Topic: Is Bitcoin a Pyramid or Ponzi scheme & what are the ramifications? (Read 16948 times)

Ron Paul says he was misquoted in the past on Bitcoin and he downplays the hype around Bitcoin:

http://video.foxbusiness.com/v/2916084919001?cmpid=cmty_twitter_fb

Add Alex Jones to the growing lists of prominent Libertarians that say Bitcoin is a ponzi-bubble.

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Gonzalo Lira explains why anonymity is so important but Bitcoin doesn't have it.

Gary North who is allied with Ron Paul, Lew Rockwell, the Mises Institute, and Austrian economics, says Bitcoins: The Second Biggest Ponzi Scheme in History.

Henry Blodget weighs on the bubble.

http://finance.yahoo.com/blogs/daily-ticker/bitcoin-heading-toward-high-could-1-million-175818638.html

Peter Schiff conveys many of the same points:

Link to the other parallel thread:

https://bitcointalksearch.org/topic/m.3682757

Actually you and I entirely agree. Very astute. I was actually pitching that outcome but it may be difficult to discern among the constant defense of the prior points. I stated two possible outcomes.

1. Bitcoin goes to $trillions market cap and we have systemic default problem on our hands.

2. Altcoins or other factor halts the ascent before that happens.

However, #2 forks into basically two possibilities and one of them is very scary IMO:

2a. Altcoin(s) and decentralized competition.

2b. Government supply electronic fiat currency.

I've known for a long-time what the government's strategy was, and now they are starting to reveal it:


They can accomplish it with the market failure of Bitcoin.

They have two main vectors of takeover:

1. Regulate the people and business who use Bitcoin, since it is not anonymous.

2. Technical takeover employing Amazon et al.

This thread has been published as an article at The Atlantic mainstream media publication.

http://www.theatlantic.com/business/archive/2013/11/bitcoin-is-the-segway-of-currency/281625/

Bitcoin Is the Segway of Currency

Silicon Valley thinks it's the future, but Bitcoin is more ridiculous than motorized scooters for adults.

MATTHEW O'BRIENNOV 21 2013, 1:02 PM ET

Can we get these half off if we pay with bitcoins? (Reuters)
We were promised jetpacks. We got Segways instead.

Well, we didn't get Segways. Nobody did. At least nobody other than mall cops, tour groups, and techies. Okay, and ironic polo players. But in any case, it's fair to say that Segway hasn't exactly been "to the car what the car was to the horse and buggy," like its founder Dean Kamen said it would. It hasn't even been to the moped what the moped was to the horse and buggy. Or what the bicycle was. It's just been a (sometimes morbid) punchline. And one that's almost too impossible to believe. Did you know that Kamen thought he'd need an around-the-clock factory churning out 10,000 Segways a week to meet initial demand? It's true. It's also true that he only needed to make 10 a week to do so.

This wasn't just self-delusion. It was mass delusion. Back in 2001, Steve Jobs thought Segway could be as big as personal computers. The venture capitalist behind Amazon thought it could be bigger than the internet. The entire internet. The only reasonable explanation for all this hype was that neither of them had actually seen someone ride a Segway. Because, as Y Combinator's Paul Graham puts it, you can't ride a Segway without looking like a "smug dork." And people generally try to avoid looking like that. They won't use something so inherently ridiculous, no matter how technically impressive it might be.

Like Bitcoin.

Now, for those of you who aren't techno-libertarians, Bitcoin is supposed to be a virtual currency you can use to buy things online. Except it's not really a currency, and you can't really buy that much with it. It's more like a dotcom stock—circa 1999. See, in just the last month, one bitcoin has gone from closing at a then-record $192 to reaching $788 on Monday. It then opened at $502 on Tuesday, before briefly rocketing up to $900, and ultimately falling to $646. Just your average 80 percent price swing. That's totally normal for currencies ... if you multiply their biggest swings by 80.

You can kind of see these absurd price moves in the chart below. But only kind of, because the vertical up-and-downs have come so fast that they've blurred into each other. It's almost as if Bitcoin doesn't have a single price at any one time, but rather a range of possible prices that depend on the observer. (Note: the red dots show each day's closing price, and the black lines show each day's high and low).

We can see this a little better if we zoom in on just the last two months. Bitcoin prices were pretty flat from the end of September through early October, but then (relatively at least) doubled slowly. Then they doubled quickly. And then even quicker—before falling fast. Not exactly a stable store of value.



