Topic: Why bitcoin is very different from Ponzi/Pyramid/Bubble - page 3. (Read 3715 times)

Why bitcoin is not a Ponzi scheme...
1. No central authority.
2. No one is promising anyone anything.

It is very interesting how much history comes into the analysis for being a revolutionary concept. I agree there are unique aspects here and I will keep an open mind as to how things will unfold. I really don't know. I think it's great that questions about monetary theory are arising though, as most of the public never really stops to question the status quo other than bitch about the banks.

As for known reserves against derivatives (money et al), doesn't matter. From Breton woods to Nixon closing the gold window there was always more dollars issued than gold backing it. This was known by all who cared to inquire. The gold window was closed when France (only france) tried to convert their dollars to gold. There was not even enough to cover them. All the same it was fractional for 30 years before anyone called their notes.  Of course a bitcoin bank may not have the power to change the rules and so there is a distinction there.  

We do have a credit catastrophe looming for sure. I cover that in the video I published.  Nonetheless, even my very wealthy friends finance a lot of their purchases. All of my poorer friends do except the very poorest who cannot get access to credit at all. This is what I mean by people live credit. They love to finance and borrow. The devaluing of currency helps debtors pay back loans with cheaper money. There are downsides to this but given the choice it is a no brainer to finance in dollars rather than bitcoin. Unless we have an all out paradigm shift and/or the current system implodes (plausible if not probable), well I just see bitcoin as a payment service and a speculative vehicle for now, and probably a store of wealth like metals. The credit based system will carry on as long as people want to be in debt to possess more than they can afford. Which is probably forever.  

Bitcoin's CLEARLY not a ponzi or scheme or anything like that.  It can be used for things and transactions and it can be traded and it adds something that nothing else has (being a cryptocurrency).

The cultist is you. You are wrong about bitcoin being a pyramid or a ponzi. Factually wrong, it is not a matter of opinion or feelings. You have been told why you are wrong. You know perfectly well where to look up the definitions and any technical questions about how bitcoin works can be answered here on this very board or looked up from other sources if so preferred. You can even look through the source code yourself. And you don't care. You have made up your mind and there is no budging it with facts.

Well, I would be lying if I told that answers like that, coming from the current bitcoin community, surprise me. They really don't. This forum reminds me of times when I actually visited religious forums trying to debate their point of view. What I found out was that it is futile to do so, because religion is mainly defined by the dogmas it follows and dogmas aren't considered to be debatable.
The current bitcoin community is becoming more and more of an religious cult, not an community that is interested in technological development of finance. Most of the people here are totally clueless about technology or finance and I think that it is the main reason why progression with bitcoin is so slow. Most of the people here think that they actually give their contribution to the community by chanting the words of the holy scripture: "choo choo, to the moon". Why the community is like that? Well I explained it above, that the deflative nature of bitcoin attracts a certain type of people that probably also visit motivational lectures for finding shortcuts how do be a millionaire without any education or hard work.

With ponzi schemes you cannot typically buy goods or services with your investment.

You. Are. Wrong. There is no debating this. You are factually wrong.

Edit: About most of the rest that followed too, but that is not worth the trouble.

Yes, bitcoin can't be a bubble because bitcoin is a piece of software. But the bitcoin market system is in a constant trend of bubble forming and bursting.

Bitcoin has very little practical value in legal business models. Because all of it's value is still supported by the value of fiat money, it's just a gimmick for payment. A company actually has to spend more resources on accepting bitcoin payments then it gains. Currently bitcoin is adopted as an payment option just for marketing purposes. When some company adopts bitcoin then it can get a lot of free attention and maybe gain new loyal customers who are also loyal to bitcoin.
Cryptos will be serious alternatives to fiat only when they are able to support their own value. When bitcoin value isn't measured in USD, but for instance in LTC instead. Then will cryptos be more then a gimmick.

No it doesn't. It is already easily seen how cryptos have wealth distribution issues. For instance looking at the top 500 richest addresses (and it's only a fraction where most of the richest probably hold their funds in thousands of different addresses), observing the market manipulation and the artificial deficit created can already give you an idea how bad the wealth distribution already is. And it will only get worse, because the richer you get the more advantages you have in gaining new riches. And with deflative currencies you don't have to invest into new projects and use your money to some progressive actions. All you have to do is manipulate the market with numb minded tactics, sit on your money numbers and everyone will owe you more and more everyday. I am quite sure that deflative currencies would soon create a lot bigger wealth distribution problems then fiat. Only way to stop mindless hoarding with deflative currencies would be an heavily regulated market system that presents a lot of laws that prohibit hoarding. But that's a slippery road and will lead to centrally controlled economy and I know that it isn't a something pretty, because I have also lived in soviet union.

