out, SFYL.

(4) All exchanges have a huge interest in seeing the game continue, and are more than likely colluding to keep the price up.

Most of us bears believe that Bitcoin exchanges are crooked Mob casinos - entirely in isolation of the fundamental Ponzi nature of the underlying asset. What you're suggesting amounts to telling someone who believes the casino is crooked to bet on red instead of black. The only way to win is not to play.

[edit] Yes, you can short CME futures (with massive 200% collateral requirements), yes I've done it, yes I've made money, not you shouldn't. Nobody should.

WOOOSH The point is that it's terrible advice. My point is people who espouse how smart they are about something should put up or shut up.

1.) there are a multitude of ways to you can do this on a decentralized exchange DYDX as well. Or a Mercantile exchange like BITMEX.

2.) Funny you should bring up Bill Akman he publicized his short position, and another investor took a counter bet to him. That investor so happened to do it out of (speculated) spite. So not really a good example but since we're here Herbalife was investigated and not found to be an MLM, although I'll grant you that the SEC came RIGHT up to the line in calling them an MLM scheme.

3.) I'll move past the criminal enterprise portion as that's for courts to decide. With respect to binance specifically there are multiple ways to go short I'll post the straight forward versions. Cash settled perpetual swaps, Coin settled perpetual swaps, Put option contracts, Margin shorting. The way I would recommend people short bitcoin is cash settled perpetual swaps, you will be paid out as there are insurance funds that are VERY LARGE you can see what they are, that will pay out winners should losers positions can't be sold to the market.

4.) So does every exchange with respect to the market they serve, the smart exchanges actually want to be price neutral as they view as a business, both FTX and Binance CEO go on the record about this.

So you don't want to short BTC but you still think it's a ponzi scheme ... report it as such to the SEC. Accept that's a loss cause because bitcoin is deemed as property, furthermore a commodity and thus regulated by the CFTC.

I'll finish about the crooked casino portion... you can do this in a decentralized fashion with DYDX or another de centralized exchange. EVEN IF you didn't want to take the time to do that. RIGHT NOW you can go to IBKR and take a short position on the greyscale trust which is essence a short position on BTC. FURTHERMORE if you think these exchanges are crooked and are doomed to fail. Take a short position on the exchange it self. Binance and FTX have their own coins (which are probably securities) that you can take short positions out on.

Final words, how long must a market remain irrational before your prospectus is wrong about the market being irrational? The paradox is if you answer infinity, you may be "right" but you're still wrong.

> WOOOSH The point is that it's terrible advice. My point is people who espouse how smart they are about something should put up or shut up.

I get your point, and I'm telling you that the thing they should do is nothing, not take a short position.

Your argument that "if you're so smart you should short it" is BS. If you're smart, you'd stay the heck away.

(1) Decentralized exchanges have all sorts of their own issues, from contract bugs to flashbots, to requiring crypto collateral that may also get nuked in the event of a systemic collapse due to Tether or Bitcoin.

(2) Herbalife is an MLM, but MLMs are not illegal. In fact it says so on their wikpedia page [1]

(3) Anything at any crypto exchange is subject to massive systemic risk.

> So you don't want to short BTC but you still think it's a ponzi scheme ... report it as such to the SEC. Accept that's a loss cause because bitcoin is deemed as property, furthermore a commodity and thus regulated by the CFTC.

The SEC is well aware of its structure, as is the CFTC. They'll act as they deem appropriate in due course, or they won't. But that's a non sequitur. It's actually the first item listed under common misconceptions.

>> That is not the legal definition of ponzi in country X. The legal definition is relevant to understanding the legal implications: can anyone in Crypto Space be prosecuted for running/promoting/aiding that scheme in country X? But if one wants to know whether bitcoin is a good investment, or just an old type of investment fraud with a new coat of paint, the legal definition is irrelevant. One must use a quacks-like-a-duck definition, that describes the mechanism through which fools and money are separated and the reasons why it is a fraud.

> FURTHERMORE if you think these exchanges are crooked and are doomed to fail. Take a short position on the exchange it self. Binance and FTX have their own coins (which are probably securities) that you can take short positions out on.

At the same casino, taking a short against the casino at the casino is the worst plan I've ever heard. If they go under they won't pay you out. The entire crypto ecosystem is one giant distributed casino. Why would you say crooked exchanges are doomed to fail - and on any particular time horizon?

