[arcticbull]

The article literally covers each of those cases and explains exactly why those are not Ponzi schemes while Bitcoin is ([edit] under "Common Objections" - which should really read "Common Whataboutisms").

> By that definition, stocks too are ponzis. No. Stocks have an external source of revenue, namely the profit that the company makes by selling its products and services to customers (not investors); and these profits eventually return to the investors through dividends or cash buybacks. In time, those profits are expected to exceed the amount invested, with a significant profit for all investors -- that is, they are expected to be positive-sum games. The market value of stocks reflects these expectations among investors. While some companies fail to achieve this goal, enough of them succeed to make stocks the favorite option of savvy investors.

> By that definition, real estate too is a ponzi. No. Like stocks, real estate creates value while it is being owned, namely the sheltering service it provides to those who live in it. That value returns to the investor (owner) either by him living in the property, or by renting it to others.

> By that definition, gold too is a ponzi. No, gold clearly fails to satisfy that definition on two counts...

[qez]

As per gold: I agree with that common objection. If bitcoin is a ponzi, so is gold.

> First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour.

First, this does not negate the comparison. Bitcoin could also be like that, and therefore not a ponzi. Second, I know a long of gold investors who would disagree with this opinion. Third, the market cap of gold is over 4x bitcoin, indicating that gold has already reached saturation, whereas bitcoin has space to grow.

> Second, as a commodity, gold HAS a source of revenue besides the investors; namely, the purchases by consumers like jewelers and industry,

This is a point that always gets brought up in discussions of gold. It is wrong and practically dishonest. Gold as jewelry does NOT drive the value of gold, by and large. And even if it DOES, the valuing of gold as jewelry material over any other similar-colored material is itself non-intrinsic/socially constructed. People like to own gold jewelry for the same reason people like to own bitcoin.

[arcticbull]

Yeah, I think you have a point regarding gold. I think the same way the author treats Bitcoin in regards to the way 'most people are using it' when defending its categorization should apply to gold as well.

Once we accept that the price is defined by speculators, the industrial and decorative applications of gold set a floor price rather than necessarily redefining the category.

There are a few key differences.

(1) Gold is zero-sum. Once out of the earth, it simply continues to exist. It produces nothing, consumes nothing, reacts with nothing, and doesn't really get lost or destroyed.

(2) On the other hand, if Bitcoin miners are turned off, 100% of the value evaporates instantly.

(3) Bitcoin therefore is negative-sum because miners require a steady influx of new capital in order to purchase coal to burn to 'secure' the network. This new capital is raised in the form of block rewards which are sold, exerting negative price pressure in the amount of ~$60M USD per day. If new capital stops coming in, Bitcoin bleeds value slowly, and then drops to zero all of a sudden.

The difference between a zero-sum vehicle and a negative-sum vehicle is enormous at the limit.

> People like to own gold jewelry for the same reason people like to own bitcoin.

I do disagree with this however, most people buy gold because it's shiny and a status symbol. They want others to see it. People buy bitcoin because number go up.

[zaidf]

(Nevertheless, investing in gold at the current price seems unwise, since its price is many times its "natural" price as commodity...)

You left out the most important and contentious part. It is not surprising because the author of the article itself made the single, most important point a fine print because it hurts their argument.

[arcticbull]

Oh, sorry, I didn't want my post to get long, however I also agree that investing in gold is unwise generally speaking. I don't believe in investing in unproductive assets period. Unintentional miss, and totally relevant, so thanks for adding that color.

[rob74]

Yup, but that explanation is not satisfactory IMHO. Of course stocks, real estate etc. have an "underlying value", but in case of a market bubble, these values lose all connection with reality, and some will profit while others (typically the late comers) will lose out when the bubble bursts. And Bitcoin's value is currenty overinflated in the same way...

[koonsolo]

Gold doesn't have a source of revenue.

[arcticbull]

The argument is that as a commodity that is consumed to produce jewelry (52%) and industrial (12%) that there is baseline demand for it, and thus it does have intrinsic value. I don't consider it a worthwhile investment, however.

[koonsolo]

Bitcoin seems to bootstrap its own value: you can store and transfer value, because bitcoin has value.

So as long as its value is > 0, it has intrinsic value.

[arcticbull]

I’d argue that’s still extrinsic.