Aside from the fact that there are a steady stream of actual ponzis centered around bitcoin, many new coins and tokens are almost certainly hollow schemes designed to transfer wealth from the naive to the ICO creators.
Then you have the "mining" companies selling shares of mining power, but those sometimes turn out to be pure frauds - no mining nor equipment. Those behave just like ponzis.
It is probably in the average person's best interest to avoid it all.
The problem in India is that everyone looks around and sees what industry is making the most money and jumps in there. I know a ton of people who have switched from textile to diamonds to construction and so on because their friend is doing well in that industry.
Similarly, now a large number of actual ponzi schemes have come up in this space (Bitconnect, Dekado, etc) and if you look at their websites it is very easy to tell (Dekado claims to use arbitrage buoyancy software to generate 1.5%+ return per day). The problem is logic doesn't apply here when your friend has made XYZ dollars in that coin. Greed gets the better of you and you invest knowing that it is not possible.
There is an extra sprinkle of technology magic dust that seems to make many otherwise reasonable (non-technical) people believe absurd claims and make uncharacteristically bad decisions.
It's been amusing to watch HN's overwhelmingly negative reaction to cryptocurrencies. Yes, there are absolutely some shady things going on with cryptocoins, but the response to them here seems pretty overblown. What I suspect is that many startup types have sour grapes over how they could have made nearly as much money speculating on digital tokens as they did building their web or app business. It's too bad, since there actually are some interesting technologies beginning to come out of the cryptocurrency sphere. These opportunities will get overlooked by everyone in SV apparently, though.
Look up OneCoin. That is just one of dozens of scams riding on Bitcoin coattails, attracting (greedy/foolish) people, and taking most for a bad ride.
Most of these scams have been done in the height of the penny stocks days, and the SEC has (or had in the past) put a lot of effort into protecting less saavy investors.
Lastly, I work for a client in this space. My client is doing a legit business, but we constantly deal with customers who have made and lost money in dozens of these ponzis over the last couple of years.
Bitcoin is just like any other investment I don't see how people can have "sour grapes" about it. So you knew about bitcoin or even had bitcoins when they were fractions of a cent? So what...most people would have sold when they reached $5 or $10 or $50 thinking they were at the peak.
Couldn't we say the same thing about gold? I'm sure if you look far enough, you'll find someone willing to "sell" you gold and hold the gold for you when they don't have the said gold.
Or replace gold with US dollars or tulips or Amazon.com stock or whatever.
This absolutely has been done with gold mining ventures, just as it was done with oil drilling ventures. That's why some regulation on solicitation of investments in crypto currency ventures would be beneficial. It is developing though.
> It's been amusing to watch HN's overwhelmingly negative reaction to cryptocurrencies
Not all cryptocurrencies. Only the ones with "intrinsic value". Just because I print pieces of paper in my basement, doesn't mean that there is an intrinsic value in them.
> It's too bad, since there actually are some interesting technologies beginning to come out of the cryptocurrency sphere
100% agree with this. There are some interesting ideas and technologies.
> What I suspect is that many startup types have sour grapes over how they could have made nearly as much money speculating on digital tokens as they did building their web or app business
I can only speak for myself: No. No sour grapes. Since day 1 I thought Bitcoin was a pyramid/Ponzi kind of scheme. I would never have taken part in such a system.
> Not all cryptocurrencies. But the one with "intrinsic value". Just because I print pieces of paper in my basement, doesn't mean that there is an intrinsic value in them.
Basement paper doesn't have a guaranteed fixed supply.
the investors who don't know what they're doing will overlook it and miss out. The skilled investor will always have an open mind and always be willing to at least review interesting projects even if it is cryptocurrency or token based project.
At the moment 50% of all Bitcoins are controlled by less than 2,000 people(assuming 1 wallet per person).
It is becoming exponentially more difficult to mine them, and there is only a finite number of bitcoins in that can be mined.
Buying bitcoins is making these 2000 people richer.
I really don't understand people who put money into Bitcoin. Actually I don't understand anyone that puts money in a cryptocurrency that is supposed to have "intrinsic value".
It isn't making them richer unless they sell, at which point the wealth is further distributed. Also exchanges and custodial wallets skew the distribution numbers.
You probably need to exclude those for your calculation... but how would you know for sure? If we filter the top 100 for only addresses created or used in the last 2 years, then 26% would get dropped. This amounts to 867,448 out of 2,958,041 coins gone, or ~30%.
I'd like to see how that distribution at the top of the page changes according to various filters like that. Is there a site where I can get a list of current addresses without needing to scrape, or do I need to download the entire blockchain?