> Final words, how long must a market remain irrational before your prospectus is wrong about the market being irrational? The paradox is if you answer infinity, you may be "right" but you're still wrong.

This is a total non sequitur.

Nothing you've said is representative of the way markets actually operate here in reality, and you've provided incorrect and dangerous advice.

[1] https://en.wikipedia.org/wiki/Herbalife_Nutrition

"Markets can remain irrational a lot longer than you and I can remain solvent." -- A. Gary Shilling

> Something about anti btcers I don't get you'll wax how smart you are and how everyone else is dumb. Just put your money where your mouth is.

I don't have infinite money to keep propping up my short positions until this thing collapses. That's the reason, not because I don't want to put my money where my mouth is, it's because I don't have enough money to see the pay off.

It's not that hard of a concept to grasp, I believe...

Nassim Taleb pointed out that if you have no 'skin in the game' your opinion is actually less than worthless.

Worth considering...

If you are long bitcoin, you hold bitcoin. If you are for some other asset vs bitcoin, you hold that asset and not bitcoin.

Some things are simply tradeable, and his advice is not “throw money at the owners of a fraudulent casino to say you are short”

Nassim Taleb himself wrote a paper arguing Bitcoin’s value is zero and sold all his Bitcoin. I do not believe he believes it is his moral duty to open a Binance account and make a short on a Tether Exchange

That's true and technically anyone that doesn't have bitcoin (or a bitcoin owning entity) in their portfolio has a short position open.

So far, that 12 year short position has been a disaster for all of the people (literally every single person) on the planet.

Yeah pretty much. Except the miners don’t take the money, they burn the money. Mining has low barriers to entry (more or less) so you’d expect low profit margins. And the major costs are energy (lost forever) and ASICs (unfit for other purpose)

So while most industries have costs that feed back into economy, mining costs are just burnt.

But yeah beyond that it’s just musical chairs. Depends entirely on inflows.

And those aren’t too high. Coinbase’s USD volume is $300,000,000-$1,500,000,000. And that’s buying and selling. You couldn’t sell the whole $1,500,000 and exit without crashing price. 2% depth negative is a bit over a million.

So with an apparent $1 trillion in value in the btc market, the exit door is thin.

I was looking for a graph that describes total transaction fees for the life of BTC in USD last night. Couldn't find one.

> Since money is not created

Isn't USD created? Thus BTC functions as a USD sink. As the USD economy expands BTC represents some claims on it. It's a store of value that automatically appreciates (by design basically).

> Whereas virtually 100% of all money invested into crypto has been burned by miners. This is pretty easy to model.

People like Bitcoin's provable global ledger and this is where the value lies. The value is not burned, it's embedded into this ledger.

In some religious rituals, devotees offer luxury items to gods to appease them. These are items like new clothes, food, maybe even non-metallic jewelry. These are subsequently burned on a pyre by the way of offering them to the gods. Bitcoin is like that, only now you have a receipt on the blockchain. I like it.

> People like Bitcoin's provable global ledger and this is where the value lies. The value is not burned, it's embedded into this ledger.

Aren't you just stating that Bitcoin has absolutely no intrinsic value?

What is "intrinsic"? Nothing has intrinsic value.

Gold has inherently good conductivity, extreme malleability and pretty good chemical resistance. I would call those intrinsically valuable traits.

Likewise a whole slew of physical goods, who have built-in traits due to what they are that make them (on some level) valuable.

Bitcoin only has value due to a shared hallucination.

Most of the value of gold is not due to those properties. Yet even for those properties, if you look close enough, it is shared hallucinations all the way down.

I think you'll also have a hard time explaining how "good conductivity" is fundamentally different from e.g. "resistance to tampering of historical records".

Bitcoin is only resistant to tampering of historical records if you have a continuous expenditure of compute to maintain that tamper-proofness.

In the absence of substantial compute resources dedicated to maintaining the longest fork, there is in principle nothing stopping anyone from changing a historic blok and rolling forwards from that.

The good conductivity is a base physical property, not really requiring any external investment of anything to be maintained.

The value is not embedded in the ledger. Miners need to keep mining for all of eternity to maintain the security of the ledger. The featured article explains this point quite well. Ask yourself what would happen if miners stop mining?

