Topic: Why bitcoin is very different from Ponzi/Pyramid/Bubble - page 2. (Read 3691 times)

You raise some interesting thoughts, by accident probably but feel I should comment. I agree with you on the last part. I hope someday our culture no longer associates living with one's extended family as derogatory. It's really fascinating, albeit tragic, that the societal imperative implies not only that you should not live with your parents (or grown children), but the implicit that the parents are not together either. I'm not sure why it's funny, to make a class distinction that forces the massively dysfunctional miserable drugged out culture we have today. By all means, perpetuate the stereotype and stigmatize family values, it's totally working out well for everyone. Get out of the house and go into debt to buy a shitbox of your own to flip to the next chump.

Which leads me to your "oh all these coins are pyramid schemes"... but first I will add my mom doesn't have a basement... let me help you grok this. CAPITALISM IS A PYRAMID SCHEME. All of it. You know why stocks boomed from 1950 to the 2000's? Because the world population went from 2 billion to 6 billion. You know why it is crapping out here? Because we cannot extract resources fast enough to downline the 7th billion with the gross excess required to feed the pyramid. Stock market IPOs oar pyramid schemes. Fiat money is pyramid scheme, decaying at fixed rate to guarantee loss to holders. Credit/debt is the ultimate pyramid scheme, requiring exact exponential growth and unavoidable collapse. This is fact. Social security, that's just a ponzi scheme but the differences aren't that significant. There is very little in modern society that is not absolutely dependent on growth. The rate of growth and collapse vary, if it is too short is a disallowed pyramid, if it is long enough it is an allowed pyramid, if it is a genefration r more it is often a legally mandated pyramid.

Think that was all I had to say. Good luck getting out of your shitbox.

to those that say it's not a pyramid scheme, I wonder how many of them would still be mining or buying if they knew the currency had a fixed value tied to a modest inflation rate with no huge price runups allowed at all, if such a coin existed.

Most alt coins, not all of them, most of them, are generated solely as pyramid schemes.. they start off with super high block rewards that diminish rapidly rewarding those who find them first. They are pre-mined with the creator of the coin already holding 5-10% of the coins with grand promises about the good uses coin will be used for.... some people have honorable intentions with crypto currency while others are just looking to profit. If all the miners with $20,000 rigs started to find that all the alt currencies had fixed, low reward blocks and low to no profitability with actual inflation rates that kept their coin prices from spiking all over the place, I bet you wouldn't have the interest in crypto currencies.

People are only here because they expect bitcoin to 'go to the moon' and they can lie to themselves if they want, but I'll admit why I'm here... to cash in trading alt coins.. pure and simple. If bitcoin becomes accepted as a currency, all the better, but that's not my primary motivation.

Having been involved with smooth talking people selling pure lies in the past, I can and do know that people will say anything as means to their end. Never trust anybody when they stand to profit from their activities. What's coming out of their mouth or appearing on the computer screen may not be what they are thinking.

I do love the wild west feel to these crypto currencies and plan to stay along for the ride though! I'm just not going to lie and pretend I have noble causes and that I would be here if I knew there wasn't potential for profit.. just like trading any stock. Time is money and there  has to be incentive for time utilized.

The main danger in bitcoin now is that such a small percentage of the users hold such a large proportion of the coins, just like in real life, the top is small and concentrated.... the riches belong to a different subset of the population.. INTJs laying around in 'mom's basement' to coin a phrase who now have the last laugh.. but nonetheless the result is the same.. wealth disparity. By the way, I always hated that phrase 'mom's basement' .. well now at least they can afford to move out.

Sadly I think that not many power companies will start using BTC. The main thing here is that the only value that a company will get in accepting BTC is marketing value, not financial value. Starting to accept BTC will get your company free press and you will get new loyal customers from people who are loyal to BTC. But in financial terms, you are actually spending more then you did when you weren't accepting BTC.
I think that the big companies will stay away from BTC because the marketing value can also backfire. People who control most of the BTC aren't mostly known and the market system isn't very transparent. For instance if it would leak that even the biggest markets are presenting falsified data to stimulate trade, then BTC would be called an all out scam by the media. And when that happens then noone want's to be associated with BTC.

