Nice job. Now if only some people would see the difference between an actual ponzi scheme like this one and bitcoin and other cryptocurrencies. That would be nice.
You might call the above a simplification; that is fine -- my point is that this is a (inaccurate) linguistic shorthand -- calling something by the name of something else which shares a characteristic, but it is inaccurate (a Ponzi scheme has a central organizer / hub), and bitcoin does not.
You're right that if you look strictly at the now, it resembles a Ponzi scheme, but there's an underlying intrinsic value that supports a given price. If there's not intrinsic value, price usually collapses in the longer run. E.g dotcom, many of the 200x price sales companies over the last year.
Many growth stocks with valuations far detached from fundamentals are very crypto like. Trading on likeability/goodwill rather than anything real.
The lack of intrinsic value is why Crypto is probably doomed to volatility forever.
> cryptocurrencies which have no such relationship to the real world
This is a key point unless the concept of the metaverse takes off; you're starting to see this change though. Look at the Coachella NFT as an example. People will pay to have guaranteed weekend 1 tickets for multiple years; there are years where this is basically sold out before public ticket sales but there's a status element to be able to go W1. These people (like young adults) will probably go for a few years, get bored (or have a change in lifestyle/priorities), then probably resell those NFT's to someone who's a few years earlier in their lives and wants guaranteed W1. This sounds like a ponzi scheme by the description many commenters here are using; the only value is getting some sucker down the road to waste their money for a guaranteed W1 ticket. There's a non-zero chance that coachella doesn't even exist 5 years from now. There's a bigger chance that it's not as popular and the value of any NFT is worth less then it is today. Yet it doesn't feel as scammy because of the real world event that's involved.
The NFT part of the product has no relevance to why it’s valuable. The valuable part is the promise by the event organizer to save a spot for you.
Every major sports team has had this product for decades. It’s literally the same thing as having season tickets to the White Sox or something. The blockchain has added no value to the transaction.
it does make it impossible to make and sell fakes?
On the other hand, it's probably easier for Coachella to maintain a public list of valid ticket NFTs than it is for them to maintain a P2P marketplace for items that change hands very rarely. And also it means that any fraud that occurs is Not Their Problem.
Well, yes… Buying a season ticket is primarily for the perks, events, etc - not as a long-term average Joe investment.
You can’t just call anything that can be resold as a Ponzi.
> some cryptocurrencies have expected cash flows
Ethereum has cash flow which is expected to go positive after they switch their consensus model from mining to staking this year.
At this point, I wouldn't buy any crypto that doesn't at least have a credible roadmap towards positive cash flow.
However, they are different from a Ponzi scheme in that there is a real business behind them, and no deception/fraud.
At some point it's only normal there's a push back against cryptocurrencies.
Also in the last 10 years, only a handful of tokens have had a somewhat usable blockchain which grinds to a halt anytime people share pictures of cats or monkeys and we're told to wait for another year or two for an update to whatever protocol is trendy at the moment. Rinse and repeat every year. Also also, every other year a cryptocurrency comes along and professes to be the second coming of God with solutions to problems with don't have.
So no, not interested.
The solution to that is to educate people on how Bitcoin is old dangerous tech, not to throw out all other blockchains along with Bitcoin.
> a somewhat usable blockchain which grinds to a halt anytime people share pictures of cats or monkeys
These chains don't "grind to a halt" in any sense of that phrase, they dynamically price a scarce resource (block space). The chain runs at 100% capacity during these spikes in demand.
> we're told to wait for another year or two for an update to whatever protocol is trendy at the moment. Rinse and repeat every year.
Every few years, cryptocurrencies upgrade their capacity using new technology, and every few years, enough new people start using them to saturate the new, higher capacity. There's nothing contradictory about that.
> Also also, every other year a cryptocurrency comes along and professes to be the second coming of God with solutions to problems with don't have.