If miners were to stop mining the difficulty (the computing power needed to mine blocks of transactions) would drop and people like me would start mining. So where did all the existing work go? It went into improving the security of the chain that my mining program is adding blocks to. That basically means that for someone to completely rewrite the provenance of all the bitcoin before the point where miners stopped mining, they’d have to replicate the same amount of work that was originally put into making that history. With less people of ordinary means working on the chain, the security of the blocks generated will be decreased. This is because it would then be easier to launch attacks on the chain and erase history and double spend, but the community could easily be rebuilt to a point where it is no longer feasible for a malicious actor to compete with the miners again.

> People like Bitcoin's provable global ledger and this is where the value lies.

What real world value has this brought?

The ability for the Chinese rich to get money out of their country. For one.

And for another, it allows ransomware gangs to much more easily extract payments from their victims as well.

>No. They instead take your money, buy coal, and burn it. Nothing is left.

Yes, miners “take your money” but only a portion of every transaction as a service fee for processing your transaction. This is a payment for a service, the value of which is predicated on a service immediately provided rather than a promise for future value.

Also “nothing is left” is also a false statement as most of the bitcoin/money processed by miner’s isn’t going to them.

Also, every time a miner processes a block of transactions they receive newly minted bitcoin from something called a Coinbase transaction. This transaction will not keep getting doled out since the protocol enforces that there can only be 21 milllion bitcoin minted, but it provides extra incentive for the money poured in for the time being.

In other words, money is not “burned” it’s being exchanged into a different commodity. If this commodity fails to hold value over the long run then sure there’s nothing left in terms of value but I’d say the same risks exist and have been realized by government issued currencies. Look at countries like Venezuela for example.

I have a lot more reasons on why it’s improbable Bitcoin will ever plunge to 0 in value but in the spirit of clearing up some misconceptions I’ll leave that for another comment.

So unless you burn cash in a fire or counterfeit money, the only entity that can create and destroy money is the Federal Reserve.

Everyone else can only create "value". So I can combine two widgets together to make a third widget and sell it for less than you could do it. That's "value" in a nutshell.

So on an exchange balance sheet (stockmarket, coinbase, etc), dollars aren't created or destroyed, just transferred for something of perceived value. So I trade one dollar for a fraction of AMD Stock, e.g. But the dollar goes to whoever sold me AMD. The price of AMD stock can go up and down ("value") but the total dollars created or destroyed is always zero. Same is true with BTC.

Right, makes sense? Good.

So every transaction in BTC has a "cost" associated with it, where some "value" of BTC is transferred to miners. The miners spend money burning energy which removes "value" from the economy as a whole. Basically that means we had "X" many tons of fossil fuels left on Earth, but now we have slightly less because energy was "burned" for the transaction.

If I give you a ton of coal you can burn that for heat. But that removes the coal permanently from the world. OTOH, if I want to make a cryptocurrency with 10^86 coins and if I do that a billion times over, well, I have a limitless supply of cryptocurrency.

If you look at the situation as a flow of dollars you see an equation that looks like this:

BTC bought in dollars = BTC Sold in dollars + Mining Costs in dollars.

So while dollars flow back and forth, some have to go to the miners to burn physical energy. That incurs real world costs. So "value" has to be extracted and transferred to the energy companies to "burn" energy. Even if dollars aren't exchanged in the transaction, "value" has to be extracted regardless for confirmation. That value is "burned" by consuming non-renewable energy.

You might say that's exactly what credit card transactions are, (which is not incorrect) but the burn rate of Visa per transaction is much less than BTC.

This shows the cost of 1 BTC transaction vs 100K Visa transactions.

https://www.statista.com/statistics/881541/bitcoin-energy-co...

What this means is that if you reduce the "burning" cost per transaction in BTC, you can keep the value in BTC, and I'll be less cranky about it, since you're not hurting the environment.

> So unless you burn cash in a fire or counterfeit money, the only entity that can create and destroy money is the Federal Reserve.

I think this is generally false as a premise depending on your definition of “money”. If your definition of money is equivalent to US dollars then I guess this could be interpreted as correct, but other countries have “money” that isn’t issued by the Federal Reserve (the Federal Reserve being what we refer to as the US banking system)

> The price of AMD stock can go up and down ("value") but the total dollars created or destroyed is always zero. Same is true with BTC.

