Topic: The Ponzi scheme argument (Read 5562 times)

Are you sure? IANAL, but most schemes involve fraud (Madoff's for example, which btw went on for decades), what would make them illegal even without explicit ban.

What is a funny-money scheme?

-MarkM-

The Ponzi scheme could not be based on other Ponzi scheme platform. We have pyramids based on bitcoins, so, Bitcoin itself is not a pyramid  .
It's commodity.

You may call it a scheme but i really doubt you can call it an original one
See: The bolded part of your quote!

Alot of people are very adamant to call it a ponzi scheme or try to convince others it is not a ponzi scheme. But the fact may be it is a different "scheme" entirely.

I really do love the potential of bitcoin as a currency, but I just can't see how it could transition into that.

And while it remains a gambling game of speculators winning money from other speculators it is definitely a "scheme" of some original kind.

I just want to post because I can ask, "so, APPLE is a ponzi scheme?"  They might be one of the worst companies when it comes to treating their customers badly, maybe apple users are masochistic and rich - I don't care as the products look clunky and unfriendly.

More seriously, the issue of dividends in companies is a choice of distribution.  Investors can choose to hold the same relative percentage irrespective of dividends and the dividend rate is driven more by tax efficiency than anything else.  You don;t need dividend income from a share in a company to realize value.

I look to some of the features of currency and Bitcoin has an advantage in low cost international value transfer and that is what I will use it for.  I would also recommend people read the original Ponzi scheme notes for how it worked - a stroke of genius for the time, but pure fraud.  I do not need anyone to value my otherwise worthless bitcoins, similarly, I don't need anyone to value my USD either.

I didn't say it would be a failure, and I think some of the slash dotters would have had the same feeling as me.  It was a disappointment when it came out that it used iOS and not the Full Mac OS, but I knew millions would flock to it due to it's simplicity and the Apple Logo.  I forget how long I've been looking at slash dot, but its been atleast 10 years.  I posted every now and then, but forgot my pw, and some reason recovery doesn't work, think I used a socal.rr.com email that I nolonger have access to.

The only clients on there for downloading are GRouPcoin and a play by mail thing that looked like it might potentially be able to be made use of with some work but that never resulted in any actual emails arriving at the order-submission address.

If it simply throws up a splash screen and exits I guess that explains why no actual play by email orders ever got submitted.

It worked for me, I would not have uploaded it otherwise. But it seems to be pretty much a failed experiment.

The real concept is not to need its own special clients. People wanting to control events on a planetary scale use Freeciv as a client, equipping it with the Galactic Ruleset which is available on the Freeciv forums. People just wanting a playable storyboard history of some portion of the events of the past use Battle for Wesnoth, downloading the "campaigns" from the add-ons system already built into that "client". People liking a more interactive, and single-character viewpoint use a Crossfire RPG client to connect to the CrossCiv server. Etc.

-MarkM-

That makes sense..  As is clear from your example about mining game resources to create some little thing as a sword - the value of such things may easily be on the order of picoBTC or less.  Even if bitcoin microtransactions were good down to the satoshi level, there would be a need for other systems to break it down further and so only use BTC indirectly.


I've had a casual interest in these sorts of things for a while, and am familiar with freeciv and battle for wesnoth.
Galactic Milieu hadn't hit my radar..  and even now that it has - I don't understand it.
(downloaded the client - it displays a splash screen and exits. Not much clue there)

Nevertheless.. what little I can deduce from the links above tells me it might be interesting. I'll try again if it hits my radar in a few months/years!

As to whether this sort of thing can help the overall distribution/uptake of bitcoin - I'd guess so.. gradually, but I still don't see anything happening soon.

Bitcoin turned out not to be great for microtransactions afterall.

But it is not the technology necessarily that causes this. At least not in the MMORPG field, where people can already be seen to operate at a financial loss, in fact fully expect to operate at a financial loss.

So my take has been that Bitcoins can take on the ghastly can of worms that is the interface to fiat currencies, freeing other blockchain-based currencies to do some of the things that the kind of fiat-currency-interfaces adopted by Bitcoin make difficult to do with Bitcoin.

The Galactic Milieu has already spawned a number of spinoffs of Bitcoin, not just to allow transaction fees to remain small in proportion to the prices paid for things but also because some "nations" want to float their own "national currency" on the "galactic market" and some players want to be able to actually play the forex markets and stock markets of the Milieu.

I have also set up a game that can serve as a distribution system, distributing virtual assets even to players who do not pay to play.

Not using Bitcoins directly gives a further step of remove from fiat currencies and all the hassles they can entail (accusations of being "gambling" for example) as well as a way to avoid the relative-to-prices "high" transaction fees of actual Bitcoins. (If you mine millions of tons of resources a day, and pay less than a bitcoin a month to play, each ton is worth only a tiny fraction of a bitcoin, but individual characters might only need to buy a few kilograms to forge a sword from...)

-MarkM-

So a few more niche markets open up over time..  but unless the value skyrockets and true microtransactions are practical - it still doesn't mean it's destined to serve the wider ecommerce market properly any time soon. (ie within a decade or so)

I'm not particularly tied to this scenario.. It just seems plausible to me that it could go the ultra-slow way.

