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I'll give it a go. The early distribution of bitcoins seems to have been enough to motivate lots of relatively early adopters to promote it aggressively, maybe out of ideology or maybe just out of greed. Their claims, which fueled the recent speculative frenzy, have always been that Bitcoin would have a continuous, exponential growth against all other currencies. "It always goes up." "Get in before it's too late." I can see how relatively small amounts of money could be invested into Bitcoins as speculation or just play. Several tens of millions of dollars have presumably been transferred to Bitcoin holders so far, in the aggregate. But many people are investing on claims that a single bitcoin will eventually be worth $10,000, $100,000, or $1 million. For that to happen, the world would have to transfer massive wealth to the early adopters, as this early adopter explains: https://bitcointalk.org/index.php?topic=175833.msg1830933#ms... Why would anyone do that rather than setting up an alternative? Massive delusions are possible, but it seems far more likely that the claim that a bitcoin will be worth $10,000 will start to seem ludicrous to everyone, as it obviously is. After that, why would anyone buy a bitcoin for $100, or even $30 or $10? There's little practical use for them other than drugs or illegal gambling. And they're hardly worth speculatively buying at $100 just so that they could be sold at $120 or $150. It's got to die eventually, unless everyone decide that they don't mind depreciating the value of everything else just so that the early adopters of this scheme can have untold wealth dumped into their laps. It's a fascinating technology, but that doesn't mean the speculative delusion will last forever. Pyramid scheme? Just so. Of course, to some degree so is gold -- but gold has a much wider existing distribution (compared to Bitcoin), a much deeper history, and backers far more significant, both intellectually and financially, than the childish ideologues of bitcointalk.org. |
1. Early adopter wants more buyers in their market to drive up share price? Check.
2. Price bubbles up and crashes due to high expectations? See number 1? Check.
Unlike any asset I'm aware of, this one is open-source and completely transparent.
> There's little practical use for them other than drugs or illegal gambling.
I think these types of statements will be looked back at contemptuously years from now, even if bitcoin fails and is replaced by something else. This is a completely new field. How can you imagine bootstrapping a currency like this? It can't start with nobody receiving any coins, or it couldn't be used. You could give all the coins to a single entity and have that entity distribute (like Ripple is doing) but this is even less fair than Bitcoin, especially since OpenCoin is keeping half of the coins they're minting.
Practically speaking, there is plenty of use for Bitcoins. I don't have to give anybody my personal information to transfer value, which is impossible to fathom in any other existing commodity. There's even more use for them as it grows and concepts which have not been fully implemented (smart property and the like) are developed into/around the protocol. Every month a great new idea pops up, like fidelity bonded ledgers or some zero-knowledge proof system which makes bitcoins pop into and out of existence without a linear path -- all without a central entity and only some crazy tricky math and sometimes game theory.
Gold itself has had a nasty history too. Remember, it was bootstrapped (relatively speaking) off a market of financing war and has been periodically seized by governments for that end. I personally think gold is much more secure of an asset now, as we have to trust that nobody will seize a majority of the hashing power in the bitcoin network for our coins to be valuable, whereas with gold we only have to trust that they are scarce. It's something like NSA vs. Science, really.
Every bubble could be its last bubble and just like the early adopters who were smart enough to cash out in 2011 when they saw the opportunity, there are some who were smart enough to cash out during this last bubble. This is why it is absolutely pointless to call it a ponzi scheme. The economic base does not depend on new users financing it. Massive bubbles do, which is why they should be ignored/hedged against.