[weddpros]

There's no pyramid scheme. It's a hyped asset, to say the least, but there's no pyramid. Like a hyped startup, it doesn't do much yet, but it is promising, so people buy it. It may be "worth" much or zero in the end, it all depends on the final outcomes.

It's also the easiest/cheapest/most open asset to trade (depending on where you trade).

In the long term, Bitcoin can be seen as a safe heaven in case of economic chaos, like gold, but way easier to buy and hold. It can also be seen as an interesting economic experiment: what if currency wasn't managed by a government? Or you can give trading a try for a few $$ as a gamble (with more chances of success than in a casino).

It's also a useful currency in some cases: I'm a "digital nomad" which my bank can't seem to understand. Getting my Debit Card to work online from a foreign country, with an ever changing phone number (they insist on using SMS as a 2FA), sounds like an obstacle to them, but not to BTC.

[0bsidian]

I think most of the people putting larger checks into Bitcoin are betting that it will become a store of value asset.

Going from memory, a recent Bloomberg article called Bitcoin: "Gold for millennials".

Or, similarly, Peter Thiel said recently [1]: "it's like a reserve form of money, it's like gold, and it's just a store of value. You don't need to use it to make payments."

[1] https://www.cnbc.com/2017/10/26/bitcoin-underestimated-peter...

[romanovcode]

All people who are owning Bitcoin are betting.

[0bsidian]

Agreed, I was just trying to say that currently, one of the most popular investment theses for Bitcoin is "Gold for millennials", not "anonymous paypal" or "decentralised stripe".

[g09980]

A post [1] shared a couple of days ago made a thesis that BTC price needs to grow for it to become a viable "store of value." Maybe this is what we are seeing.

"Market cap size is critical for adoption of a store of value. It needs to be large enough to “fit” even very large amounts of fiat, ideally without affecting the market. Gold market cap is estimated at 7 trillion USD, which means that even the richest people can move all their assets into gold and not move the market. (At least one at a time. All of them at once will move the market big time).

Bitcoin market cap of about 70B USD is not large enough for even one of the richest people on the planet. This implies that if the market cap does not grow, Bitcoin is likely to fail as store of value."

[1] https://grisha.org/blog/2017/09/25/bitcoin-value-2/

[jungans]

FYI Bitcoin marketcap as of today is 120B USD but your point still holds.

[pbhjpbhj]

Ultimately that's true of any non-backed currency (and those too I suppose) isn't it, it's just the bet looks far safer for a country/region wide fiat currency.

I wonder if much of the medium term success of Bitcoin has been because the money put in couldn't be laundered readily in any other way, so whilst Bitcoin is a relatively high risk the alternative was just to dump the money without a way to use it?

[grey-area]

No.

People actually use other currencies as a medium of exchange first, and store of value second (usually they purchase assets to store value long term).

Bitcoin is the other way round (at present at least).

[weddpros]

Most currencies suffer from inflation: it's more interesting to buy now than later because your wealth will go down with time.

BTC with its fixed supply works the opposite direction, devoid of inflation: you'd rather keep your BTC as a store of value that will increase, than spend it on goods you can still buy later for fewer BTC.

[grey-area]

QED. It's designed as a good store of value, not a good medium of exchange which people want to spend.

[omgbananas]

I save more than I spend, so wouldn't I be mainly using it as a store of value rather than a medium of exchange?

[ihsw2]

Technically yes, you are treating it as a property rather than currency. Such a property is subject to positive and negative externalities (notably, inflation/deflation), and (where applicable) it is subject to taxation on transference (eg: inheritance tax, gift tax, etc).

From a purely economic perspective, cash is just another liquid asset. The distance from currency to store of value is quite short.

Physical assets are generally regarded as stores of value, however, in modern times, currency stability has resulted in currency supplanting durable goods as the primary store of value.

[grey-area]

I save more than I spend, so wouldn't I be mainly using it as a store of value rather than a medium of exchange?

Yes, you would. I'm not clear what you mean by it here:

If you mean Bitcoin, you're agreeing with my point, it's a good store of value first (modulo price volatility and external risks)

If you mean Fiat, don't do that long term, use assets.