Is it a reasonable assumption that due to the limited distribution,  the per BTC value must be very high for it to expand to other markets?

But just how does it get out of those niches?
The general effect of businesses running in those niche markets is to slurp the wealth up from the end-users into the businesses.
The consumers in those niches will presumably have a need to go back to the exchanges and get some more BTC to continue participating, while the businesses will cash out their BTC to other currencies in order to pay their costs.

I just see a situation where those little markets could sail along with a fairly low BTC value.. and there's still nothing really driving overall distribution.

Like any other technology, it will find its first success in the niche markets that it serves best. Over time, if it's useful, it will expand into other markets that it may not serve quite as perfectly, but merely better than anything else.

Wireless telephones found their first market with the wealthy. Computers found their first market with large corporations and governments. Bitcoins are finding their first market in the underground and geek economy.

Obviously, getting out of the niche is a large hurdle and many technologies never make it. But distribution friction is going down.

Yes, there's a chicken and egg problem. But the solution to that is niche markets where it's especially useful.

My guess would be 'distribution friction'.
By this I mean that because it's a global system, it really needs a very large number of bitcoin holders in order to be really useful or dominant in more than a few niche markets.
With the 21million coin limit - there's something of a psychological barrier to interest in the idea unless you can be a holder of at least a few whole bitcoins.
The obvious way for that barrier to disappear - is for the per bitcoin value to be extremely high. But without the massive distribution whereby 10's of millions of people have some millicoins or microcoins, there's little incentive for that sort of spread. (chicken and egg stuff I guess)

Part of this distribution friction is also the costs associated with converting other currencies to and from BTC, as well as the non-availability of exchanges in most geographical markets.

I'm not saying the 21million limit is an issue in itself - but somehow the distribution seems too concentrated.
One way I see that could help this - is if it were really useful for microtransactions and made headway in some related market (currency of choice for MMORPG virtual goods?) . This would give an incentive for large numbers of people to desire sub-BTC quantities.
Unfortunately I understand there are (at least for now) a few technical impediments to it being a good system for a vast number of truly small transactions.

I don't know if 'doomed' is quite what this implies.. but it suggests to me that the required timeframe for serious distribution of bitcoin could be in decades or even on the order of a century or so.

Bitcoin may indeed be revolutionary - but it might be our grandchildren who reap the real rewards.

I've come to understand the nature of 'ponzi' to be a function of focus, how close in (or far out) one zooms.

In light of this, it is far more practical to ask simple questions of Bitcoin utility, rather than (what are essentially) economic-philosophy questions.

So we go from: "Is Bitcoin a ponzi?"
to: "What is the definition of a ponzi?"
to: Screw it. What can I buy with a Bitcoin?

I think it could go on forever being used solely for those niche applications where it genuinely works best. I think that would cause its value to erode, which would be completely appropriate. Whether you consider that a failure or a limited success depends purely on your expectations.

In my heart of hearts, I believe bitcoins are doomed to fail. However, it's not because they're not a viable cryptocurrency, it's because they're the first serious attempt. We're bound to figure out how to do things better the next time around, and likely a superior replacement will doom bitcoins. However, no serious flaws have emerged yet, so the first mover advantage could carry. Oddly, that's kind of why I'm motivated to make them work. Even if bitcoins fail, we need to learn as much as possible so the next replacement will be as good as possible.

Does anyone know what the serious flaws that supposedly doom bitcoins are? Other than the fact that government actions could doom it, or a superior cryptocurrency (or one endorsed by large entities) could supplant it?

This is a fair point. How long do you give Bitcoin till it becomes utilized for its intended use? Or, put another way, what do you think would be the signs (if ever) that Bitcoin will not achieve this goal?

It depends on what the product is. If the product is useless or drastically overpriced and must always realistically be so, I agree. If the product is innovative and genuinely useful, then I disagree.

If you believe bitcoins can never become a useful and viable payment system, then it's really no different from investments in ill-conceived products of other kinds. The IPOs of the dot-com boom created huge values for companies attempting to make products that had no chance in the market. You can certainly argue that this is what bitcoin is, but that's not the same thing as a scam or Ponzi scheme. That's just a bad idea.

Slashdot is one of the original "Reddit" type sites.  It started in the late 1990's.  I joined in 1998, so it was around then, at least.  You could say Reddit and Digg are "Slashdot-type" sites.

But like any tech-heavy discussion site (say, like forums.bitcoin.org) you have a lot of smart people who think they know everything.  And Slashdot's users are consistently wrong about what they think will catch on with the "general population".  For example, they all thought the Apple iPad would be a huge failure.

So, looking at it that way, if the Slashdot users think Bitcoin will fail, it's now guaranteed to succeed!

This.


Bitcoin is comody now, which might be in future used as currency. Its like collectable goods, minimal real value, but high expectations and thus high price not a Ponzi.

It might very well be a bubble, but not a Ponzi. Ponzi should be used with centralised schemes where early investors are paid by later. Pyramid is bit more complex. As nothing is paid out, it can't be Ponzi.