Every other year a traditional tech company also comes along and professes to be the second coming of God with solutions to problems we don't have. But we don't judge Apple based on the failure of Juicero.
https://en.wikipedia.org/wiki/Sturgeon%27s_law
> So no, not interested.
You have a right to not be interested, but you're choosing to share your take, and your take is incorrect.
[T]he idea that the promotion of crypto thus far has existed to allow early adopters to cash out at the apparent expense of later adopters, while bringing essentially no other utility to any of its backers or the public at large, is pretty obvious.
By your definition, every successful stock on the planet is a ponzi scheme
High investment returns with little or no risk. --- Not true.
Overly consistent returns --- Not true.
Unregistered investments --- True in some cases, not true in others.
Unlicensed sellers --- same as above.
Secretive or complex strategies --- Not true.
Issues with paperwork --- Not true
Difficulty receiving payments --- Not true. Actually irrelevant.
The sales personnel or adviser are overly pushy or aggressive. --- Not true. Actually irrelevant. Not bitcoin or ethereum sales personnel or advisers exist.
The initial contact took place by a cold call or through a social network, a language-based radio or a religious radio advertisement. --- This one is a tough one since there are definitely devotees that likely were vital in the initial spread. In most cases people probably came into contact with crypto through the mainstream media though.
The client cannot determine the actual trades or investments that have been carried out. --- Not true
The clients are asked to write checks with a different name than the name of the corporation (such as an individual) or to send checks to a different address than the corporate address. --- Not true. Actually irrelevant.
Once the maturity date of their investment arrives, clients are pressured to roll over the principal and the profits. --- Not true. Also irrelevant.
A Ponzi scheme (/ˈpɒnzi/, Italian: [ˈpontsi]) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.[1] The scheme leads victims to believe that profits are coming from legitimate business activity (e.g., product sales or successful investments), and they remain unaware that other investors are the source of funds. A Ponzi scheme can maintain the illusion of a sustainable business as long as new investors contribute new funds, and as long as most of the investors do not demand full repayment and still believe in the non-existent assets they are purported to own.
I think that's the key part that contradicts Bitcoin. Nobody believes that Bitcoin is a business that generates profits, and everyone is aware that when they cash out, other investors are the source of funds.
There's no illusion of a business, and no assets that are promised to exist but don't.
IRS wants to crack it and awarded $1.25 million contract: https://cointelegraph.com/news/chainalysis-and-texas-firm-wi...
Hundreds more too, I list them in most of these threads and yet every time, same question. The amount of people who confidently proclaim crypto does nothing useful without actually looking into the cool things that are happening is getting old.
Edit: when shills gets called on purposefully missing the point by arguing over semantics, they switch to outright denial and making stuff up. Actually, ethereum and bitcoin ARE both scams, in fact the biggest ones of them all. And that IS the point.
I think I replied in a respectful way to your original comment that was essentially just poisoning the well. I also feel it's a bit dishonest to reply to my comment by editing your post. You are now deliberately trying to discredit what I say by calling me a shill, this is not how we can have a curious discussion.
What is it that I am outright denying and making up?
Just claiming something is a scam doesn't make it so, you have to provide some sort of arguments to support your thesis.
https://www.youtube.com/watch?v=YQ_xWvX1n9g
Sources and Further Reading:
https://tante.cc/2021/12/17/the-third-web/
https://davidgerard.co.uk/blockchain/2021/03/11/nfts-crypto-...
https://amycastor.com/2021/03/14/metakovan-the-mystery-beepl...
https://www.stephendiehl.com/blog/crypto-absurd.html
https://blog.mollywhite.net/blockchains-are-not-what-they-sa...
https://twitter.com/davetroy/status/1478017698676228099?s=20
https://davidgolumbia.medium.com/cryptocurrency-is-garbage-s...
https://marker.medium.com/fintech-is-a-scam-a-listicle-in-ei...
https://naavik.co/business-breakdowns/axie-infinity/#axie-de...
https://www.gawker.com/culture/the-future-is-useless-expensi...
https://www.theatlantic.com/ideas/archive/2021/04/nfts-weren...
https://www.gamesindustry.biz/articles/2021-11-05-baseless-n...
https://www.technollama.co.uk/platform-is-law-the-cautionary...
https://davidgerard.co.uk/blockchain/2021/02/12/libra-shrugg...
