Bitcoin is essentially a Ponzi scheme. The only way to make a profit is to sell an asset whose added value only exists if more people buy into it.
Nowadays many bitcoin supporters refer to it as "digital gold", but that's just not the case. Gold is a natural element with some unique phisical a chemical properties that make it both attractive (e.g. jewelry) and useful (e.g. industrial applications). So those buying gold to speculate do not necessarily have to resell to speculators to make a profit. There are countless buyers that are willing to pay the price of gold for reasons other than investing.
On the contrary, those holding bitcoins can sell only to buyers that think that prices will go up. So they can only sell to other speculators (including of course the random buyer who saw an ad for bitcoins).
So, because today there's no real exit strategy from a bitcoin investment other than reselling to other speculators, there's really no difference between bitcoin and a Ponzi scheme.
A very common counter argument is that one day bitcoin will [insert _useful_usage_case]. However, once again, this is speculative, as it's based on the idea that the current value is determined by a future uncertain event.
Also the fact that with bitcoins it is possible to buy some goods doesn't change much. The actual ability to use bitcoins to buy things or pay for services is so limited that it doesn't make any difference. And, more importantly, it is inherently less efficient than FIAT (official currencies).
Having said all of that, I'd like to add that I am very very supportive of decentralized technologies, and bitcoin has certainly helped immensely to promote decentralization, so there's that. But my point is that bitcoin is only a speculative asset.
Because I truly support decentralization, I would very much like to hear different opinions in the comments, so do let me know if there's a different perspective I could see things from. Please though don't just say that the price of bitcoin is going up and that it has been around for years. This is not proof that bitcoin isn't a ponzi scheme. Think of Enron and for how long it was around before collapsing.
That's often the first question people asked in the early days. But where does its value come from? And I couldn't help but ramble on about the fact that its value isn't tied to anything but that simply there is a need for it... for some reason.
Bitcoin is a ponzi scheme, and as far as I know it's the best one ever created. That's why I'll drop my paychecks into it for as long as I live (or work).
I was always sympathetic to the argument that we underestimate how valuable having a centralized control is (when it doesn't go off the rails). We get a lot of fraud absorbed by banks right now so that end users aren't holding the bag. When there are bubbles, the fed tries to mitigate the affect of massive price crashes/economic downturns. The SEC limits the impact of market manipulation, and makes the game generally more fair. And on the tail end of all of that, being able to track money more effectively makes law enforcement's job easier.
All of those things have their own downsides, but I think they're all net positives. Though I do think modern monetary theory is a great example of why we might want something decentralized, and is a big reason for why bitcoin is gaining traction.
The system in place right now is meant to protect the corporations not the users. Credit card companies ask for too little proof of identification, and then blame the user in the name of “identity theft”. The problem is no, no one stole the person’s identity. No one was kidnapped or killed and then replaced with a look a like. Instead, the company was scammed, but they don’t care because they can pass the buck.
Honestly, a lot of it is the community. The strongest advocates for crypto tend to have a lot of wince factor.
* The most prominent actual merchants taking crypto first or only (as opposed to a novelty 13th choice between PayPal and money-order-in-an-envelope) are in it because no conventional financial platforms will touch them (Silk Road style stuff, ransomware, etc.).
* The "irreversibility" crowd. The people who are convinced that all their profits are going out the window because of the cost of honouring refunds and chargebacks, and if only we used a payment method that didn't support them... normal people tend to classify "the system will make you whole if stolen from" as a feature, not a bug.
* The "it's independent and self-governing" crowd. These are the same people who blame their gout on the Federal Reserve and 20 years ago were buying Liberty Dollars. Money is a tool, and it makes sense to have the tool be bendable to public needs, not dogmatically hard-coded into economic rictus.
* The FOMO/HODL crowd inherently keeps cryptocurrency from developing legitimacy. What is a dollar, rouble, or yuan worth? It's how much goods and services you can get for it, and that being relatively stable and predictable allows people to build an economy around it. Until we get a critical mass of actual commerce occurring in cryptocurrency, we can't say "what is a Bitcoin worth" in the same way, and instead we have speculators tossing the value wildly up and down from day to day.
For me, transaction times and cost. Paying $2 to send $100 over 15 - 30 minutes, feels expensive and slow to me as a buyer. Sellers are used to longer clearance times and higher fees it would be more like our modern system if the seller paid the fee.