Thanks by standing behind me

I was telling that if BTC is not rising, then it is falling. That is the pyramid scheme part that the price won't be able to sustain itself without a rise. BTC either has to rise or fall, there won't ever be any stability. The reason is deflation and how the main attraction to BTC is speculation, not in transfer of value or holding of value. When people see that the price won't rise then they will sell their coins because holding seems useless. The financial world doesn't see BTC in a religious sense like the hodlers here see. They see speculation as the only practical value of BTC and that is why it will lose value in their eyes if the price stops rising.
You just can't create a working currency with deflation and unregulated free market. It will cause an speculation frenzy that will turn the entire system into a big pyramid scheme.

I call that a sure bet.

I would add here that such is the nature of capitalism, and since bitcoin doesn't change that model, things will continue bubble and burst one after the other.
I believe that a true milestone will be (even a rally startline) when power companies accept payments by bitcoins.

kkaspar I stand behind you

I disagree.  Remember that money isn't wealth. Instead, it represents your right to make an immediate claim on wealth, i.e. useful goods and services. When you don't exercise that claim immediately and instead save your money, the resources that would have gone into satisfying your present consumption remain available to be immediately used by others -- including new businesses. You've effectively made a loan to the remaining holders of the currency who do spend now whether for consumption or investment. (They're able to buy cheaper because there's now less money chasing the same number of resources.) And that's why savers are rewarded with increased purchasing power over time in an economy that uses sound money. In such an economy, deflation is simply the market-determined interest rate for an extremely low-risk loan that can be recalled at any time.

And when I say that it's a market-determined interest rate, I mean it.  People frequently argue against deflation by imagining absurdly unrealistic deflation rates, e.g. "Would you buy a car that costs 1000 bucks today if you knew that it would cost 500 tomorrow?" No, probably not. Very few people would. On the other hand, in that scenario, you'd have LOTS of sellers willing to sell you a car today for 1000 bucks. (Even if you need your car, why not sell it today and buy another one tomorrow at half price?) Lots of people willing to sell at that price and almost no one willing to buy = that won't be today's market clearing price. The actual rate of deflation will reach an equilibrium reflecting people's preferences.

kkaspar thanx for your point of view, interesting reading
i like your statement about deflation - sitting on money doing nothing and why its bad, i agree with that and personally i feel its true in real world because i doing it too - just collecting coins because i know their value will increase if i dont spent them...

The current rate at which Bitcoin's purchasing power is increasing is obviously not sustainable indefinitely, but so what?  The "price" of a bitcoin doesn't need to increase exponentially forever in order to prevent some "scheme" from collapsing. Bitcoins are simply digital commodities whose value will continue to be determined by the intersection of supply and demand.  That value can go up, down, or sideways. And in fact, we've already had several extended bear markets where the price has fallen.  Now, your response might be something like: "Yeah, but the only reason people are interested in buying bitcoins is because they believe the price will continue to rise over the long-term and that can't continue indefinitely."  And my response would be to ask you to think about how money works.  No one actually wants dollars (or Bitcoins). They want stuff -- useful goods and services that can be used to directly satisfy their wants and needs. The only reason anyone ever agrees to accept money in exchange for providing something else of value is because they believe that later, they'll be able to exchange that money for something they really want. And note that it doesn't particularly matter whether people access the stored value represented by their bitcoins by exchanging those bitcoins directly for goods and services, or by going through the intermediate step of first exchanging them for fiat. (Consider that gold still serves a useful monetary function as a store of value even though almost no one "spends" gold directly.)

And so the inevitable end game for Bitcoin is not that you eventually run out of "greater fools" to sell them to; it's that Bitcoin's monetization reaches a saturation point. When that occurs, people who accept Bitcoin in exchange for fiat / providing goods and services won't do so because they expect its value to increase dramatically; they'll do so simply because they expect Bitcoin to hold its value (or increase relatively slowly at a rate that's commensurate with the growth of the underlying economy).

Bitcoin and the bitcoin market system are two different things. Where one is just a neutral piece of software, the other is a well marketed pyramid scheme.
And again I'm reminded of religious forums. Where I see fantasy, others see the word of an omnipotent god. And no explanations are given for religious dogmas, they just are so and I just am wrong for not believing it so.