Most of those links are about artwork NFTs, not Bitcoin or Ethereum.
There are a lot of cryptocurrencies that are scams, and there are a lot of NFT projects that are scams. I've heard respectable arguments that Bitcoin and Ethereum are not actually all that useful (which is for the most part the point your remaining sources attempt to make), but that's a whole world of difference from them being scams.
You should thank your friend for trying to deprogram you from the cult you've fallen for, and go back and watch the entire video. Because he makes excellent and "technically accurate" points about the cult-like behavior of that community, which explains why you're so quick to "ignore warning signs and dismiss criticism", and have a such a difficult time perceiving the pervasive fraud that's so stunningly obvious to everyone else:
>The shorthand WAGMI, We’re All Going To Make It, is aphoristically bandied about even in openly zero-sum competitions where, by definition, most participants explicitly won’t make it.
>But you can’t point that out, because that would be FUD.
>And if you’re spreading FUD then you’re NGMI, Not Going to Make It.
>And making it, getting rich, is all that matters.
>HFSP, have fun staying poor.
>These are synthesized into a No True Scotsman paradigm.
>The “we” in We’re All Going To Make It does not refer to we all, it refers to the select, the chosen, the Diamond Hands and the hodlers.
>Those who make it are clearly the We, and if you didn’t make it, then you weren’t.
>People who get angry about being scammed by a rug-pull or by malware or by social engineering are berated and belittled for not following the crowd.
>This incubates a community trained to ignore warning signs and dismiss criticism, a community with internal language and customs that are explicitly incompatible with outside communications.
>Skepticism is FUD from non-believers who are trying to undermine the value of your assets and manipulate a crash or trick you into being a paper hands.
>It all maps onto narratives of sin and deception, a chosen-few who are privileged with advance knowledge about the promised land, which they can achieve by holding strong to the rituals and expelling all doubt.
>The end product is a self-organizing high-control group.
But back to the main point: Do you earnestly believe that his extremely well-documented point that Bitcoin and Ethereum are riddled with fraud that's pervasively promoted by shills is "technically inaccurate"? Are you asking us to believe all those shills are actually correct and telling the truth, or do you deny the existence of shills and their get-rich-quick pyramid schemes?
Since you asked "why" "Bitcoin and Ethereum are scams", here is the transcript of Line Goes Up, which decidedly answers your question.
https://eizebasa.baby/line-goes-up
Which of the following quotes do you claim are "technically inaccurate"? And what do you claim are the "technically accurate" counter-arguments? Please refer to specific quotes.
>And as far as banking is concerned, Bitcoin was never designed to solve the actual problems created by the banking industry, only to be the new medium by which they operated.
>Peter Thiel, who also went from wealthy to ultra-wealthy off the Web2 boom via PayPal, loves crypto, and is friends with a bunch of eugenics advocates who promote cryptocurrency as a return to “sound money” for a whole bunch of extremely racist reasons because when they start talking about banks and bankers, they mean Jews.
>So just to head all this off at the pass, Bitcoin and proof-of-work cryptocurrency aren’t incentivizing a move to green energy sources, like solar and wind, they are offsetting it.
>Because electrical consumption, electrical waste, is the value that underpins Bitcoin.
>Miners spend X dollars in electricity to mine a Bitcoin, they expect to be able to sell that coin for at least X plus profit.
>When new power sources come online and the price of electricity goes down, they don’t let X go down, they build a bigger machine.
>[Drumming] In 2012 Vitalik Buterin, a crypto enthusiast and butthurt Warlock main set out to fix what he saw as the failings and inflexibilities of Bitcoin.
>Rather than becoming the new digital currency, a thing that people actually used to buy stuff, Bitcoin had become an unwieldy speculative financial instrument, too slow and expensive to use for anything other than stunt purchases of expensive cars.
