Bitcoin is a Ponzi Scheme

I yield to no one is my disdain for bitcoin, but this article is just stupid.

"Bitcoin is a ponzi scheme"?

First, the article isn't specific to bitcoins; it applies to gold, silver, and a large number of other similar currencies.

Second, the article isn't actually arguing that bitcoins are a ponzi scheme; it's just saying they won't work as a currency.

So a more accurate headline would be "Law professor claims gold cannot work as a currency; ignores theory, history, and evidence."

If you want to criticise bitcoins, knock yourself out. (Want some suggestions? I can rant for ages about the sillyness of bitcoins.) But please refrain from arguing that since bitcoins are just like gold, it's a ponzi scheme and thus literally cannot work as a currency because the value will fall to zero. Because if you do this, someone will then point out that you are a flaming idiot who is embarrassing himself, the school he teaches at, and his family name.

If we're going to be wading through multiple Bitcoin posts per day, can we at least limit it to ones that aren't full of glaring factual inaccuracies and misunderstandings?

Do a find/replace in that article, replacing 'bitcoin' with 'gold', and all the points are equally valid. This demonstrates that the reasoning used in the article is flawed, as we know that gold has not suddenly lost all of it's value due to a more or less fixed supply.

Additionally, you can replace 'bitcoin' with anything with a fixed supply, say 'us dollars pre 1950', and the logic of the article remains unchanged. Again, this demonstrates that the reasoning used in the article is incorrect.

Perhaps bitcoins will be worth a lot, the same, or nothing tomorrow. This article sheds absolutely no insight to help us figure that out.

"Until central banks were invented in the 17th century, the money supply was unregulated even if governments did stamp coins. Other unregulated or private currencies have emerged from time to time—think of cigarettes in prison camps. "

They didn't have the same conditions as we have with highly networked computers, so this is not a fair comparison and thus can't be solely relied upon to produce accurate statements about the eventual long-term result of the usage of the currency.

"True, bitcoins cannot be manufactured beyond the limits set by Nakamoto. But there is no way to prevent future Nakamotos from creating bitcoin substitutes—say, bytecoin, or botcoin. If merchants are willing to accept bitcoins, they will be willing to accept the substitutes, especially as bitcoins become scarce and consumers scramble for substitutes."

Is this reasoning not flawed? Bitcoin has built a certain level of brand equity and track record, in addition to the fact that its difficulty to produce via mining damps the rate of its injection into the market. By the time any alernative virtual currency has caught up, it will have its own reason to exist – either by virtue of how it's mined or because some entity is backing it financially. The question of whether computational mining has a problem is not being pointed out concretely so there's no proof to verify that there's a more favorable virtual currency. So, if the other virtual currency is of equivalent quality and Bitcoin's integrity and existence (stability) remain then would not the users of the currency just as easily jump TO bitcoin than from it?

I read yesterday about a cloud hashing service. You paid $150 in BTC for a 1G/Hash slice of a 1T/Hash machine for a year. Or paid $250 (in BTC again) of ever. With an expect return of 5 BTC per year and 6 BTC per year respectively. The site offered 6000 slots available and the machine would be up by June.

My problem with that is it seems just like a scam. They are making $900,000 up front in an untraceable currency. They are proposing that you'll get an annual return of $720 at yesterdays rates.

My gut tells me that if its sounds too good to be true it generally is.

Gold has value in that it can be made into something, bitcoins have value only because of the perceived value. How is bitcoin different from the ponzi membership badge I have? What is going to make bitcoin still worth something in 10 years time, as in what's holding its value up other than perception?

What a timely and unoriginal hit piece.