Topic: Bitcoin Savings and Trust is probably a Ponzi Scheme: A Petition - page 11. (Read 25616 times)

Essentially, what you're suggesting is that he may have some source of money that's so lucrative or so enormous that he can afford to give money away. This argument works the same whether it's some absurdly successful retail business or he won the lottery and "it's his money and he needs it now".

How is he supporting Bitcoins exactly? If you assume that he's not a legitimate investment but a gift (which is what you're suggesting) then he's probably driving legitimate investments out of the market. How does that help?

In other words, again, it's a gift. That's certainly possible, but as for a reason why -- I've yet to hear one.

http://en.wikipedia.org/wiki/Utility is a good place to start, as is http://en.wikipedia.org/wiki/Decision_theory. The usage of a logarithmic utility function is just common sense (it basically means that a person worth $100K is as excited to gain $1K as a person worth $1M is to gain $10K) and was suggested as early as by Daniel Bernoulli; the formula given is just a straightforward calculation (second-order Taylor expansion of log combined with neglecting of E[X]^2, then optimizing the resulting function) (I reproduced the calculation from memory and I had a small error which I now fixed).

Since the approximation only deals with small deviations anyway, changing the utility function doesn't materially affect it, but it does change the effective value of T, which corresponds to the risk-aversity.

In general, no matter how risky an investment is and how risk-averse the investor, as long as it has positive expectation, it will be attractive if scaled down enough. Insurance can serve a purpose when it is impossible to scale down the investment (and in some other cases), but simple uninsured pass-through bonds can be scaled down.

Details: Utility is generally considered to be fairly accurately modeled as the logarithm of the total net worth. If the initial net worth is T and the gain from an investment per BTC invested is a random variable X, then the expected gain from investing a is

E[log(T+aX) - log(T)] ~ aE[X]/T - a^2 V[X]/(2T^2)

This is maximized when a = E[X]T/(V[X]). The approximation requires that E[X] is relatively small, so may not be applicable precisely to the problem discussed.

You just got a free lesson about marketing and why it works

Ah, interesting. I was just intuitively thinking that a lower-risk asset would be more desirable when I want lower risk, despite the lower return.

The insurance is a gimmick. Buying X bonds with 25% insurance at Y BTC each is equivalent to buying 0.75X uninsured bonds at (4Y/3 - 32/75) BTC each. This means that, all else being equal, buying X PPT bonds at more than 1.07 BTC each is dominated by investing 0.75X BTC in pirate at the same MPR.

The bonds in general are good for people who can't invest in Pirate at all, or too little to enjoy the higher interest rates; but assuming everyone is rational, the insurance shuffles some numbers around but it ultimately has no effect on who should buy them and what they gain for it.

Edit: Actually, I've neglected the time value of money in this calculation (which I think is fairly insignificant as far as BTCST investments are concerned). A more accurate decomposition is: Buying X bonds with 25% insurance at Y BTC is equivalent to buying 0.75X uninsured bonds at (4Y/3 - 32/(75(1+r))) BTC each and investing 0.32X/(1+r) BTC in 100% insured bonds with a return of r. If there are no other investment opportunities and money has no time value, r=0 and we go back to the previous case.

This looks exactly like a HYIP to me; I'd be pretty surprised if it turns out to be legitimate. I have purchased some PPT bonds, though. With the extra insurance, the odds of winning seems reasonable.

Lest my comments be misinterpreted, I'll clarify I'm not taking a side in this debate.

That's exactly what a person running a ponzi would want you to think.

At what odds? If it's anywhere near 1:1, I think nobody would take that bet. Even for someone who is 100% sure Pirate will default at a uniformly random time between now and Jan 1 2013, investing some amount in his program is an economically sound decision (maybe not legally/ethically) - let alone someone who believes he will not default in this time period, who would rather invest funds in pirate than offer collateral for this bet.

About the USD denomination, that even further complicates things, and you should consider instead hedging against currency risk by extending your short position on Bitcoinica.

For the record, I am also of the mind that Pirate is going to collapse. If it's not a ponzi, it's drugs or money laundering (both of which would make him enough money). For all we know, this could be how Silk Road is able to safely hedge orders, which would explain the need to grow. No matter what, though, this means that it could collapse at any moment - the only question is when.