>It was infested with money laundering and mired in bad press.
>After the FBI shut down Silk Road you couldn’t even buy drugs with it anymore.
>In practice you couldn’t do anything with your Bitcoin but bet on it, lock up money you already have in the hopes that Bitcoin goes up later, and pray you don’t lose it all in a scam, lose access to your wallet, or have it all stolen by an exchange.
>In terms of problems with Bitcoin, Ethereum solves none of them and introduces a whole new suite of problems driven by the technofetishistic egotism of assuming that programmers are uniquely suited to solve society’s problems.
>Bitcoin in particular, owing to its glacial transaction times, suffers from problems where the value of the coin can change dramatically between the start and end of a transaction.
>Ethereum is ultimately a central platform, and the fact that a few dozen people need to sign off on every major change before it can be implemented is largely meaningless and symbolic, with the validation network ultimately sitting somewhere between consortium and cartel.
>While the network of Ethereum miners and validators are not a formal corporation Yet There’s no mechanism in existence that compels them to act in the interest of users, particularly poor and disempowered users, where those interests conflict with their own.
>The movement of Ethereum from proof of work to proof of stake has been vapourware in no small part because the validators simply choose not to.
>The entire market is absolutely lousy with scams, and has been since Bitcoin first gained any traction.
>Every single scam structure imaginable has been dusted off and redeployed into this explicitly unregulated market where victims are largely without recourse.
>These range from institutional scams, like Ponzi schemes, pump and dumps, and insider trading, to middle-weight scams like gold brick and wash trading, to grittier scams like phishing and sending fake links.
>Pump and dumps, in particular, are conducted in broad daylight, since it’s not illegal, it’s just against the terms of service of the exchanges that you use to do it, so the worst case scenario is you burn your account.
>They’ll straight up walk you through the process of doing a pump and dump, no codewords, diagrams and everything.
>They’re notable as they’re actually a two-headed scam because, you see, you might get recruited onto the pump half of the scheme, or you might think you’re being recruited to pump, but you’re actually the dump.
>And as far as banking is concerned, Bitcoin was never designed to solve the actual problems created by the banking industry, only to be the new medium by which they operated.
Bitcoins original goal was to try and solve the trusted third-party issue. "A peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution." So definitely not be the new medium through which banks operated.
> Peter Thiel, who also went from wealthy to ultra-wealthy off the Web2 boom via PayPal, loves crypto, and is friends with a bunch of eugenics advocates who promote cryptocurrency as a return to “sound money” for a whole bunch of extremely racist reasons because when they start talking about banks and bankers, they mean Jews.
Guilt by association isn't an argument. You tried to use the same trick on me by calling me a shill, so maybe that's why you don't recognize the logical fallacy. Either way, it's not valid. It's a staple in any propaganda handbook though. Web2.0 was coined in 2004, two years after Paypal IPOd by the way.
We're on quote number two and the "arguments" are already at rock bottom, I'll stop here.
You've posted a wall of text about how they enable scams and how the community is riddled with fraud and pyramid schemes. Guess what, I agree with you.
You accuse me of ignoring the cult-like behavior of the crypto community, when I am more familiar with it than anyone. But the behavior of a community has nothing to do with whether a network communications protocol is a scam.
You accuse me of "ignoring warning signs and dismissing criticism" when I am intimately familiar with the warning signs that many cryptos besides Bitcoin and Ethereum have, and I welcome criticism as long as it's not based on a foundation of misunderstandings of the technical workings of the protocol.
You accuse me of having a difficult time perceiving the pervasive fraud that's so stunningly obvious to everyone else. I am acutely aware of the pervasive fraud, but fraud being pervasive doesn't mean that the Bitcoin or Ethereum protocols themselves are frauds.
You know what else is riddled with fraud? The internet, the telephone, and originally the telegraph (leading to a whole new class of crimes called wire fraud).