> It is becoming exponentially more difficult to mine them, and there is only a finite number of bitcoins in that can be mined.
This was planned and one of the greatest features (for a store of value): Limited supply. With limited supply you won't have inflation but deflation which is good for storing value but not good if you want to use it as a cash system. But for p2p cash use cases newer system like Stellar/XLM which integrate controlled inflation (1%/yr) are better.
> Buying bitcoins is making these 2000 people richer.
Guess you are confusing matters. Running a local wallet as a full node doesn't mean you make tons of money. You can run 20 nodes but your friend who is BTC trader could still have 100 times more BTC than you (so, running a node != holding a shitload of BTC).
> Actually I don't understand anyone that puts money in a cryptocurrency that is supposed to have "intrinsic value".
From another post: Bitcoin is a store of value. Moreover, it's one with a high liquidity, strong brand, limited supply, available in 180 countries, without banks involved and super reliable (gold doesn't have that features and please show me any other asset that has these features). So, it has a use and value.
Please don’t compare gold with bitcoin and make bitcoin look good.
How is bitcoin super reliable? Someone could buy it for 20k$ and next thing he is getting only 5k$ for it because of a crash. Or someone has hacked the exchange and it’s all gone.
How often was Bitcoin called a Ponzi scheme? When it was at 50, at 100 or at 1,000? Always.
If I look at my stock portfolio there are so many strange stocks and funds I once invested in. They feel much more like Ponzi schemes or pump and dump, especially the riskier funds.
If I look at my angel tickets into early stage ventures (done with FIAT) even worse.
And if I look at the countless ICOs based on Ethereum, this is the real pump and dump Ponzi Disney Land.
But Bitcoin? Seriously? I highly doubt that Bitcoin's founder or its early adopters intended Bitcoin as a Ponzi scheme.
To be fair the developers of Bitcoin seem to have abandoned the original vision of Bitcoin, peer-to-peer digital cash, and has moved towards being purely a store of value.
As transaction costs increase and Bitcoin's usefulness diminish it is becoming more and more like a ponzi scheme, a pyramid scheme or a game of greater fools.
For what is the use of Bitcoin when other cryptocurrencies can be a store of value and peer-to-peer digital cash? I see none thus I see no value with Bitcoin.
Couldn’t the store of value thing just be temporary, while Bitcoin gets well-known? To be clear, I don’t think vanilla Bitcoin is very viable as a widely-used consumer-level p2p transaction system (like cash or credit cards), but I think the volatility and meteoric rises in price would have happened even if that were the case, simply because the value of such a network depends heavily on the number of people and organizations who know about it and trust it enough to use it. It’s a massive chicken and egg problem that would be faced by any currency or payment system that isn’t forced upon a population by a government.
> Couldn’t the store of value thing just be temporary, while Bitcoin gets well-known?
Sure it's possible but we're already seeing a massive growth in altcoins which can actually be used for everyday payments while Bitcoin's relative marketcap is shrinking rapidly. For example Steam recently dropped Bitcoin support. BitPay, the payment processor Steam used, recently announced they will start supporting Bitcoin Cash (which have transfer fees of < $0.01) despite being Bitcoin maximalists until now.
This is why I predict Bitcoin will be surpassed by other coins with more user adoption.
> To be fair the developers of Bitcoin seem to have abandoned the original vision of Bitcoin, peer-to-peer digital cash, and has moved towards being purely a store of value.
How, exactly, has this “original vision” been abandoned? By supporting a maximum block size?
By making it clear that being able to use Bitcoin to pay for stuff isn't prioritized.
And yes forcing a 1MB blocksize totally destroys Bitcoin being usable as digital cash. When average and median fees are $30 - $100 it simply doesn't make sense.
So what? I value the use as store of value much higher than a cash system and I don't care if this was the initial use case. Go and find a better store of value (won't be easy) but it's easy to find another cash system (FIAT-based ones likes CCs or new upcoming ones like Stellar).
Monero is far superior as it's fungible and private.
Bitcoin Cash is also technically the same as Bitcoin while being cheaper to use and by virtue of being actually useful as cash has more uses which helps price growth and liquidity.
No, you mentioned it yourself: Bitcoin is a store of value. Moreover, it's one with a high liquidity, strong brand, limited supply, available in 180 countries, without banks involved and super reliable (gold doesn't have that features and please show me any other asset that has these features). So, it has a use and value.
That it has evolved to this is no one's fault and btw this might change (the cash part) with the lightning network again.