I don’t understand why you’re comparing the “value” of a stock or bitcoin with the “amount” of dollars. A fair comparison would involve the value of the US dollar, which is subject to change (take a look at the Forex market to see people capitalizing on that every day).

> The miners spend money burning energy which removes "value" from the economy as a whole

“Burning energy” is not removing value, it’s providing value by means of strengthening a proof of work blockchain. Whether that’s worth something to you is irrelevant to it being valuable to others.

> If I give you a ton of coal you can burn that for heat. But that removes the coal permanently from the world. OTOH, if I want to make a cryptocurrency with 10^86 coins and if I do that a billion times over, well, I have a limitless supply of cryptocurrency.

It seems like you’re saying scarcity implies value here. If that is what you’re implying, this arguments starts to take the form of a “straw man”. Bitcoin is not unlimited. Part of Bitcoin’s whole appeal is that there is a limited quantity of it to go around. Grouping Bitcoin with any other random cryptocurrency without that limitation will make any argument related to it a moot point.

> You might say that's exactly what credit card transactions are, (which is not incorrect) but the burn rate of Visa per transaction is much less than BTC.

I will agree that the amount of electricity to process a transaction on the Visa network is a lot lower than the energy required to run the Bitcoin infrastructure, but that energy just happens to be the price needed to pay for a decentralized proof of work blockchain. Even if you subjectively don’t believe Bitcoin is worth the value that’s spent to maintain its infrastructure, other people do and that’s reflected in the current economy.

> I think this is generally false as a premise depending on your definition of “money”.

Banks, exchanges (BTC or stock), and markets in the US all use dollars. So dollars it is.

"Value" can be represented by "money", but also by widgets, hay bales, labor, corporate stock, etc. AMD stock has "value" but is not "money".

> I don’t understand why you’re comparing the “value” of a stock or bitcoin with the “amount” of dollars

Dollars are transferred, but never created (unless you're the Fed). You "make money" by creating, or holding something of value and selling it. But you are not actually printing dollars -- really you're exchanging dollars for value.

Money doesn't have to be dollars it could be the North Korean Won, the Iraqi Dinar, Russian Rubles, etc, but it helps to have a stable currency to measure value. You could, yes, pay in Gold if you so desired.

> “Burning energy” is not removing value, it’s providing value by means of strengthening a proof of work blockchain. Whether that’s worth something to you is irrelevant to it being valuable to others.

That's where the disagreement is, right? I'll get to this in a minute.

> Bitcoin is not unlimited.

Today it is limited. It may change in the future. But more to the point, the original 21 million BTC came from thin air in the first place. There's only an "artificial" limitation in that people agree there will only be 21 million, and not a physical limitation.

People can't just code more coal or copper out of thin air.

So now the question is, how do you measure value?

> Even if you subjectively don’t believe Bitcoin is worth the value that’s spent to maintain its infrastructure, other people do and that’s reflected in the current economy.

Therein lies the problem.

All for-profit corporations want cash inflows that are greater than cash outflows. Corporations create things of value that other people or corporations want.

Profits must be objective, not subjective. "Value" can be subjective, sure, but profits must be objective.

So where do we find objective value in BTC? What about BTC drives economic efficiency?

Visa provides a bunch of services to merchants and customers. Yes they take a percentage of the transaction, but corporations realize the fee has value, since they don't have to do billing, fraud management in the VISA system, reconciliation, dealing with multiple banks, bad checks, etc etc etc. Those things have a direct measurable impact to a business, because they're cash outflows.

When we look at BTC we see money exchanging hands for BTC plus some money going to miners.

But what's more interesting is when money doesn't exchange hands, but when BTC is just transferred (like a gift). In that value must be extracted out of BTC in order to confirm the transaction because this needs to be converted to dollars to pay the electric bills.

Today most corporations that supported BTC have shut off BTC as a means of payment. The barriers of entry are high, and pricing BTC to the value of your goods and services is a hard issue since BTC fluctuates. That makes BTC hard to trust.

> but that energy just happens to be the price needed to pay for a decentralized proof of work blockchain.