But to pick at just one of the technical inaccuracies:
>Ethereum is ultimately a central platform, and the fact that a few dozen people need to sign off on every major change before it can be implemented is largely meaningless and symbolic, with the validation network ultimately sitting somewhere between consortium and cartel.
Ethereum has roughly 2,000 nodes, the operator of each of which must approve a change and manually upgrade, otherwise they continue to participate in the unchanged version of the network. In practice, this means that every customer-facing exchange, custodial wallet, and service provider needs to "sign off" on a change in order for the fork to be legitimized.
>The movement of Ethereum from proof of work to proof of stake has been vapourware
Ethereum's beacon chain proof of stake network has been running since November 2020 and has received its first hard fork upgrade, Altair. Currently, there is a public merge testnet named Kiln, the second testnet rehearsing the "merge" event where Proof Of Stake replaces Proof Of Work as the Ethereum execution chain's consensus model. The code is there, the network is there, and it's all running publicly. You can download the client software today from the public github repo and run it to join the network and help rehearse the merge, in a way that is very close to the final specifications. That's the opposite of vaporware.
> in no small part because the validators simply choose not to.
Moving consensus models is done by hard fork, it has absolutely nothing to do with "validators choosing not to." Think of it like the Ethereum development team, with the explicit permission of the exchanges and service providers, changing the direction of a firehose to point at the PoS validators instead of the PoW validators. The PoW validators can't grab on to the stream of water and wrestle the hose away, their income stream just vanishes.
Those are 2-3 examples of technical inaccuracies. More technical inaccuracies in that video surround the characteristics, economics, minimums, and protocol liveness guarantees for Proof Of Stake, the nature and maturity of protocol scaling, the nature of bounded historical data size, and the nature of network congestion (it does not in any circumstances lead to forks, that's complete bunk).
If I chose to indulge your shotgun approach, we'd both be here all day and I don't really want that. This comment is already getting long and took a lot of effort for me to write up. Most of your copypasta can be summed up as problems with the community, not problems with the network protocols themselves.
I'm not here to try to convince you to like cryptocurrency, you're free to hold whatever opinion about it you want. It just really annoys me when people spread misinformation about how the protocols are constructed, and try to characterize them as scams when they are nothing more than distributed database software.
What does that even mean?
Especially since most cryptocurrencies factually doesn't fit the definition of a Ponzi scheme.
In the same way you can argue that investing in gold is a pyramid scheme (since it relies on its price going up), you can argue that crypto is too.
(Note that there are some real Ponzi schemes in crypto too, but they're not real cryptocurrencies either.)
There are two separate phenomena that give it the appearance of a Ponzi.
First, a Ponzi works by taking the money of new investors, and distributing it to past investors that cash out with “profit”. Similarly, BTC investing (as in, intending to make a profit from the difference between the buy and the sell price) works by taking the money of new investors (in an exchange) and distributing it to past investors that cash out, yielding a profit that, from a systemic perspective, will eventually cause someone’s loss. From that viewpoint, successful investors are unwittingly taking the money of people that may not afford the loss.
Second, a Ponzi works by making up assets (typically financial instruments) out of thin air, and selling them to victims (some of which will profit, many will lose), making a profit out of thin air. Similarly, the creator of a cryptocurrency typically puts itself in a position where they either premine the coins, or create an algorithmic schedule where most of the coins are created in the first few years, making them out of thin air, and giving themselves a significant advantage, as they will give themselves a generous chunk. They then sell those coins to victims, making a profit out of thin air. Even Nakamoto famously was flagged as an intensive miner in early years, and clearly did not expect to be deanonymized by the coinbase counter, since they changed it once it was found out.
It is true that there are dissimilarities as well. The largest one is the failure mode. A traditional Ponzi fails because people that did not get their “guaranteed profit, whisper past performances is not a guide for future performance”, are unlikely to reinvest, leading to a breaking point where everyone takes their money out until none is left. In the types of cryptocurrencies described above, people are often willing to reinvest even when they lost substantial amounts.