> more like a Ponzi scheme
That would mean that all operators of Bitcoin, so everybody who is just investing or running local wallets with full nodes deliberately intend Bitcoin as a Ponzi scheme?? This is utter nonsense. If I launch an ICO tomorrow. Just a landing page and a BS white paper, you could allege that I deliberately plan my ICO/coin/token to be a Ponzi scheme. But you can't allege millions of BTC investors that they intend a Ponzi scheme eight years after this things started. Maybe you should check the definition of a Ponzi scheme again.
> No, you mentioned it yourself: Bitcoin is a store of value. Moreover, it's one with a high liquidity, strong brand, limited supply, available in 180 countries, without banks involved and super reliable (gold doesn't have that features and please show me any other asset that has these features). So, it has a use and value.
As I've said before Bitcoin is absolutely a garbage "store of value". It's not going to exist for decades, let alone for centuries, because of the nature of technology. As you yourself have pointed out there's nothing inherent about Bitcoin other than a network effect that's made it a brand. It isn't backed and guaranteed by a government, there are no organization that are demanding to be paid only in Bitcoin as America demands to be paid only in dollars.
Furthermore There will be better technologies that will emerge and supplant Bitcoin. Land, Dollar, precious metals all far exceed as stronger "stores of value", both because of their historicity, and also because of their technology, that is a technology that is stable.
Not to mention the complete and utter lack of privacy of Bitcoin because of it's public ledger. Everyone knows everyone else's entire transaction history, and any large enough actor can find that out. Traditional stores of value don't have that problem, or rather not nearly as publicly visible.
Cryptocurrencies, and digital currencies do have place, but I don't think we've come to any sort of equilibrium as to what its role will be in society, which is why I don't think Bitcoin will succeed as "store of value", or currency.
I don't care if I can convince you or not. That doesn't matter. Realistically only time will tell which one of us is right, and give either one of us the satisfaction of saying "told you so".
With that said are you saying that there will be no other competitors, or technological advancements that will improve on Cryptocurrency technologies, and supplant Bitcoin? If so, I think that's a more irrational position.
If Bitcoin gets large enough you'll just have cryptocurrency legislation that will regulate it to oblivion, and make what are relatively private transactions today into Big Brother is watching. Perhaps that's the goal anyways.
Physical cash is still king in terms of privacy, but a poor long term store of value if that cash isn't invested.
Metal is difficult to buy, and it is tracked, but that information isn't public. The value of a precious metal isn't in its liquidity, but rather its theoretical long term value so volatility isn't necessarily a factor. Land is better because it actually has uses, but similarly it too is volatile, and as such viewing it as a long-term 20+ year investment is better. Again the current value of it doesn't matter so much.
I'm not saying Cryptocurrencies have 0 value, just that we haven't reached a consensus of what exactly the value of a cryptocurrency is, or its role in society, let alone having achieved a technological stasis to make a cryptocurrency a long term store of value. There are in reality no true long-term store of value, just that some are better in way than others.
In general though, I think, the problem is what we as humans consider "value". So far I think the only real value of anything is what a State actor demands, and enforces as valuable. Not land, not precious metals, not cryptocurrencies, or dollars, but whatever a government deems officially as valuable becomes magically valuable.
If tomorrow congress makes Bitcoin the official currency of the USA, and buys up all the Bitcoins then Bitcoin will become infinitely valuable in comparison today. On the other if it's made illegal to make Bitcoin transaction it won't be worth a penny.
I don’t follow your argument that Bitcoin won’t be around for long because of the nature of technology. What exactly do you mean? Of course advancements will be made, but those can be merged into Bitcoin or even forked off of Bitcoin.
> No, you mentioned it yourself: Bitcoin is a store of value. Moreover, it's one with a high liquidity, strong brand, limited supply, available in 180 countries, without banks involved and super reliable (gold doesn't have that features and please show me any other asset that has these features). So, it has a use and value.
I said Bitcoin's usefulness is diminishing by becoming less useful due to the high transaction time and price. Other coins are taking over the exact use case you're refering to.
> Maybe you should check the definition of a Ponzi scheme again.
It's more a greater fools game at this point and I only mentioned ponzi scheme as it was what I was responding to.
> However, do you own or did you ever own any BTC?
Yes I've owned and used BTC a while but recently stopped using it since it doesn't make sense for me anymore as it's too expensive.
> I said Bitcoin's usefulness is diminishing by becoming less useful due to the high transaction time and price.
If I want to store my assets I don't care about high transaction prices.
> It's more a greater fools game at this point and I only mentioned ponzi scheme as it was what I was responding to.
But you still used it in the wrong context. Bitcoin can't be a Ponzi scheme because the founder and the early adopters clearly didn't have this intent.