Sorry dude, people here only deal in real money... BTC or GTFO.

Also, if you really were risk adverse you wouldn't take any bets, you would stay the hell out of Bitcoinica and from any kind of exchange market...

Your shit doesn't fly, sorry...

I'd bet against Bitcoin Savings and Trust in US dollars.    I don't want to earn BTC because I think it could lose value when Bitcoin Savings and Trust fails (and I'm slightly bearish on BTC in general).

I'm risk-adverse, so I'd want a longterm bet.  I'd bet it will fail by Jan 1 2013.  I'm also worried about bitcoin sites stealing my money, so ideally I'd like a trusted third party to hold us to the bet.

>>lol - must have a big chip on shoulder - been arguing against people making returns for a while.

>>http://www.campusactivism.org/blog/node/351#comment-711

>>Actually, a doom-sayer from way back.


Note: At $18, I correctly predicted that BTC was going to crash and wrote about it in my blog.  I shorted it down from $6 or $7 to $2.20 on bitcoinica (once it became available).  I sold out at very close to the bottom (20 cents from the $2 bottom).  My predictions and trades were dead on. 

Currently I've got a very small short of BTC which I started at $6.

The most I've lost on a BTC trade is a couple cents from my test trades.  My BTC trading record is one of a little skill and luck.  Mostly I haven't taken major risks because I don't trust the websites that do options (I spent over a month getting my money out of bitoptions.org - where I also made money, ask Peter.)

I'm a critical thinker. I'm now more positive about the possibility that BTC could succeed than back in June 2011 when it was surging through the roof and looked like a big boom/bust cycle, however there still are other competitors that could trump it (eg. a better effort than what the Canadian mint is doing with its alternative electronic currency) -- so I'm cautious.   

Instead of picking on BTC in general, I'm focusing on Bitcoin Savings and Trust.  I haven't posted much, but I've read 1000+ posts on this forum (I like the drama!) and have seen the BTC economy experience a ton of scams.



I missed where Pirate's identity is given.  Please provide a link.


If I was trafficking drugs or laundering money, I'd reinvest my profits (which would be substantial - otherwise I wouldn't be taking the risks).  I wouldn't need additional capital from people on the internet as that would expose my illicit project to too much attention and increase the odds of getting busted.   

I could understand asking for startup capital, but he is asking for startup capital AND for growth capital so that he can pay out 33.5% per month on additional capital AND make more than that so he will actually grow his operation (and not just pay it all out to investors). 

Confirmed. Everything is all cleared up.

Thank you.

I've PMed you again, hopefully bringing this matter to a close
Sorry for not responding to your many PMs.

Yes, I confirm that I have received a pm as explained to me there were technical difficulties with the personal message system that was suppose to send out mass notifications that I never received.

Please forgive me on both parts of me taking it in public as I didn't want to send more pm's that I already had to you inau.

For the record, I have not defaulted on any loans from pekv2 yet (or defaulted on any other obligations).  pekv2 will confirm this.  I have contacted him regarding the PM.  I fully intend to repay pekv2 and my other lenders.

Also, for the record, I will not default on loans just because you do not PM me, or just because I miss PMs.  They are recorded in a spreadsheet, by username and bitcoin address, with multiple backups.

You can't make money out of jealous dead beats who can't even afford 100BTC to have an account with BTCS&T

Someone more creative than me should modify the form below and release a Bitcoin version of it

Did you forget I'm on UTC+12?

Detractors are making it seem as though pirate is teetering on the brink of insolvency. Bitcoin is a growing ecosystem. You could run the most horrid service with cooked books galore and still have a decent chance of profiting handsomely. Growth can cover up a lot of issues.

Meanwhile, the opposite of that is the existing fiat monetary system. I'd be more concerned about default in that arena than anything going on with Bitcoin, pirate included.

I think we've all been so conditioned to expect fragility due to contemporary weaknesses that it's being extrapolated and projected onto everything Bitcoin.

Case in point:


As for the situation feeling eerie - it always helps to understand an approach. If you don't see how it works, there's no shame in staying away.

Beats me. I don't bet, but the OP, believing as much as he does it being a ponzi scheme, should bet.