So why has Bitcoin gone parabolic? And what does this have to do with Segway? Well, the short answer is we don't know why the virtual currency has exploded. Part of it might be demand from China (which you can see in this realtime chart of who's buying Bitcoins). Part of it might be the reduced supply after the FBI shut down and seized the drug website Silk Road's substantial Bitcoin holdings. And part of it might be pure mania. But all of these are just another way of saying that Bitcoin's design makes it prone to these boom-bust cycles.

Segway certainly knows something about design problems. Though in its case, its product worked fine, if zipping around on a glorified scooter was your kind of thing. The problem was you couldn't use the product without looking insufferably pretentious. Bitcoin, though, has deeper problems. Its product doesn't work, and its early adopters are still incredibly self-satisfied—because it's making them rich. But the product really doesn't work.

See, the idea behind Bitcoin is to create a decentralized currency that central banks can't inflate and governments can't tax. Basically, digital gold. And like actual gold, the only way to get new bitcoins is to "mine" for them. That involves running a computationally-taxing program on your computer that mostly generates gibberish, but maybe, just maybe, some bitcoins too. The key, though, is that mining for more of the virtual currency doesn't create more of it. That's because there's a predetermined number of bitcoins. Specifically, there are around 12 million today, and there will be 21 million in 2040—and no more after that. Of course, this limited supply means Bitcoin should tend to increase in value against the dollar. But only tend to. See, its deflationary bias means Bitcoin prices will go up and down quite violently. Think about it this way. The supply of bitcoins can't increase much to meet increased demand, so increased demand will make prices soar. And soaring prices will make early adopters try to cash out their winnings—which will send prices crashing back down.

In other words, Bitcoin is a Ponzi scheme libertarians use to make money off each other—because gold wasn't enough of one for them.

Bigger Than PCs and the Internet Combined?

But techies say so what. That this misses the point. That what's revolutionary about Bitcoin isn't that it's a currency with no state-backing. What's revolutionary is that it's a payments system with no third-party, like a credit card company, standing in between buyers and sellers. See, any time you buy something, it's a minor leap of faith. You choose to believe that the seller will deliver as promised—and if they don't, you want your money back. That's where financial intermediaries like credit card companies and Paypal come in. They make sure buyers and sellers are both trustworthy, and handle any disputes.

Now, it's nice to be able to get your money back if things go wrong, but that's not free. The middlemen take their cut. Bitcoin, though, has no middlemen. It's just a decentralized peer-to-peer system. So you can't get your bitcoins back if things go wrong, but there won't be any transaction fees. The question is whether non-enthusiasts will think this trade-off is worth it.

Actually, the question is whether anyone will actually use bitcoins to buy things at all. It's not clear why they would when its value can go from $500 to $900 in a matter of hours. Nor when so many people treat it as an inflation hedge. They think of Bitcoin more as an investment than as money. Indeed, researchers from the University of California-San Diego and George Mason University found that 64 percent of all bitcoins are being hoarded in accounts that have never been spent. And of the bitcoins that are being spent, a full 60 percent are on the gambling site Satoshi Dice.

There are companies trying to expand Bitcoin beyond its core constituencies of libertarians, gamblers, and people buying drugs. The startup Bitpay, for one, lets merchants immediately convert any bitcoin payments into dollars. The idea is it can charge lower fees without making companies take on the risk that Bitcoin's value falls. It's a clever idea that should make merchants more willing to accept bitcoins ... but won't make people more willing to use them. The people who have bitcoins still have no reason to spend them, and the people who don't still have no reason to get them. They don't want a currency whose value you can't predict from one hour to the next. They don't want to buy things anonymously. And they don't want transactions to be irreversible (and certainly wouldn't want that if they got hacked).

Every big idea starts out sounding crazy. But not every crazy-sounding idea ends up being big. History is littered with Segways. But for all its majestic dweebiness, at least the Segway was kind of useful. You really could zoom across sidewalks without anything resembling effort. I don't know why you'd want to, but you could. But what can you do with Bitcoin? Well, it's good for real and fake gambling. Since it doesn't have any actual fundamentals, it can be worth anything: Bitcoin 36,000 and 36 are about equally plausible. That's good for making money at the expense of people who get in the game later, but little else.

So the biggest difference between Segway and Bitcoin might be that even mall cops won't use Bitcoin.

On the utility of "transparency" bullshit and TBTF systemic risk Armageddon it creates:

From email someone wrote to me:

> > A few hours ago I made the comment that BitCoin = Amway for delusional
> > Libertarian wannabes.  I couldn't help myself.  Yesterday I said
> > something about the fiat pope (Bernanke) giving BitCoin his blessings -
> > the global mafia often reminds me of The Godfather.
> > Today a video began circulating of an interview with Max Keiser who
> > apparently said BitCoin is beautiful!  The mania is almost on par with the
> > religious fervor of a Pentecostal.  Will Keiser go into a trance next time
> > and speak in tongues?  lol

Your penis has an intrinsic value, i.e. it can generate offspring.