I've been following crypto since 2012 (I work in the industry on an alternative cryptocurrency). I completely agree that this is the primary issue that Bitcoin and Ethereum have. Lightning and other second layer scaling solutions show promise but just haven't matured at the rate that I was hoping. Most applications just aren't feasible with such high transaction costs. I have a strong feeling that when second-layer solutions finally mature, the conversation will completely change.
2 - Worse, there is literally a finite amount with a surprisingly large floor on the smallest denomination (which exacerbates problem 1)
3 - slow, repudiatable settlement.
How could you use it to buy a pack of gum at the store? The cost of the transaction would be high and the shop owner would be pissed if 45 minutes later the transaction backed out.
Bitcoin does not scale as a medium of exchange. It has a hard transaction limit of 7 transactions per second. In contrast, the VISA network alone can process at least 47,000 tps. The entire Bitcoin system would be hard pressed to serve the retail transaction needs of a large shopping mall, much less a city, country, or the world.
The hard cap on the number of Bitcoins also makes Bitcoin a deflationary asset/currency. Deflationary currencies have been known to be actively harmful since at least the great depression.
Overall, Bitcoin is a technological curiosity that is only attractive to people who don't know much of anything about monetary economics and have no desire to learn.
A mild annoyance of mine is how the potential benefits of cryptocurrency (decentralized verification, cloud storage, etc) are often lost among discussions of why Bitcoin is bad, which it is. Many of Bitcoin's flaws (energy usage, easy to lose, slow transactions) have been solved by other cryptocurrencies, many of whom aren't even intended to be used as money, which is good because I don't think cryptocurrency's best application is as a form of money, at least not in the long term. For what it's worth, I am not a right libertarian, or a fan of the gold standard either.
The challenge of safeguarding your private keys and not falling victim to the many fraudulent schemes to separate the gullible from their bitcoin.
The wealth concentration resulting from emitting the majority all bitcoin that will ever exist in just the first few years. It's designed not as a peer-to-peer currency but a p2p speculative asset.
Leaving just a fraction of a percent of all bitcoin to be mined in the last century (2040-2140) of its emission. And relying almost exclusively on transaction fees to provide security after 2040.
Philosophically? As an investment? I don't think this question has any meaning without being qualified.
Assuming you are saying as an investment, I think a plausible worst case scenario is that a major government, let's say the US, makes it illegal to move their currency on to crypto exchanges and kills all legitimate on ramps.
Bitcoin would survive this but I would guess it's price would go down somewhere between 10 and 100x . Potentially more.
The worst case scenario for "investment" is if government doesn't do anything but ignore bitcoin and allow it to fail under it's own weight --- taking your "investment" with it.
Think of Bitcoin like your savings account, moving the entire account happens within an hour. 2nd layer networks (lightning) work on top of it and have very cheap transaction costs.
The energy spent on securing the network makes it antifragile and eliminates the need for many functions of the finance sector.
It is totally ineffective as a currency --- for a long list of reasons.
It's main utility is speculation. But this too is a fraud due to the fact that the speculation is managed, controlled and manipulated by unregulated exchanges which operate without oversight or transparency and with blatant and inherent conflicts of interest in some cases.
What happens when rewards for mining a block halt or the price of Bitcoin drops to a point where it’s no longer economically viable to pay for electricity and mining rigs?
I like to think of BC as simple "printing yourself money in your basement". Normally when you do it you go to jail and there are couple of good reasons for that to happen.
One argument against Bitcoin is Bettercoin. Why should anyone bother with Bitcoin when there's Bettercoin? And then again, why should I use Bettercoin rather than just launching my own Evenbettercoin? Or maybe just wait until Bestcoin comes out.
Coins are rarely better than bitcoin in all regards. Instead they simply offer trade-offs, making some things better and others worse. They often harm the very thing that justified bitcoin's existence: being decentralized and uncensorable.
Or being able to fully validate the transaction history with limited resources.
[+] [-] ghego1|5 years ago|reply
Nowadays many bitcoin supporters refer to it as "digital gold", but that's just not the case. Gold is a natural element with some unique phisical a chemical properties that make it both attractive (e.g. jewelry) and useful (e.g. industrial applications). So those buying gold to speculate do not necessarily have to resell to speculators to make a profit. There are countless buyers that are willing to pay the price of gold for reasons other than investing.
On the contrary, those holding bitcoins can sell only to buyers that think that prices will go up. So they can only sell to other speculators (including of course the random buyer who saw an ad for bitcoins).
So, because today there's no real exit strategy from a bitcoin investment other than reselling to other speculators, there's really no difference between bitcoin and a Ponzi scheme.
