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Comment by lurch00 | Hacker News Reader

Bitcoin is essentially a giant pyramid scam. The early adopters have cashed out long ago. As mining gets more and more difficult, less people will cling to the liquid currency. Why trade with a deprecating currency, anonymous or not? The fact that the exchange rate is below the cost of mining should be alarming for many reasons.

I'd assume the creator/first adopters do not care, either way.

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It's free market, everyone is free to buy and sell as they wish. It's not a scam since there is the same information to everyone.

I'm pretty sure that the early adopters couldn't guess this year's rise in value, and couldn't guess the price drop either.

While I believe in bitcoin or cryptocurrencies in the longterm, I'm still pretty sure that bitcoin value will stay very volatile in the coming years. The stability will take time, and widespread adoption for this kind of innovation will take years if not tens of years.

Your reply missed his point as bitcoin is 'mined' not just bought and sold. The difficulty of that mining is set based upon the computing power of the miners. Add to this the fact that the number of coins available to be mined each day is designed to be reduced over time, and you end up with early adopters (formost of which being the creators) controlling a massive proportion of the total worth of bitcoins.

Well, I guess that most startups are pyramid scams, since the founders (early adopters) end up controlling massive proportion of the total worth of the company.

If the startup founders create the company specifically to sell a worthless product to investors, then yeah, it's a scam.

Also Bitcoin is not a company, any more than US Dollar is.

Only if they say they aren't worthless. Which in this case they don't.

How is BitCoin worthless? It's a tool that can be used for a variety of things.

Is that much better than printing money and distributing the new money to major banks? That is what the US government is doing now. Most countries do a combination of distributing newly printed money to domestic banks and the government itself.

You know that they don't just give the money away to banks, right? It's loaned. They have an obligation to repay it.

Thanks for that. I needed a good laugh today. :-)

Fine, money is loaned to a bank, and they have an obligation to repay the loan. With what does said bank repay the loan? Money, of course. Where does that money come from? Ultimately: other loans.

"It's loans all the way down..."

"It's not a scam since there is the same information to everyone."

does this really make something not a scam? As far as i've seen, most people do have access to the information needed to prove something a scam. It doesns't mean they will both find it, and believe it.

In any scam, the scammer promises profits which (s)he knows are a lie. No such thing happens here.

A lottery isn't a scam, even though only a few actually get money out of it. It's just gambling, and so it Bitcoin.

No, the exchange rate ($2.6/BTC) has still not fallen under the cost of mining for the average miner who selects the right GPUs ($1.8/BTC).

The current difficulty is 1468e3. It takes 2^32 * 1468e3 Bitcoin hashes to solve a block of 50 BTC. The majority of people mine with HD 5000 or 6000 series. If you pick efficient ones, you can count on 2 Mhash per Joule. The average worldwide domestic electricity price is $.10/kWh. So the average cost of production is:

2^32 * 1468e3 / 50 (BTC per block) / 2e6 (Mhash/Joule) / 3.6e6 (Joule/kWh) * .10 ($/kWh) = $1.8/BTC

There's a lot more to computing costs than $/kh.

Everything else are sunk costs. So, for existing miners, all that matters is $/kWh.

I'm in the school of thought that anyone who says Bitcoin is a pyramid scam is trying to scam Bitcoin and/or intentionally depress the value of BTC for personal gain.

I am an early adopter, I was one of the first 100 people to mine, and I've mined thousands of BTC (including 650 with a single CPU), and I wrote the most popular miner, DiabloMiner.

If it was a pyramid scam, why would I currently be ignoring the current price of BTC in USD? It just means the demand is currently low, and since I'm not selling, who cares?

Mining is not about making money, its about preserving the cryptographic integrity of the currency. Also, no, the exchange rate is not yet below the cost of mining for many miners. It will have to drop below $1 before everyone is out.

> I'm in the school of thought that anyone who says Bitcoin is a pyramid scam is trying to scam Bitcoin and/or intentionally depress the value of BTC for personal gain.

That is ridiculous. Anyone who criticizes Bitcoin is automatically a scammer themselves?

http://www.youtube.com/v/cpPABLW6F_A

(Not taking sides here, just pointing out some people conflate economics and war.)

"Pump and dump" scam is, I believe, the correct term.

http://en.wikipedia.org/wiki/Pump_and_dump

The mining difficulty is adjusted periodically to balance the computing power of miners. As people stop mining, difficulty will reduce.

I must agree it is massively stacked in favour of the early adopters, who could have made an absolute killing so far if they played things smart.

As a small-time miner, I don't care. I always thought the value should be stable at roughly $1 at this point in time. I am in it for the long haul, I am waiting to see where it goes in the next 5 years, not trying to cash out to dollars.

> Bitcoin is essentially a giant pyramid scam. The early adopters have cashed out long ago.

This may not be relevant, but not all of them have. Something like 800,000 of the early bitcoins have never moved in the blockchain since they were minted (leading to speculation that they have been held onto by Satoshi).

It is my understanding that Pyramid Scheme was an explicit, stated design feature of Bitcoin. Because the only value of the coins are in the network effects, there would otherwise be very little motivation for early adoption and the idea would have died on the vine. By giving a huge advantage to early movers, the whole system was kick-started.

I expect that the creator already considers the system a success. The goal was not to create an investment vehicle. It was to allow people all over the world to exchange value without corporate or government interference. $30/coin or $3/coin doesn't matter. Either way, it's working.

Of course it matters. If you "exchanged value" with someone in return for bitcoins three months ago, then approximately 90% of the value of your transaction has disappeared (whether lost by you, or someone else you passed the coins onto). Unlike hyperinflation of currencies backed by governments and banks offering interest, the only way for you to have retained value received in bitcoins was to dispose of the bitcoins in favour of something else. So after getting burnt by a lot more than Paypal exchange fees, you probably end up converting to a government/bank backed medium of exchange anyway. That's not dysfunctional?

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