I guess you didn't address my main point: Why would Bitcoin be a sane store of value if other coins can fulfill the exact same niche while also being p2p digial cash? Why would you pay very high fees when you get the same features with a coin with very low fees?
For now Bitcoin is valued higher and has better liquidity than other coins but with use cases quickly moving away from Bitcoin this is changing. The only thing Bitcoin has going for it by that point is FOMO and selling to greater fools.
I know what market liquidity is, but if I were to purchase or sell large amounts of Bitcoin I think it would definitely affect the price. I don't think Bitcoin has high liquidity at all.
Well this was a long time coming. It is not reflection on bitcoin per se rather the use of the coin.
Let me try and explain why this is happening. In India, people don't warm up to "internet" only companies easily. What this meant is while bitcoin and cryptocurrency FOMO has caught on, people don't go and buy coins online. There are exchanges but none of them are household name like Coinbase.
So, a new industry has mushroomed - people offering "investment" opportunity in bitcoin "funds". These guys are not authorized investment professionals. They collect any where between 25-50k and promise a fixed return.
No investment opportunity can claim fixed returns unless it is a Ponzi scheme. Hence, this announcement.
My personal take on these opportunities is that, if these "funds" are in trouble - prices increase or decrease lot
- they can simply claim that they have hacked. So, it is not even a ponzi scheme rather outright fraud.
Even though I have tried convincing otherwise couple of colleagues have invested in such opportunities. They find the whole bitcoin process - wallets, keys, pass phrases etc very cumbersome but can't miss out on the supposed gains. And these guys are software engineers.
Lastly, if a person with above average technology experience finds it difficult to use bitcoin, I think it shows how true cryptocurrency's dream of banking the underbanked in 3rd world country is going to be.
> So, a new industry has mushroomed - people offering "investment" opportunity in bitcoin "funds". These guys are not authorized investment professionals. They collect any where between 25-50k and promise a fixed return.
So scammers are using the Bitcoin brand to attract customers?
Sounds exactly like what ICOs are doing here in the West. Except they use the word “blockchain” instead.
Ridiculous. Pyramid and Ponzi schemes do absolutely nothing other than redistribute wealth. Bitcoin obviously has some value and if you can't see that you're willfully ignorant. The article suggests that Bitcoin "promises insane returns" but Bitcoin doesn't do that at all. Speculators want you to buy so the price goes up, just like a stock.
How does that make Bitcoin a Ponzi scheme? A ponzi scheme is an organizational structure, not the people that exist in that organization. Bitcoin is a piece of software, and some people using that software are trying to profit. There is nothing inherent in the structure of Bitcoin that makes it a Ponzi
You're really twisting what happened here. It wasn't so much "yanked" as it was "replaced". I was initially against the idea, but soon got around to it. It was a very risky and daring move by the government, but it was a good one.
How do you even measure it. What's the metric. How do you classify it as good or bad. It was clearly short-sighted and the government even failed to account the size of the new currency notes and the inconvenience caused by it. All that was achieved was dip in the GDP and the loss of lives.
Contrary to the popular belief that BTC purports money laundering, it can actually mitigate the problem of black money and money laundering. The governments all around the world should try to keep up and they should themselves establish a separate think tank/research arm/department for blockchain and cryptocurrency space.
That same government is perfectly capable of throwing you into a deep dark hole until you comply with their demands or die of old age. I understand you have a particular ideological viewpoint, but that shouldn’t prevent you from understanding how the world actually works. There is no end run to your dream of how society should be, and pretending that there is simply divorces you from that reality.
To be clear I’m not saying that things can’t change, but I am saying the change has to take place in reality and not your imagination.
Not yet. You bet your ass that if Bitcoin gets large enough State actors will use coercion to regulate it, track it, tax it, and do what bureaucracies do best. Nothing escapes the Leviathan. The USA uses Eminent Domain to steal land, and uses laws to deny gold as a currency, what's stopping congress from doing the same with cryptocurrencies.
I mean people are acting as if governments in past haven't faced similar problems. The only real value of currency is if a STATE actor accepts it as payment. Otherwise international trade, commerce, taxes, etc. would all be moot. So Bitcoin can never be a large scale, nationwide, let alone international currency. Even though currently it is large, and getting recognition from State actors, but it's not large enough to enter the domain of legislation.
Ponzi or not, there is a new phenomenon where the ecosystem has created more individual millionaires than the ones created by startups in the last few years. Many people are reinvesting their funds in new ventures, spending more money than angels or VCs in the typical startup world. It is obvious that this is connected to the high exchange rate of cryptoassets but it can have good historical consequences: there are good projects that the general community is not hearing about because they don't follow the typical ICO marketing route.