[seanmcdirmid]

Are you investing your savings? No. Are you just holding it in a bank with little or no interest, then yes.

[charlesdm]

If it's intended to be a store of value, it's an asset, not a currency. Like property.

[npongratz]

I think I do not understand. If I possess a certain amount of currency, is it not my property?

And why would it matter what's the "intended" usage of it? Who determines intent? Might every holder of the asset/currency/property (whatever one calls it) have different intentions for it?

[deadmetheny]

Things have meanings in legal terms that are different from conversational terms, you know.

[charlesdm]

Property, as in real estate. :)

[weddpros]

You're always betting when you're investing. At least the odds are better than in a casino.

[wolco]

In some ways we all are but I think we are forgetting the most important aspect. Using it for payments. That utility use case is more important because at some point the price will go down

[Scea91]

That is the problem with deflation. People expect that their money will be worth more tomorrow so they are more reluctant to spend it.

[wolco]

But if you use it as a currency you exchange money for bitcoin as soon as possible and use it when required. Money is always increasing so you try to earn more.

[feedjoelpie]

Gold without millenia of collective psychology to give it staying power as a store of value once more useful, cheaper, and faster to transact cryptocurrencies get any uptake.

[dagaci]

Bitcoin isn't suffering from a lack of uptake, right now.

[mrhappyunhappy]

That’s why I got into bitcoin. It has far more potential as a global vault for store of value than a currency. I don’t expect it to ever function as efficient currency and don’t think that it really needs to given other crypto currency developments.

[pbhjpbhj]

It's like a pyramid scheme in that so long as people keep buying in on the hope of a profit you'll keep making more and more. As soon as people say "hang on this is a con" and convert to another currency then this factor of the supposed value of Bitcoin could deflate to zero. It's not formalised like a pyramid or MLM scheme but it has some of the same structure.

[buchanaf]

A pyramid scheme involves some form of active (fraudulent) recruitment to help increase the price of the asset. Bitcoin doesn't have this.

From what you described above, every single speculative/overinflated asset would be a pyramid scheme. That's not the case.

[zanny]

It is a bit of a fraud to claim bitcoin can ever replace fiat currencies, though. Its deflationary, has a fixed coin limit, is incredibly centralized, and its tx rate is awful and costs a ton to move any of it around the chain.

The only value in bitcoin is in how much it exchanges for at this point, and that is definitionally a pyramid scheme, because current buy-ins need more adoption to drive the price up so they profit off their investment.

3% of all addresses control 97% of all coins. 0.01% of all addresses control 21% of all coins. And bitcoins mint rate is slowing every four years and almost 80% of all bitcoin that will ever exist already exists.

Its absolutely a pyramid scheme. Early adopters were incentivized with large quantities of limited coins to persuade them to mine and participate when the value was low. Those really early wallets (circa 09-12) amassed over half of all bitcoin ever and are now worth extreme fortunes. Those fortunes are based on demand for BTC, demand for the tiny amounts actually left circulating.

The real question is how much of that old money is actually dead - lost wallets and lost passwords - and how much is just waiting to cash out for absolute fortunes. All it would take is one early wallet carrying thousands of BTC to liquidate to cause a panic.

[SippinLean]

What you said still falls quite short of a literal pyramid scheme, which has a pretty specific definition. There is no central organization to recruit new members. People that buy bitcoin receive a real, usable product. Every person holding bitcoin profits when the price goes up. This is all in stark contrast to a true pyramid.

The way specific ICOs are structured, I could see an argument for some kind of pyramid; but "bitcoin is a pyramid scheme" is easily proved false.

[mywittyname]

Well, there are two components to a pyramid scheme: 1. returns to early investors are generated by contributions from new investors. 2. Each new investor attempts to recruit two or more new investors.

The "profits" for existing investors are paid with money from new investors. So it checks the first requirement to be a pyramid scheme. Now, this isn't explicit, but people still understand that the more BTC investors, the higher the price.

And BTC investors go online and evangelize. They talk about how BTC is a full-proof investment that can only go up-up-UP. Even this thread is full of them. So that checks the second requirement to be a pyramid scheme.