There is no fixed limit in the value of one coin and that is where the pyramid game is played.
I agree that bitcoin will probably see an transfer of value before it's collapse, because I also truly believe in the future of cryptos and the general idea of privatized monetary systems. I just don't believe in bitcoin, because I find it simplistic and full of determinative flaws. The progression with bitcoin is also very slow, so it will be quickly outmatched by an altcoin that is backed by serious people with skills and resources. Only reason why bitcoin is nr.1 at the moment, is because other coins have been created by students and hobbyists.

Only thing different with any other pyramid scheme, is the reward system. Usually, pyramid schemes use an individual reward system. Meaning, there is a fixed reward that goes directly to the older member for every new recruit and for other recruits that come after the new recruit. With bitcoin, the reward system is more general. Meaning, if you recruit someone, then everyone who are already in the pyramid will get an equal amount of reward. I think that this is a smart trick, since it makes the community stronger and that will hodl the pyramid together with more strength.



No it isn't. It's the same school of thought why we currently have inflation based currencies. Deflative currencies have an regressive influence to the economy. When you are in a situation, where it's more profitable to sit on your money and do nothing, then you can be sure that everyone will sit on their asses doing nothing. If money will lose value then it is more profitable to use the money as soon as possible and that encourages doing something and by that helping the progression of the economy.
The idea of deflation is attractive to those whose goal is to sit on their ass doing nothing and still being rich in the process. Most of the people in the world are like that and that is why most of the people aren't rich. They are only fixated in looking for new shortcuts, while they could use their time in working on something that would have practical value.
And my point was that money shouldn't be a value by itself, but it should only represent value. I was not talking about money having no value. You are putting wrong words into my mounth which you try to argue against. This is is just bad demagogy.

No. You are wrong. Look it up, there are very clear definitions.

That's just armchair pseudo-philosophy. No, economic religion more likely. You can't buy things with money without money being valuable. It always amazes me how hard it is for people to accept reality for what it is.

Lots of ideas here, I must say. First. A Ponzi scheme does not collapse because of the number of participants, but it fails because of its fraudulent nature; not all people are stupid. Bitcoin does not have such nature. Bitcoin is a revolutionary Network which enables payments without a third party; "in maths we trust". Second. Bitcoin supersedes conventional currencies because it replaces institutions like Fed by a mere 100 lines of coding; this not only makes Bitcoin much cheaper but it also makes it less (zero in fact) corruption sensitive. Third. A P2P network works as a virus, which is very hard to extinguish; the only real danger lies in an internal bug, which is very unlikely. Four. The most vulnerable properties so far, are Bitcoin's lack of anonymity and fungibility, yet all hands are on deck solving those problems; system's integrity is fundamental. Five. Alt-coins are used as playgrounds by the Bitcoin diehards for performing all kinds of testing scenarios; none of them will survive mainly because the best expertise is concentrated in Bitcoin.

You maybe don't understand debt and credit very well.

All there needs to be to create bitcoin credit is a reserve. This is easily created through certificates of deposit. Coins are locked in for 1 or 2 years at preset interest. Once a bank has a certificate of deposit they can trade it like it is money. In fact that is where money came from. Just gold instead of bitcoin.  They always have more certificates than gold. Eventually everyone forgot about the gold and just traded the certificates. Aka legal tender as we know it today. There is nothing new under the sun.

People like money. They will use Jpm because it is easy and immediately fungible.  Speculators and savers should go with bitcoin. But for ecommerce transactions and the 80% of the people who are a paycheck from insolvency they aren't much concerned with devaluation. There is probably space for both but we will have to find out.

People also like credit. You are much better off borrowing a devaluing currency than a deflating currency. Especially at low interst rates. I would much prefer to borrow dollars and repay dollars. Thus, the demand for fiat will probably remain the overwhelming choice for the broad economy.

Bitcoin is more like a rare earth element, artificial as it may be, I think it's value will hold in perpetuity because of who the early adopters are and the level of cultish devotion it already has, as a collectible in essence. But the altcoin deluge proves how not novel the concept is. The banks will catch up and dominate the payment processing aspect of it eventually. Of course they are in no hurry as much profit as they reap from it now.

I'd love to see visa and the rest crash and burn, they have taxed the real economy long enough and bitcoin is better. But you're dealing with serious power players and they will not get cut out of their own game to any meaningful degree if they can co-opt the technology.  And they can.  

People would go to JPM?  Don't think so.  One is a devaluing currency USD and the other is an appreciating currency Bitcoins.

As Bitcoin is deflationary (and massively so for the next few years), there is no incentive to borrow in Bitcoins and invest in fiat as interest rates would easily exceed 15%.  It is better to borrow in fiat and invest in Bitcoin.  To create fractional reserve banking around Bitcoin requires a bank be able to issue more bitcoins out of thin air.  Sorry, protocol does not allow that.  End of story.

mostly good points all the way around.