IMHO the one and only thing a government is to do to protect the people from Ponzi and other schemes is to make sure everybody leaves school with conscious knowledge of the following:
1. Every investment is a risk, you may win or you may loose.
2. The chance of loss is usually proportional to the potential profitability estimated.
3. Never invest what you can't afford to loose easily.
4. Don't be mad on the friend who has introduced you to the business if he didn't explicitly guarantee you will win - that was your choice.
5. Whoever says there is no risk and the success is guaranteed - lies, don't believe them and don't rely on them.
Actually, if a person doesn't know this by the time they finish the school the time they've spent there has probably been wasted. As for me I've learnt about Ponzi scheme from a Khan Academy lecture (and yes, my time at school was a waste mostly, that's a pity there was no Khan Academy back in those years).
What I can't understand is why do people demonize Ponzi Schemes so much while lotteries and bookies of all kinds are legally available on every corner. I know quite a number of people who have consciously taken the risk of investing in an open (so I can't logically agree it being scam/fraud/etc although legal authorities can insist it is) Ponzi Scheme and have quit it with rather serious profit some time later. And I don't know anybody who has ever won more than a couple of bucks in a lottery. In my opinion a Ponzi Scheme (unless the potential investors are actually told a false claim that it is not a Ponzi Scheme but a low-risk high-profit enterprise) is not a scam but a game, similar to fishing, and even much more nice to people than classic chance games played in casinos. Why not just teach people basics of risk management, warn them 3 times and let them play if they want to?
One difference between ponzi schemes and games of chance has to do with impartiality. Even if casino games are tweaked to give better odds to the house, once you roll the dice, neither you nor the dealer can influence the outcome in any way.
Another difference is that there’s no requirement to bring more and more people into the game, so there’s no risk of widespread adverse effects.
Agreed, a ponzi is just another scheme (where scheme doesn't have to be a negative word). The gamble with a ponzi is whether the person entering the scheme is the last person or not. If not last, they make make money. If to far at the bottom (too near the end, when not enough new people join to continue funding the process), then they lose.
There are people who make a living "playing ponzis", estimating which ponzis will be big, how long they'll last, and when to enter and exit.
What does make ponzis particularly bad is that they are almost always promoted as something else - some kind of magical investment (and now using tech terms that are either nonsensical or will otherwise confuse their potential investors). That is the fraud aspect, and is no different than promoting some investment fund as being typical while privately just deciding who to pay dividends to.
If you bought a McDonalds franchise, and the next day the world decided that fast food made them fat and ceased buying it, you would experience the same outcome as if you had joined a very expensive ponzi. But you know that going into it, and you believe that is not a likely outcome. With a ponzi, unless you know who's operating it and how good the promotion is, you're going to have a much harder time determining entry and exit timings. (I don't recommend playing at all!)
Lotteries don't relay on adding more marks to grow and you can actually work out the pot odds where it makes sense to play the lottery - just as poker players do.
Not surprising they say that since many Indians are taking interest in cryptocurrencies due to the Indian central bank being unable to control inflation. It was at 10% just a few years ago! Also it isn't like something that has the potential of ever going up by any significant amount. Every year it drops 3-10%. Who wants to hold on to that to save their money? No wonder the Indians have so much interest in crypto. I don't blame them. Their government has failed them. At least with crypto it has the potential to go up.
Well is this Orwellian double talk? To some extent, I think that's wildly accurate. Buy stocks that are sort of a scam, but don't buy into a new technology like BTC which has imo by now proven itself to be powerful and legit, unlike the next crappy IPO. Honestly it's hard to take articles like this seriously when what's going on is a lot of misdirection. Just my 2c.
The people have the motivation of greed, the government has the motivation of fear. Fear that the greed will lead to fear of losses and everyone exiting at the same time. It is a bit sad really as the governments should just let the people wanting to get burned in this harmless bubble lose all of their money.
Yeah, when the population is educated and has general awareness of technology, betting on ponzi schemes is up to them. When you have large, uneducated and poor population, letting people know of the risks is a decent thing to expect from a government.
The government want to be able to control the currency minting new money in cooperation with private banks. With bitcoin governments does not have that control. What says government central banks with zero interest rate creating new credit money out of thin air is not also a Ponzi scheme?
Then you have the "mining" companies selling shares of mining power, but those sometimes turn out to be pure frauds - no mining nor equipment. Those behave just like ponzis.
It is probably in the average person's best interest to avoid it all.