[coryfklein]

Point 1 applies to Apple stock as well

Point 2 has nothing to do with Bitcoin. Yes, there are bitcoin holders that evangelize the currency, but there are plenty that don't.

You are not analogizing correctly - just because you can find a similarity or two between two things doesn't mean one is a metaphor for the other. See Hume's response to the Watchmaker Analogy[1] for more.

[1] https://en.wikipedia.org/wiki/Watchmaker_analogy#David_Hume

[SippinLean]

There are many more components to a pyramid scheme, you've purposefully left out the ones that clearly don't apply to bitcoin and gone with a definition that is too broad to fit.

Further, your first component leaves out the necessity of a purposefully fraudulent bad actor to redistribute the new investors' "investments" to old investors, instead of investing them. This is clearly impossible with a distributed ledger. Returns (and losses) to all investors, new or old, are equally distributed.

Your second part is clearly much too broad, in a pyramid scheme new members are promised a share of the money taken from every additional member that they recruit.

Simply saying "hey, this could be a good investment" doesn't make something a pyramid scheme, unless Apple is a pyramid because my financial advisor told me and one more client to buy shares of it.

[mrhappyunhappy]

Bitcoin is highly divisible so I think your point regarding it being fixed is unjustified.

[pbhjpbhj]

Have you bought some BTC, I made a killing on it, it's free money, get some now because after the fork you'll be able to bank at least 20% of your initial sum, ...

The peons in pyramid schemese usually aren't committing fraud, they don't realise that they're in a scheme, they're not lying, they are really convinced that they found the money tree and if only people buy in it will bear fruit forever.

I still think the analogy is useful.

[weddpros]

Forks are a corner case. As long as someone is willing to pay for the minority coin, why not sell it: the fact that someone is willing to pay for it makes it valuable.

"The peons in Theranos didn't commit fraud, they didn't realise they were in a scheme, they were not lying, they were really convinced that they found the money tree and if only people buy in it will bear fruit forever".

You can't call every company that has failed a pyramid scheme.

You can't call every company that seeks funds through VC or IPO a pyramid scheme, yet they know that they'll only get rich if others buy in.

[aw3c2]

> A pyramid scheme involves some form of active (fraudulent) recruitment to help increase the price of the asset. Bitcoin doesn't have this.

Haha, have you ever looked at what Bitcoin owners/speculaters post online?

[coryfklein]

More specifically, a pyramid scheme requires that you recruit others to make money. If you bought $10 of bitcoin 5 years ago and never told another soul or recruited another person, then you'd make a profit. The same cannot be said for a pyramid scheme.

[weddpros]

The same can be said of any startup/company.

Founders throw 1k$ in the pot, investors 100M$, the public 1B$, yet the founder has benefited a lot, by being there first.

If people start thinking "he's a con", the company's value will drop to 0. Bankruptcy.

Is the whole stock market a pyramid scheme?

A market isn't a pyramid scheme just because you didn't enter it at the beginning (that's also true for real estate).

The alternative would be a market where you'd benefit more if you enter last, which means there would be no incentive for anybody to enter first and create the market. That's why the alternative doesn't exist and markets do reward the first mover.

[mrb]

"It's like a pyramid scheme in that so long as people keep buying in on the hope of a profit"

You just described any investment. FX market, stock market, housing, etc. It doesn't make them "pyramid schemes".

[wbl]

I could buy a bitcoin and hope to sell it later. Or I could buy the S&P 500: a market cap weighted set of pieces of companies that will conduct business and grow by the time I have to sell them, and some will give dividends. Which seems better to you?

[cableshaft]

Determining that one thing is better than another thing (by however means you determine it, I think both are good for different reasons and have money in each) does not mean the less good thing must therefore be a scam, and definitely not a pyramid scheme, which has a specific definition that bitcoin doesn't fit.

Yes, bitcoin benefits from having more people participating in it, but so does Facebook, so does Twitter, so does Youtube, so does the Internet, so does the US dollar, so does the stock market, etc etc etc. That doesn't make these all pyramid schemes.

