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Comment by snitko | Hacker News Reader

Bitcoin is not a ponzi scheme. It's a technology with actual useful properties. The code is out there to see.

If you don't understand why these properties are useful to so many people, I welcome you to the third world countries where you can't start selling your product to the rest of the world (even if it's a great one), because PayPal doesn't work with your country and cc processors won't let you accept cards from other countries (fraud risk). It's not just that. It's also that you don't have to report to anyone and go through all the tedious paperwork to incorporate BEFORE you actually made a cent on your product. When you compare the ease with which you can start selling your product with Bitcoin, it's just amazing. Government regulations stifle innovation and entrepreneurship, Bitcoin let's you break free.

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It can't be both? The declining rate of bitcoin generation certainly has ponzi-like properties. It seems like the primary motivation to mine is assuming that the value will go up as mining becomes more difficult.

So? Is Gold a ponzi scheme too? I don't see a problem with the declining rate of generation because you can divide Bitcoin up to some pretty small fractions. You have to really wrap your head around deflation, you know. It's a beautiful and healthy thing, it's just that we've been told it's not.

So you're saying it has ponzi-ish properties? Or not?

If you're always incentivized to hold something and never incentivized to spend it, it becomes more of an asset than a currency. Gold is an asset, too, but it has much broader market participation in addition to being "special" as a value store due to 6,000 years of tradition.

If you've got an asset with a lot of hype that's supposed to always increase in value, so you better get on board now unless you want to be a sucker, that looks a lot like a ponzi scheme to me. You can still make money on it, don't let me stop you. You're probably not going to refactor capitalism with it.

Additionally, (I'm assuming you're a little young and naive here, apologies if that's not the case), additionally I'd really suggest decoupling your personal political beliefs from investment decisions with real money. It never ends well.

No, I don't believe Bitcoin is a ponzi scheme at all. And I really don't think my age is relevant, you either have arguments or you don't.

But let's come back to that notion of yours

> If you're always incentivized to hold something and never incentivized to spend it, it becomes more of an asset than a currency."

Let's say all you got is 10btc and $0 in your bank account. And you need some food. You're probably gonna decide not to starve yourself to death because being alive tomorrow is more valuable to you than having more money and being dead. Thus you are going to spend your bitcoins (either directly or by exchanging them into fiat).

Now, what you probably wouldn't do is buy something you don't really need or want at the moment. And that's fine, in this case Bitcoin encourages responsible spending. Now, of course, you should understand why a deflationary currency grows long term - not speculation, but new products and services in the economy. If no one spends, then no new products and services appear, currency is not gaining in value. If it's not gaining in value anymore you have your incentives to spend back.

The major differences with a deflationary currency are this: 1. No one forces you to spend (like governments inflating your money), so you make decisions on your own. 2. Deflation is an ultimate tax that rich cannot avoid. If you make money, you will inevitably share it with the rest (their money gaining in value).

When it comes to thinking "this time is different" and "I have an idea to refactor the world economy", your age is VERY relevant.

Everyone thinks they have a simple way to fix everything when they're 22. By the time you're 30-40 it's amazing how much smarter the rest of the world got. You can take my word for it as regards politics and investment, or not, it's your money.

On the argument, you're implicitly admitting that you wouldn't spend bitcoins until you were completely out of dollars, because bitcoins will 'always appreciate'. That's kinda conceding my point as far as asset vs currency. You can sell stock for dollars if you're short on cash as well.

It seems that we agree on the effects of deflationary currency incentivizing not spending money. There's a few examples of that phenomenon happening in the real world, and none of them were really great for GDP growth (severe understatement). You know that spending by a lot of people is what adds up to that 14T GDP number, right?

> When it comes to thinking "this time is different" and "I have an idea to refactor the world economy", your age is VERY relevant.

Its really not. If you are trying to evaluate how good of an idea someone is likely to come up with, their scope of understanding of economics and past efforts in that field is relevant, and age is an extremely poor proxy for that. (It's exactly the same problem as using age alone as a proxy for to measure programming skill would be.)

If you have an actual idea in front of you, its better to just evaluate that rather than the source.

> Everyone thinks they have a simple way to fix everything when they're 22. By the time you're 30-40 it's amazing how much smarter the rest of the world got.

That's not universally true, and to the extent it is true, its significantly about increased focus on near-term self (or immediate-circle) interests rather than increased knowledge -- there's a reason why major advancements more often come out of work people do very early in their career.

" their scope of understanding of economics and past efforts in that field is relevant, and age is an extremely poor proxy for that. (It's exactly the same problem as using age alone as a proxy for to measure programming skill would be.)"

That's exactly the spot where I disagree. Understanding political-economy properly requires a certain amount of cynicism that can only come from observing the world for a while. Very different from programming skill. In programming, "this time it's different" can be true sometimes, we've only got 60-odd years of programming. In political economy, after 3,000 years or so, it's almost never the case.

For what it's worth, I didn't feel that way when I was 22.

> That's exactly the spot where I disagree. Understanding political-economy properly requires a certain amount of cynicism, that can only come from observing the world for a while

Cynicism hinders understanding, though it may be a product of understanding, and while cynicism may come from age, its a whole lot more related to particular experiences interacting with underlying personality.

> For what it's worth, I didn't feel that way when I was 22.

For what it's worth, I might have been more inclined to your simplistic paean to the magical powers of age and the value of cynicism when I was 22 -- or at least 17-18. At 40, not so much.

I was actually thinking about this comment, and I agree with you for all cases where we're not radically rethinking existing systems.

Note that I wasn't really arguing from authority except when giving him investment advice. Also note that I could tell his age from his arguments.

No you couldn't, I'm 28, not 22.

> It seems that we agree on the effects of deflationary currency incentivizing not spending money.

I'd say a deflationary currency incentivizes less spending, not no spending at all. That's the difference.

Now, your point about Bitcoins only being good for storing money, but not for spending. I don't really understand it. Bitcoin is in no way inferior to fiat currencies if you judge it by its properties. In fact, you can spend it much easier and faster than fiat. The adoption problem is a separate problem and it has to do with government regulations to a large extent and people not understanding the technology to a lesser extent. Both problems are temporary. But let's say Bitcoin is accepted everywhere, since we are talking about the idea of a deflationary currency vs an inflationary one. What would be the incentive for me to own any USD?

So, less spending = less GDP, right?

It could be. If someone spends money digging holes, it adds to the GDP, but is it good? Hardly so, because no one else profits from it and no additional value is created. The money are wasted, but it looks good on the paper. So why is GDP so important?

>So? Is Gold a ponzi scheme too? No, gold is used in almost every electronic device because of its conductive properties.

As for the miners, yes, they pursue their own self interest, of course. But what they are really doing is helping the network process transactions. So it's very similar to how Adam Smith described businessmen in a free market: they don't need to believe in higher ideals or something, they can be greedy and such, but they inevitably will do good.

You might want to read up on Ponzi schemes again. I don't see a connection with declining production rates of a product.

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