No argument there, but I fail to see what huge advantage it has for businesses and the economy over Visa, say. The economic advantage for criminals OTOH is easy to see -- it just has to be less expensive than traditional money laundering.

But if crime is like 1% of all BTC use, and using it to pay for services is like 4% (numbers are pulled out of my ass to make the point) of BTC, then 95% of the perceived value of BTC right now is for speculation. E.g. Elon Musk isn't buying $1bn dollars worth of goods on BTC or Dogecoin.

The only way to make money on BTC then would be to create more demand for BTC. And that's certainly what it looks like from my viewpoint.

But in the end, if it's only purpose is speculation, well then we're burning a lot of real world resources for it -- hence "burning value".

The bulk of miner income is mining new bitcoins. And the money received from that goes to burning energy mostly.

So if someone new buys a miner btc at $54,000 today, that represents money paying for coal that was burnt. It isn’t profits and the money is gone. Effectively you are transforming $54,000 into burnt coal and a bitcoin.

Eg:

1. Miner expects $54,000 bitcoin sale. Takes $53,000 loan, buys coal, burns it. Gets bitcoin

2. Received $54,000, gives 1 BTC. Pays back loan

If you ask for your $54,000 back, it isn’t there. It’s gone.

(I know mining doesn’t work so precisely but that’s just a thought experiment to illustrate the dynamic)

By this definition, isn't for example USD a ponzi? Afterall, it is a Fiat currency now and not backed by a commodity. If I received wampum back that would offset it no? How does taxes/gdp protect you if taxes are of their self made up of USD.

> With a decentralized digital asset there is no sole person or company that profits from just lying to you about where your Dollar goes in exchange for the digitals.

Ponzi schemes don't have to run by single individuals, but perhaps by multi-person organizations like the mafia. The mob was the reason the RICO laws came to be.

And undoubtedly, the mafia organizations would collaborate to break up their crime into regions. Mafia group A would take the West, etc. Since they're a criminal organization, anti-trust laws were meaningless. There wasn't a requirement that the different mob bosses had to compete with each other.

That's interesting. Can mobs sue each other for anticompetitive practices?

Actually, kind of. It would involve appealing to other organized crime outfits that the given mob interacts with to have them reign in their behavior. Group A might think they can bully group B, and maybe they can, but they can't bully groups C, D, E, and F, who all rely on each other to not attract unwanted attention from the authorities or the public.

See: https://en.wikipedia.org/wiki/Apalachin_meeting

not quite suing, but it was a diplomatic way of resolving disputes and preventing them.

I think they would just kill each other, or take contracts out on each other for reneging on verbal agreements.

The mob isn't running bitcoin as a Ponzi scheme. People who buy bitcoin are not mobsters.

There are different waves of investors from the true believers who mined because the idea was powerful to the mt gox crowd, coinbase newbies, wall street / hedge fund crowd. Each group has a different reason. The latest groups are looking to make money and the earlier adopters have moved to a less popular more ideological coins with advantages over bitcoin.

Mafia no.. something else yes.

I think you miss the point. Ponzi schemes can be run by multiple organizations, and agreeing to a scheme together without signing legal formalities.

The big example of this would be the 2008 banking crisis where CDO's were bought and sold by multiple banks, but ended up being worth less than the pieces of paper they were printed on -- even though the banking industry should have known this were the case.

Once it was known, they sought to protect themselves first -- "Too big to fail", TARP were common terms of the time.

This isn't even true you can track wallet addresses and see their movement overtime. Look up a graph called hash ribbons. People hold btc for very long periods of time.

Rarely is it one person doing all the lying in a Ponzi scheme. Commonly they're labeled as multi level marketing, which then encourages more people to lie.

And I disagree that bitcoin proponents doesn't claim they make your money with for you: there's a lot of talk about the "deflationary nature" of bitcoin, aka the "magical scheme". Miners haven't burned all the money invested in bitcoin, but I'll admit this particular scheme has an unusually high cost of business, for a Ponzi scheme.

Most victims of a Ponzi scheme believe they're investing in something that will earn them money in the long run, otherwise they wouldn't have fallen for it.

Bitcoins long-term value is clear by examining it's usefulness: it's a tulip, at best.

I'll also freely admit that bitcoin is by far the most cleverly disguised Ponzi scheme yet, it's nature will probably only be obvious after the inevitable collapse.