The failure mode typically comes many decades later, when lost keys (deaths etc) cause a slow deflation until no coin remains in use.
In a ponzi scheme the people higher in the pyramid are anyone who joined in the past and is trying to grow it. You could say Satoshi with his early mining and various other "insiders", whether their identity is known or not, are at the top. I don't necessarily agree that it's a ponzi scheme, although I'm sympathetic with many anti-crypto arguments, but that's the reasoning if expect they'd use.
http://content.time.com/time/specials/2007/article/0,28804,1...
Scripps-Booth Bi-Autogo Currency?
http://content.time.com/time/specials/2007/article/0,28804,1...
Bagger Currency?
There is nothing special about crypto apart it being digital and new... Art, collectibles, real estate... Many things have been overvalued with basis that prices have always gone up and being paid by those acquiring them later...
I don't follow. DApps didn't change to nfts, did they? I'm pretty sure they still are used and developed.
Big if true.
What is that tool useful for that isn't better served by other tools?
That is the question that has never been answered, at least not to my satisfaction.
Although whenever I hear claims of "guaranteed returns" or "proprietary investment technologies" I do think it may be a ponzi scheme lol
> - Upton Sinclair
And unfortunately nobody's salary depends on preventing other people from shilling get-rich-quick pyramid schemes. (Except maybe for dang's.)
2) If crypto "fails", I'd say that the reason for the failure is important in making an assessment. If it fails because the technology is too slow long-term or not enough people choose not to use it for a very long-time, that's one thing that would be harder to argue against. If crypto fails because it's effectively legislated out of existence, that would be hard to see that as anything but a vindication of the concept.
3) For what it's worth, while I consider myself to be a fairly rational person, nobody is absolutely immune to cognitive dissonance. You should constantly check your premises and examine your past predictions. That's part of why I support the absolute right to free speech and debate ideas and play devil's advocate a lot.
4) I stand firm on one prediction. If some government out there decides to use some crypto for their central bank, they're going to have their media pump out support for it, and many former crypto opponents will be reprogrammed on the fly and take on a pro-crypto viewpoint without skipping a beat if they're told to.
I also wouldn't neglect that a lot of people have been programmed by crypto ideology.
If the concept is "decentralized payments are resistant to government intervention", then wouldn't the government killing crypto be proof that the concept failed?
Anything can be physically destroyed and anybody can be physically jailed or killed, so I suppose there will never be a currency that is 100% immune to punitive government action.
But it seems like a vindication of the concept if some government felt threatened enough by crypto to have to forcibly go after it. Harmless bad ideas are generally not targeted (see furries for example) the only things that are forcibly banned are things that pose some kind of threat to the power structure.
1) Despite crypto being around for just over a decade and real commerce being transacted with it, we're still in the frighteningly early days of its use. I'd say that even super-smart technical people are just barely scratching the surface and it's probably going to be about 3-5 years before an average technical person has a proper understanding of what a blockchain is and how it works, let alone understanding the ramifications of oracles when combined with smart contracts. Everybody is entitled to their opinion, but there's no chance that the general public really understands crypto right now, especially when their impression of it comes from a media that doesn't understand it either.
2) Regardless of most peoples' understanding of it, it should go without saying that human rights should not be up to a poll.
> want crypto banned simply because its uses seem to be almost entirely restricted to criminal activity
1) I don't know what percentage of crypto uses are normal commerce and which are criminal actions, but I know firsthand that crypto is used for all kinds of business payments for years.
2) You might as well advocate banning paper cash, most banks, etc if you want to ban something tied to crime.
> and speculation (i.e. gambling).
It should go without saying that even the worst excesses of gambling are legal in a free society.
If you want to ban all financial speculation, you might as well ban all betting and the stock market too.
Most of your response is based on a failure to understand how useful things that can be misused are different from things that have virtually no good use and lots of bad ones. If Bitcoin was banned tomorrow, the world would be no worse off.