Well, no one can predict the future, but many people can speculate the probable outcome. And I still haven't found one solid argument that the bitcoin expansion is sustainable. All I see is high hopes from people who wish for an easy fix to get rich.

A lot of FUD from banks I do believe.

This is beginning to look like another repetitive "semantic game." What you call a "pyramid scheme" others would define as building up a P2P-proof-of-work-trusted-Network, which becomes stronger and of more value with each participant. Where you interpret a relation between diminishing amount of participants and value, others understand that the rise and fall in price follow directly upon good-or-bad news about a future digital, yet vulnerable, currency; any new currency has to deal with volatility in the beginning. Nobody can know for sure wether this Bitcoin-Network is sustainable or not, whereas you seem to have some fortune-telling capacity predicting the latter. Anyway, my common sense tells me you are deliberately trying to spread fraudulent information.

The problems with fiat money are different. Fiat money is inflative, so it is not attractive as an investment. The service that central banks offer is relative price stability. They keep on track of world's resources and print money according to this and with planned inflation.
The problem with the banking sector is that they are overpayed and overprivileged. State law demands the use of their services with legal tender, there is no proper public audits of their work and they get constant bail-outs for their mistakes. It is so, because those in charge of the public sector are corrupt to the extent where they are not actually in charge. That is also why the public sector is having problems with debt, because the corrupt leaders keep using banks "debt services" even when they don't have to.
I believe that the current banking system will also collapse and the future is in private monetary systems that are judged by fair competition. And that is why I am interested in bitcoin at all, because it's one of the first major steps in the ongoing evolution of finance. It's just hard to understand how anyone could think that bitcoin itself could be sustainable or how bitcoin itself is the actual evolution.

Take a look at the fiat money pyramid scheme and why it has not collapsed:

Modern fiat money cost almost nothing to make, but people are still willing to give up their valuable things in exchange for fiat money, just because all the other people also accept fiat money as payment medium. They never worry that they can't find the next greater fool to accept that fiat paper

The reason this pyramid scheme did not collapse is history: Everyone already born into such scheme, they need a unit to measure the value, and there is already one unit available - fiat money, so they established a consensus of the value of fiat money from their childhood, once this consensus reached, it seldom changes. A perfect example of first mover advantage

Another very important reason that people don't dump their fiat money: Before bitcoin, they don't have other widely accepted currency to dump to (suppose that most of the governments are similarly operated, dump USD for EUR does not make a lot of sense, unless you are a foreign currency trader)

The main thing that makes the bitcoin market system a pyramid scheme is the sustainability. Bitcoin value won't be able to sustain itself as soon as the flow of new participants start to slow. We can see this from looking at the market history and the constant trend of bubble forming and bursting. People are only holding if they believe that new people will be buying and therefor will raise them higher in the pyramid. There are no annual dividends paid, nor isn't your invested funds put into practical use. Your investments will be used to grow the pyramid or pay out other participants.
You could argue that the investments go to practical use by rewarding miners, but I think that the mining arms race is one of the most idiotic things regarding bitcoin. Enlarging the miner network doesn't speed up transaction times, nor does it increase the security, because all the mining is pooled together into single points that could be compromised in spite how much network power they handle. The mining arms race is mindless and wasteful.
Important thing to consider is that bitcoin is still a gimmick as an payment option in the legal business world. It doesn't help companies make their payment system more efficient when adopting bitcoin payment. It makes the companies waste even more resources for the ability to handle bitcoin (reprogramming the accounting software) and to convert bitcoin to fiat after every transaction. Not to mention that the clients also have to pay the fee at the exchanges to convert their money into bitcoin. That is why the CC system is still a lot more efficient and comfortable to everyone. Only reason why some companies are currently adopting bitcoin payment is for free publicity and marketing reasons. Adopting bitcoin gets you a place in the daily newspaper and those loyal to bitcoin may become your loyal customers as well.
You can see how news about payment adaptation give very little effect to the market price. The main factor to have positive influence to the price, are new markets that will introduce a new wave of recruits.
And because there is very little practical (legal) use for bitcoin, is why there is very little intrinsic value in bitcoin. Remember that pyramid schemes also don't offer any real usable goods or services and the value it holds is created by new recruits.