[coryfklein]

Historically speaking, if you bought bitcoin at any point and time and held on to it for 2 years it would outperform an S&P 500 index. We can argue about how long that trend would continue, but those who have chosen to invest at least something in bitcoin have made a good investment so far.

Yes, it is a high risk investment, and yes you could lose 99% of your investment. If you don't have a tolerance for that kind of risk, then bitcoin shouldn't make up much (if any) of your portfolio.

[wolco]

For the next few months you would be better off dividing the assets based on your risk profile. Based on current market trends the s&p may go down in the short term so bitcoin may allow you to spread that risk

[mrb]

Bitcoin changes the world: a permissionless decentralized financial ledger reduces payment friction hence boosts trade, gives access to the unbanked/underbanked, helps people escape inflation, etc.

[njarboe]

Investment used to mean putting up capital to create or own something that, with some work, would return a stream of income. Farmland produces food with the work of farming. A factory produces goods with lots of people working. A mine produces iron or copper with lots of machines and effort. With the financialization of the economy, lots of people are increasing their "wealth" by speculation and skimming a percentage on transactions. When people start believing that speculation is the only form of investing, society is in for a hard fall at some point.

[mrb]

By your definition, this still leaves FX trading as a "pyramid scheme". Trading fiat for fiat doesn't "put up capital to create something".

[matthewmarkus]

In FX trading people are putting up capital to create exchange ratios, which is information. Right now people are putting up capital to determine how much coin issued by a central bank with a "deflationary" bias written in code and run and administered by a collective (i.e., Bitcoin) is worth vis-à-vis USD. Something is most definitely being created.

[mrb]

You seem to be arguing that trading fiat↔fiat is comparable to trading fiat↔BTC. In which case I agree. That's the point I was making.

[IgorPartola]

You talk about a “final outcome” as if at some point we will all collectively say “great. We are done with Bitcoin and it is from now on and forever what it currently is.” That’s not going to happen. It may hit a period of more stability than it has now, but I highly doubt there will be a final outcome.

[weddpros]

You know what I mean... For a startup or for Bitcoin, people wonder "will it fly?".

I do think BTC is flying, but some are still sceptical, despite a 100B market cap...

[jstanley]

> Like a hyped startup, it doesn't do much yet

It does plenty already. I live almost exclusively on Bitcoin. I only get income in Bitcoin, I pay with Bitcoin whenever possible, and I have a Bitcoin-funded debit card for when that's not possible.

[mattpk]

Why? At the moment this seems like hassle, and possibly more expensive due to txn fees.

[weddpros]

I do understand... maybe I wasn't clear enough: it will do more in the future! but it's not Facebook scale yet. Coinbase has 10M users, not 100M, not 1B.

I do bet on BTC to change the world... so I pay in BTC when I can too!

[pawelwentpawel]

Does the company that you work for receive their income in Bitcoin too?

[jstanley]

I work for myself. My customers pay in Bitcoin.

[weddpros]

you could always use bitwage (never tried)

[mrhappyunhappy]

Just wanted to echo your sentiment about banking on the go. I’m sad to say that the world is still not very friendly to borderless people. We have to jump through hoops and pay unnecessary fees just to do basic of tasks. Somehow a vast majority of people I deal with have a hard time grasping that you can work on the go or from home and that the cookie cutter 9-5 lifestyle is not the only lifestyle out there.

[tixocloud]

The big risk for banks is that they need to know who you are and to a certain extent how to reach you if there ever was an investigation into your activities.

That being said, is there a way for a bank to always contact you? A bank designed for digital nomads would be a very interesting proposition for me given I'm in banking and am looking to discover new models.

[weddpros]

Yes, I think KYC is a problem with digital nomadism. All things administrative become a huge burden when you're travelling full-time, rent a furnished house in a tourist location without utility bills, etc.

Some banks are already trying to address such needs, like Monese (which I'm also using).

[tixocloud]

Thanks for the reference to Monese. What did you have to provide as part of KYC?

[weddpros]

Skype-like conversation in front of my passport + a european postal address... Their customer service has been very good.

[sharemywin]

I wouldn't keep a large portion of your "wealth" in it.