Tangible things always have some intrinsic value, even if just as landfill.

Intangible things only have intrinsic value if the shared idea is factually true (e.g. whether Bitcoin is a currency) or if (e.g. religion) the shared idea can never be falsified.

Back up to 13%. Looks like we ended on a positive trajectory.

There are no new arguments, just people wanting to spam the thread.

The End.

This has been explained ad nausea. Read the thread! Don't expect me to write it again. Go read mofo.

Correct Satoshi has the $100 and Joe has the $1000. The early adopters have walked away with the cash just as in a Ponzi scheme.

And that has caused the spot price to be $1000 / 10% of BTC. So Joe values his remaining stash at $9000 and Sally hers at $1000. But neither of them can get the $10,000 until a greater fool later investor comes in to buy from them.

The key here is that there is no intrinsic value as a currency even though Bitcoin is pitched as being one.

Joe can't go spend his $9000 to invest in the NYSE. He has to convert to fiat first and he can't if a later greater fool doesn't come give it to him.

This is so elemental and obviously a scam.

Yup. Thanks for agreeing with me.


Yup. Thanks for agreeing with me.


No you can not buy ALL goods with them, only a very few niche things.

Surely you see now why you did not understand.

Thanks for agreeing with me. That is precisely my point too.

The spot price deludes him into thinking his stash is worth more than it is. Thus this is not 100% transparent. Can't be.

All posts that are not on topic and of high quality debate will be deleted. This is a self-moderated thread.

I also deleted numerous of my posts that were tangential to the objective debate.

If it quacks, smells, and tastes like a systemic catastrophe mania, then it probably is.

Do we need to invent new names for fraudulent pump & dumpers who egg us into systemic catastrophe?

All your arguments, AnonyMint, seem to be based on your own assumption, that "Bitcoin can not be a currency".

I want you to to back this up with some evidence.

I am extremely sleepy.

I will obliterate this nonsense from my "friend" Risto.


Ditto YACoin.



Constructing a strawman is a disingenuous form of non-argumentation. It basically means you gave up before you started.

Must I quote from you the discussions in thread where we decided it has an amalgamation of ponzi and pyramid qualities. Surely you understand it is Marxism to require me to do your reading for you.


Not. Because you continue to blithe-fully ignore systemic effects.

No where do I see any dot.com stock professing valuations based on all 7 billion people one day buying in because it is a currency.

Currency is a very powerful implied con. It implies power far beyond any stock exchange, much less individual stock.


And none of those do we claim the economy-of-scale of the whole globe in one investment.

I strongly suggest you read Nicolas Taleb's new bestseller Antifragility.

The strongest characteristic of a ponzi scheme is the massive destruction it causes because the players don't see the systemic risk of pooling themselves. They are blinded to it by a mania.

And that is exactly what we have here today with Bitcoin.


Ha! You ignore systemic risk like any good collectivist does.


Bring all the world's money into one investment, then tell me how can the world function when that investment is not a currency.


You don't seem to understand that if you tie 7 billion people's shoelaces together they now walk as one.

Penny or nanopenny makes no difference. What matters is the relative potential energy outside the single TITANIC THING.


How you relate speculation to transaction volume by value is beyond me.  


You apparently don't know that the Power-law (Pareto is special case) distribution of wealth only applies at the top 3%:

"Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States" by A. A. Dragulescu and V. M. Yakovenko


In fact the 97% own very little morsels which is mostly always moving as spending and wages in virtuous cycle.

And we don't give it away, the must mine it which means put up resources and effort to get it.


Where I live that is 1-2 weeks salary and a months supply of rice. I realize you live socialist Europe, where everything costs 3X what it should do to unions and 2X Lafer rate taxes.

The more salient point is you can expose many more people to this neat technology and then they will think of ways to make money with it and become merchants, etc.

The networking effects are unfathomable.

You are a clueless technological neophyte because you've never shipped a download software to 1 million people. I have. I know there are a zillion unforseen interactions and spin-offs.

Yes. Yes.

By "us", I mean avoiding a world like 1984 which will come very rapidly now.

As you can see, most westerners are now socialists. We don't have many John Wayne's any more. I want to save the few we have and promote them to the top to run the world in freedom. The socialists don't comprehend where they are going.