A lot of people compare the Tulip craze to Bitcoin but the differences in the properties of each should make it clear why Bitcoin has a higher chance of maintaining value over time. The qualities that Bitcoin has, have typically been sought after in other high valued commodities.

Things like longevity and (protocol enforced) scarcity are previously things attributed to gold and remains one of the reasons why gold continues to hold value. Tulips on the other hand can easily wither away and its amount can grow exponentially. There are more reasons on why Bitcoin should be valuable in its own right, but many people who can write a lot better than me have written about it.

If you haven’t made up your mind on Bitcoin and still have an open mind to learning what it is, or even if you want more intelligent arguments to critique and debunk, I highly recommend reading The Bitcoin Standard written by Saifedean Ammous.

I agree that bitcoin has exactly one of the properties that makes gold valuable. It lacks the others though: you can actually use gold for a wide range of applications, from electrical to cosmetical, and it's rarity actually makes it even more useful as decoration, as it becomes a brag (look how much expensive gold I can afford).

You can't build electrical circuits from bitcoin, nor can you wear them as a necklace(I guess you could print your keys on a shirt or something, but then they wouldn't be yours for very long)

Scarcity alone isn't enough, you need a use for them too..

I don't believe utility is the driving force of gold as a store of value and if anything I would say it competes with it. I can assure you that most of the gold reserves in the world aren't holding gold with the future intent of having its value tied to its usage in circuits or beauty products, they're using it as a store of value. Being a store of value has utility in itself so again I implore you to look at arguments from someone who has studied Bitcoin a lot more extensively than I have and can give more hard data and context to the usage of similar commodities for comparison (i.e. the author of The Bitcoin Standard)

I used to think like that. Except most of the value of gold comes exactly from the same mindset it puts value on BTC and not on those properties you describe.

While gold does have some interesting properties in no way would that explain a 10 trillion dollar market cap, and the price of 55 000 $/kg, sorry. It's just not that much better and rarer than other competitor materials. If comparing by properties alone, there are materials that should then be more expensive. For example Platinum is almost half of its price, and yet way rarer, and it's properties more useful.

Its a ponzi because of how exchanges work. The exchange takes your money, gives it to some of the early dropouts. When you sell for a loss, you've been lied to about the utility of bitcoin.

You likely never used bitcoin for any of the many advertised functions. You held it, and sold for a loss. Some will win, more will lose. Its a concentration of wealth with a little more class chaos than normal because it's accessible to a more diverse crowd. It still ultimately fails to incentivize useful work to society and it's still going to cause wealth to concentrate in the wrong direction.

> Goods and services provided by humans have no intrinsic value but become precious simply there being demand by other humans.

This incorrect. I can purchase a home or food from humans and they have intrinsic value. If whatever market they were purchased on collapses, I simply live in the home and eat the food to realize their value, no further transacting required. Similarly with services I can pay for someone to build the home and harvest the food, the value is immediately realized because I can still eat, have a place to live and my time free to do other things. This is literally why the term "intrinsic" was uh, coined, to contrast these types of goods and services with things like precious metals which may have little intrinsic value.

> If whatever market they were purchased on collapses, I simply live in the home and eat the food to realize their value

If the market for food „collapses“ that means there is too much of it. Its value has gone down because your fellow humans do not want to buy any food from you anymore. Now, you can eat your own food, yes, but if you hoarded too much of it you will have to let the remainders rot away. In this extreme case the value of a good is only given by yourself. So your argument does not contradict the subjective theory of value at all.

On the day nobody cares for Bitcoin anymore, its value will go to _almost_ zero. Maybe some former Bitcoin zealots will keep the blockchain on their hard disks anyway as a memory. Then some subjective value will be left to Bitcoin even then.

I am in agreement with you precisely because I wasn't trying to contradict the original comment. I did want to correct their statement about intrinsic value because others will accept it as fact without understanding that things can be evaluated in multiple value systems at once, and their intrinsic value can be more or less independent of their market value.

The only way to make profit on bitcoin is to make someone else poorer by that amount. That's what makes it a ponzi - anything with this property that pretends to be an investment is one. Implementation details are irrelevant.

>Goods and services provided by humans have no intrinsic value but become precious simply there being demand by other humans.

