Topic: Thought Experiment: Is Bitcoin a Ponzi scheme? - page 3. (Read 12342 times)

I had to actually read back and see what exactly my initial point of this argument was because I agree with your statement in bold. But my initial argument was that we are already at that stage where the exchange rate is too high and that it will have to come down first before the economy can grow at a faster potentially exponential rate and and that the sooner the hoarders realize this the sooner the influx of new goods and services will happen..

My point is that the current exchange rate is not realistic and already too high and all my posts was basically theory supporting why that might be true.

http://en.wikipedia.org/wiki/Ponzi_scheme


http://www.sec.gov/answers/ponzi.htm

Bitcoin does not pay returns, therefore, it cannot be a Ponzi scheme.

The value of Bitcoin may increase and it may later drop in value. Under this scenario, it can be rightly described as a bubble that popped, but it is not a Ponzi scheme.

Yes, there is.
When I charge all my goods and services with BTC, I have no limits on sending and receiving money worldwide, at no fees at all.
And I can be sure I will not be screwed by any financial institution or Paypal-like, with freezings and chargebacks shit.

They're not hoarding, they're saving. If there is "too much" saving, prices will get too high, and some people will sell. If they are unable to sell due to high exchange rates, their asks will come down. I guess I just don't see any problem here that won't be solved by market forces. I plan on hoarding some BTC, but I am also investing some into BTC companies and acquiring some more to sell to friends and spend on the BTC economy.

As a "hoarder", it's in my best interest for the economy to become as big as possible, not just for me to hold as much BTC as possible.

Btw it's very hard to prove any of what I'm saying because there's a time component involved. But that's why the theory behind of it all is so important since it allows us to fairly accurately predict these future outcomes.

I commend you for actually doing some research but unfortunately you're applying the learned knowledge incorrectly. The article speaks about money and not local currencies which is what BitCoins are the most similar to atm.

If BitCoins were the reserve currency and all prices were expressed in BTC I agree with you, hoarding wouldn't have been a problem. But they're not. Prices are in USD and EUR and so forth and you need to first exchange your BTC for one of those fiat currencies before you can buy almost anything. Sure we already have a few services and goods that have it's prices expressed in BTC and those prices may very well fall if the price of BTC doesn't which btw is a function of supply and demand. But then what's the appeal of charging BTC for those services and goods if they could charge USD or EUR or other fiat currencies at a higher price? There isn't one.

So BTC economy will either keep it's exchange price and lower prices for goods and services offered for BTC which will eventually shrink the size of BTC economy or the exchange price will fall and which will raise prices and make the BTC economy more attractive inviting more goods and services in which will then slowly lower prices and this process will repeat until every good and service is priced in BTC after which moment hoarding wont be a problem anymore.

But if at any point along that path hoarders tighten too hard they'll drive goods and services out of this economy and put this process in reverse.

Look like we got ourselves into an unsubstantiated debate.

Well, the "garbage" of austrian economists is many orders of magnitude closer to reality than the garbage of "standard" economists and/or keynesists.

Economists say always a bunch of garbage, Austrian included.

Hazek,

Austrian economists have no problem with "hoarding", which they actually call "saving".

See: http://mises.org/money/2s9.asp

Please tell me where you've learned all this "wise" logic of yours. What research are you basing on your beliefs? Because you make no sense.


I base my logic on the Austrian school of economics and a lot of research on monetary policies and world wide current affairs.

People absolutely don't just buy USD with their JPY if there's a cheaper option. Why do you think the world is waging currency wars right now where they are each trying to win the race to the bottom of their currencies. Every major economic power with their own central bank right now is trying to devalue their own currency so that their exports are more attractive and they can raise more revenues through exports to cover their budget shortfalls.

BTC will have to get attractively cheap enough for more people to buy some more. I'm not saying people aren't buying them at the current price but what I'm saying is that there would probably be way more buyers if they were cheaper. I mean FFS look at the MtGox bid vs ask ratio, does it really not tell you anything???

I'm not saying I want the price cheaper, the market is! And the market currently thinks 0.88 is reasonable only because you have hoarders who have no serious competition and can afford to prop up their desirable price. I mean I don't blame them, they shouldn't be forced to sell lower if they don't want but all I'm saying is that this situation doesn't make the price reasonable and that it will have to come down if BTC wants to grow significantly before it can go up again. I mean FFS it's basic supply vs demand: Right now there's huge supply and low demand, what does that tell you? Prices have to come down, that's what. Any they will!


And please for the future if you're just having some thoughts in your head which you haven't actually done any research on keep them to yourself. Because making statements is not the same as presenting facts.

It is not you but the market that will decide what a "reasonable" price is, and the market currently thinks 0.88 is  reasonable.  The exchange rate is irrelevant to the desirability of BTC as a currency.  Just because it costs 83 JPY to buy one USD doesn't mean USD are too expensive.  If you have JPY but need or want USD, then you will trade at the market rate, then trade back out at a later date if you so desire.

There IS obviously a strong incentive for hoarders to sell at some point:  profit.

I mean, say someone owns 100,000 bitcoins, as many very early adopters probably do.  Didn't such a person have a huge incentive to sell while bitcoin reached parity?

Personnaly I own a few thousand bitcoins.  If bitcoin was to worth 10 euros per bitcoin, let me tell you that I'd sell some of them!

Of course I won't hoard the euros I bought, but I'd buy a few stuffs with them.

Gold have intrinsic value based on industrial and decorative application. Bitcoin, on the other hand, have no such use outside of money.

I strongly believe you are wrong in regards with the bold part because if the hoarders wont sell and the prices stays too high no one is going to buy and the BitCoin economy wont grow. The sooner these hoarders realize that and give in and start selling the better it is for the growth of the BitCoin economy thus they have a strong incentive to sell and lower the price to a more reasonable one.

And IMO and I'm pretty sure I'm not alone thinking like this, $0.90/BTC although looking great to someone new just finding out about BitCoins IS to high for the current volume and interest and especially the bid vs ask ratio.

Some people posting on this thread seem to believe bitcoins have no intrinsic value.  That is simply not the case.  Bitcoins can be readily transferred electronically, mathematics and a widely distributed system of trust ensure their limited supply, transactions are pseudo-anonymous, they are impossible (practically speaking) to double spend.  It's incredulous to me that people could even imagine that bitcoins have no intrinsic value in the face of these facts.  It's true that if hoarders dumped their hoards on the market, the prices would fall, but certainly not to zero...and the hoarders would have little rational economic incentive to do that (I mean, it's not like a run on a bank...due to intrinsic value, it is more like a stock and as prices fall, they would find a natural level of support).

In fact, given these properties, one could argue that bitcoins have far greater intrinsic value than gold (which has similar intrinsic value, but is stuck in the physical world).

The thing with a ponzi scheme is that it eventually will have to collapse, and when it does, everybody still in will lose everything. However with bitcoin you might see massive price increase, a bubble. But once it pops the price will only fall to a certain point because people will eventually start buying again once they feel the price is right. And also, if bitcoin is a ponzi scheme, so is all other currencies.

It's kind of silly to say that miners who sell bitcoins aren't giving anything back. When they sell coins they are giving the best version of money I've ever heard of and getting crappy old dollars in return.

Is Bitcoin only a ponzi if it fails? Is every currency system a ponzi or become one after it falls?

The difference between Bitcoin and a Ponzi scheme is that all possible outcomes of a Ponzi scheme are win-lose, while Bitcoin also has possible win-win outcomes.