But I agree that there are also stocks out there that could be considered as pyramid schemes (not amazon), and there are pension funds that have all the characteristics of an pyramid scheme. But to me "others do it as well" is not the proper justification here...

If you call bitcoin a pyramid scheme you might as well call Amazon stock, hell all stock in all companies, and of course SSI and pension funds across the board, pyramid schemes. You are equating anything that requires increased participation for growth in value a pyramid scheme.

Welcome to planet earth 21st century. It's all dependent on that.

If you would differentiate it from your run of the mill gifting circle or productless MLM, we would probably appreciate your point. Otherwise you really have none.

Actually the thing that distinguishes the bitcoin market system from an ponzi scheme is the amount of fiat that is told to be flowing into exchanges. If exchanges are presenting correct data about the amount of fiat flowing in, then it's not a Ponzi scheme. But if it would turn out that exchanges are actually presenting false data to stimulate trade, then the bitcoin market system would also be an Ponzi scheme. It would mean that the exchanges don't have the amount of fiat in their bank accounts that they present. It would also mean that, if a large amount of people would sell at the same time, then there wouldn't be enough money to pay the last sellers.

I myself am not ruling out the possibility that the bitcoin market system could be an Ponzi scheme. What troubles me are the constant issues what people seem to be having when trying to cash out their coins, especially with MtGox.

Again this childish demagogy or you actually didn't read what I wrote. I never sayd that bitcoin is a ponzi scheme, so again, you are putting wrong words into my mount. There is a clear distinction between an ponzi scheme and an pyramid scheme. And like I said, IF it would turn out that the bitcoin exchanges are presenting falsified market data about the amount of fiat that is flowing into bitcoin, then bitcoin would also be a ponzi scheme. But currently bitcoin can be considered as an pyramid scheme.


No I am not. Bitcoin falls perfectly under the general description of an pyramid scheme. Wikipedia: "A pyramid scheme is an unsustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public.". Only thing different from the pyramid schemes that we see everyday is the general reward system where the entire pyramid is rewarded for new recruits.


I was only told how you won't bother explaining me why I am wrong. I would be really surprised if you could explain me why I'm wrong. But I'm quite sure just another "whatever, you are not worth explaining to" response will follow.


Yes, and I have been telling you that bitcoin falls under the general definition of an pyramid scheme.


Well, I have to say it but you are stupid. The source code isn't hiding a secret pyramid that could be found. The pyramid scheme can be seen from the financial and marketing properties of bitcoin.


Yes I do care. That is why I argue with people like you. I'm really waiting for you to try and explain your point of view. But only thing I get is "YOU ARE WRONG! I'M NOT EXPLAINING ANYTHING, BUT YOU ARE WRONG I TELL YOU!"
This is so familiar and reminds me of religious forums.

The focus is the sustainability, not the definition. If bitcoin is a Ponzi/Pyramid/Bubble scheme that never collapses, people will still gladly join it 

The key is to identify those motivations to sell all the coins when bitcoin reached certain level of market saturation and the exchange rate can not rise exponentially any more. In that moment, it is a choice between fiat money and bitcoin

Yes. But the whole point is that France did get the heebie jeebies and ask for gold. By creating notes backed by bitcoin you are simply asking someone to make a run at you at some point.

Sure, it's cheap to borrow now. However, there are consequences when access to credit dries up. At some point interest rates will rebound, as they are currently doing. Your rich friends will start selling assets and your poor friends will buy less food. Hence foodstamp usage goes up and consumer demand drops.

There is already a paradigm shift going on. You just have to observe that people now have a choice to opt out into a non debt based non fiat monetary system called Bitcoin. It will happen gradually then all at once. Kind of like 2013 but with more people. Hopefully many, many more people.

I think the debt based system has already seen its best days. We are simply not going to get the credit growth rates that we used to get. China's credit growth in 2013 was 49% of GDP according to Fitch. Good luck to them with that. In the US interest rates are rising. In Europe, they are pretty much still a hard currency zone. All that is happening is Germany shipping out BMWs and taking IOUs in return. Shhh, they just haven't told the German public.  In Japan, they are still firing arrows to no effect. Abe's popularity is yet to hit rock bottom. They are just squeezing everyone in Japan via yen devaluation. There is not long to go, IMHO.