Nonsense that's easy to disprove: try to stop eating food and start 'valuing' dirt as food. You will, of course, starve to death. Why? Because actual value is objective and exists regardless of what people think.

Intrinsic value objectively exists, but in most cases can only be estimated, correctly or not. It depends both on location and time coordinates.

Civilizations that estimate objective value too incorrectly collapse or get conquered. Those that estimate it correctly enough prosper.

The long term metric for any civilization is fortunately clear enough - energy use, also called the Kardashev's scale. It's a long term metric because foolish civilizations can waste energy in the short term (eg. by mining bitcoin) - but because it's wasted it results in less available energy in the future.

In cases like bitcoin there are no unknowns - it objectively has negative value and destroys wealth. It's backed by nothing and generates no income.

Don't get me wrong - I'm not saying don't play in crypto.

Never in history was it so easy to get rich by extracting wealth from others - which is what bitcoin and 99% of crypto in general is for. Is it a scam to promote it? My personal definition is pretty simple: it's a scam when promotion involves lies. Telling people bitcoin has value, while being a developer (thus smart enough to know it's worthless)? Scammer. Telling people it may go up in price (because other people may buy it)? Not a lie.

China was smart to ban crypto - they're too big to hope to profit at the expense of the west, and in fact most coins and tokens are held by Westerners, virtually guaranteeing it would end up as wealth transfer from China.

Crypto tokens can have real value - if they monetize efficiency increase in the real world. A smart contract economy is a possibility and it can exist - but right now it's all in the proof of concept stage. Without the ponzi factor I think eth should be valued between $1B-$10B (based on future potential, not current income), other smart contract platforms collectively at 20% of it, some defi tokens like MKR in the upper 8 figures - lower 9 figures. Everything else - worthless.

> The only way to make profit on bitcoin is to make someone else poorer by that amount. That's what makes it a ponzi - anything with this property that pretends to be an investment is one. Implementation details are irrelevant.

I'm really far from an expert in economics so I could be wrong but ain't that how the stock market works for non-dividends stocks?

Stock buybacks and M&A function similarly to dividends in that they return money to shareholders from corporate profits.

You don't need to distribute dividends to give money back to shareholders.

I agree with your definition of a scam, however:

> Telling people bitcoin has value, while being a developer (thus smart enough to know it's worthless)? Scammer.

There is little about being a programmer that qualifies you to declare Bitcoin a scam, or not a sacm. There is a set of programmers opposed to cryptocurrency that believes that their background qualifies them uniquely - that is hubris.

People don't need to understand any code to understand that Bitcoin is a spreadsheet.

Non-programmers can be easily bamboozled by marketing: for example they may sincerely believe bitcoin stores energy in some magical way.

For a dev there's no such excuse - they know for a fact bitcoin isn't backed by anything and all energy used for mining is irrevocably gone, and that no mechanism exists for bitcoin holders to earn transaction fees (because miners are a separate entity). There's no escape from knowledge that bitcoin is a negative sum game - which means claiming it's anything but a new version of a ponzi is a deliberate lie.

You do realise digital assets have to be created right?

Your entire statement is wrong. I'm surprised you managed to write so much without realising how wrong it is.

Sounds like you don't know what digital assets are, or what a ponzi scheme is.

Trading cards are ponzi schemes too. From an entertainment point of view, they are created for the purpose of being fun to trade. From a monetary point of view, they are a ponzi scheme.

Bitcoin is neither fun, nor solves a problem, nor has any use beyond monetary.

> Trading cards are ponzi schemes too. From an entertainment point of view, they are created for the purpose of being fun to trade.

No, not really. You're confusing the concept of intrinsic vs perceived value, and completely ignoring the concept of utility.

People who buy cards for fun do it because it's fun, just like we could spend money to rent a sports car, go on a vacation, or drive around a test track. The monetary value of a hotel say from last month is zero, but that does not make hotels any type of fraud.

What would represent a Ponzi scheme would be, say, advertising Beany Babies as a safe and guaranteed investment to attract speculators, sell them Beany Babies for a hefty markup, and proceed to leave them holding the bag.

Nope. Not confusing anything.

They might make a range of beanie babies, or they'll suddenly start using the range that already exists. A ponzi scheme can start anywhere in the lifecycle.

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