Here is a hypothetical. Suppose JPMorgan comes out tomorrow with an edollar that they control. They make it exchangeable at any ATM machine for 1 USD at a fixed rate.

Would bitcoin survive? I think so, but I think it would lose popular appeal. The masses would go with JPM. I suspect this will happen, though they have all vested interest in being slow about it (fees etc).

As for the bubble question I addressed the real bubble here

https://www.youtube.com/watch?v=BzcEiszx09g

Major concern. We are headed for a shitstorm of great magnitude and no solutions to speak of. Hence my bitcoin enthusiasm/hope.

As for the


Re credit being difficult, No it won't. All you need are savers and fractional lending system which can be built around bitcoin or fruit loops if you set it up right. The 1% won't diminish. It is not a static group, see. It changes every day. It always will. People get richer and poorer. There will always be a 1%. This is exactly the same mistake the Marxists made, thinking if you got rid of the ruling class and replaced it with common working class folks (like Stalin), everything would be better. It was a nightmare. Power corrupts. You think Zuckerberg is a paragon of integrity? He was not a 1%er ten years ago. Most of today's billionaires were not wealthy 20 years ago. Whoever rises to power will face the same temptations as today's powerful do, and most will fail accordingly.


Lastly I vote we change the name from Ponzi scheme to Madoff scheme. Ponzi didn't invent it, he just held the record for awhile. His total take was iirc about 10 million before it collapsed. Madoff took down 50 billion. We should give the devil his due.

Think that was all.

Well, the bitcoin market system is indeed a pyramid scheme. And bitcoin can't be a bubble, but the nature of the market can consist of constant bubble growing and bursting. It would be an Ponzi scheme if it would turn out that most markets are presenting falsified market data and the amount of fiat that is allegedly flowing into markets is not true.
The thing that makes bitcoin attractive to most, is the same thing that would be the end of bitcoin - deflation. Looking at the community, it seems that over 90% of people who are interested in bitcoin, are so because they have hopes of buying low and selling high. Deflation is the thing that attracts people who dream of gaining wealth by just being in the right place at the right time. We mostly see the same people visiting motivational lectures and reading books from Robert Kiyosaki on how to find a shortcut in being a millionaire. These people dream that the bitcoin pyramid will grow bigger and bigger and bigger, because if it does, then the current bottom of the pyramid will be the top in the future.
But the problem is that in an economical perspective, money shouldn't be considered mainly as value. Money should be the intermediate tool to help trade value, not be value by itself. If money is attractive as an investment opportunity then it is very attractive to speculation and that leads to hoarding. And that creates very big problems with price stability, and more importantly with wealth distribution. The rule applies that the more bitcoins you have, the easier it is to gain new bitcoins with market trading. The ones that have hoarded the most can actually know the future price because they have the means to  create the future price. That will lead into a snowball effect where the richest become even richer everyday and the bitcoin based economy would suffer bigger wealth distribution issues then fiat ever had. Inflation is still the key because money should be unattractive to hoard and should only be used as a tool in trading.
I think that most of the bitcoin community is ok with bitcoin deflative nature, because that would make them a lot richer then the 99,99% of humanity. That is the greed that drives the bitcoin community where everyone wants to be a lot richer then others and want to be so without actually doing any real work that would have any practical value. That is why the bitcoin market is indeed an pyramid scheme under the guise of technology. And the entire pyramid will fall at the critical point when there won't be any new people wanting to become the bottom of the pyramid with hopes of rising higher in the future. When the inflow of new people, who would rise the old people, will stop, then everyone wants out and it will be a total crash. I personally don't think that bitcoin will live long enough to meet this critical point of final crash. It is more probable that in a year or two, another crypto will surface, that will outmatch bitcoin in general quality and then most of the value from bitcoin will flow into this new coin.

My dear Thaaanos again with more lies.  Aren't we already in perpetual stagnation?  Europe with 12% unemployment and rising.  The US unemployment at 11.8% if participation rate was constant.  All this with $4 Trillion in money printing in the US alone.  China is printing even more money.  Japan is also manning the pumps.  

You don't want to admit - the world is already in trouble with the debt based fiat system.  It is not Bitcoin that is causing the problems.  Bitcoin is the foundation of a better monetary system. It will be a hard currency that will be even better than the Deutshmark because it is more trustworthy than the Bundesbank.  It will be the best currency.

It will be super difficult to create credit out of thin air with Bitcoins.  The 1% will diminish over time.  The world will be fairer.  Most likely we don't even need a banking sector.  They can all get real jobs.  Same goes for the economists.  (Have you personally considered astrology or maybe comedy?).  The world will be more productive without the parasitic financial sector sucking on it.

I would normally agree except that you are a government employee with obvious fiat interests. Fuck off.