A very common counter argument is that one day bitcoin will [insert _useful_usage_case]. However, once again, this is speculative, as it's based on the idea that the current value is determined by a future uncertain event.
Also the fact that with bitcoins it is possible to buy some goods doesn't change much. The actual ability to use bitcoins to buy things or pay for services is so limited that it doesn't make any difference. And, more importantly, it is inherently less efficient than FIAT (official currencies).
Having said all of that, I'd like to add that I am very very supportive of decentralized technologies, and bitcoin has certainly helped immensely to promote decentralization, so there's that. But my point is that bitcoin is only a speculative asset.
Because I truly support decentralization, I would very much like to hear different opinions in the comments, so do let me know if there's a different perspective I could see things from. Please though don't just say that the price of bitcoin is going up and that it has been around for years. This is not proof that bitcoin isn't a ponzi scheme. Think of Enron and for how long it was around before collapsing.
[+] [-] NoPicklez|5 years ago|reply
[+] [-] tuesdayrain|5 years ago|reply
[+] [-] andirk|5 years ago|reply
That's what money is.
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] nscalf|5 years ago|reply
All of those things have their own downsides, but I think they're all net positives. Though I do think modern monetary theory is a great example of why we might want something decentralized, and is a big reason for why bitcoin is gaining traction.
[+] [-] admin000001|5 years ago|reply
[+] [-] hakfoo|5 years ago|reply
* The most prominent actual merchants taking crypto first or only (as opposed to a novelty 13th choice between PayPal and money-order-in-an-envelope) are in it because no conventional financial platforms will touch them (Silk Road style stuff, ransomware, etc.).
* The "irreversibility" crowd. The people who are convinced that all their profits are going out the window because of the cost of honouring refunds and chargebacks, and if only we used a payment method that didn't support them... normal people tend to classify "the system will make you whole if stolen from" as a feature, not a bug.
* The "it's independent and self-governing" crowd. These are the same people who blame their gout on the Federal Reserve and 20 years ago were buying Liberty Dollars. Money is a tool, and it makes sense to have the tool be bendable to public needs, not dogmatically hard-coded into economic rictus.
* The FOMO/HODL crowd inherently keeps cryptocurrency from developing legitimacy. What is a dollar, rouble, or yuan worth? It's how much goods and services you can get for it, and that being relatively stable and predictable allows people to build an economy around it. Until we get a critical mass of actual commerce occurring in cryptocurrency, we can't say "what is a Bitcoin worth" in the same way, and instead we have speculators tossing the value wildly up and down from day to day.
[+] [-] willcipriano|5 years ago|reply
[+] [-] robcohen|5 years ago|reply
[+] [-] asix66|5 years ago|reply
https://www.wired.com/story/bitcoin-mining-guzzles-energyand...
More generally, trust:
https://www.schneier.com/blog/archives/2019/02/blockchain_an...
[+] [-] gumby|5 years ago|reply
2 - Worse, there is literally a finite amount with a surprisingly large floor on the smallest denomination (which exacerbates problem 1)
3 - slow, repudiatable settlement.
How could you use it to buy a pack of gum at the store? The cost of the transaction would be high and the shop owner would be pissed if 45 minutes later the transaction backed out.
[+] [-] DarthGhandi|5 years ago|reply
[deleted]
[+] [-] bleepblorp|5 years ago|reply
The hard cap on the number of Bitcoins also makes Bitcoin a deflationary asset/currency. Deflationary currencies have been known to be actively harmful since at least the great depression.
Overall, Bitcoin is a technological curiosity that is only attractive to people who don't know much of anything about monetary economics and have no desire to learn.
[+] [-] mehrzad|5 years ago|reply
[+] [-] tromp|5 years ago|reply
The wealth concentration resulting from emitting the majority all bitcoin that will ever exist in just the first few years. It's designed not as a peer-to-peer currency but a p2p speculative asset. Leaving just a fraction of a percent of all bitcoin to be mined in the last century (2040-2140) of its emission. And relying almost exclusively on transaction fees to provide security after 2040.
[+] [-] anm89|5 years ago|reply
Assuming you are saying as an investment, I think a plausible worst case scenario is that a major government, let's say the US, makes it illegal to move their currency on to crypto exchanges and kills all legitimate on ramps.
Bitcoin would survive this but I would guess it's price would go down somewhere between 10 and 100x . Potentially more.
[+] [-] jqpabc123|5 years ago|reply
[+] [-] exabrial|5 years ago|reply
[+] [-] kneel|5 years ago|reply
The energy spent on securing the network makes it antifragile and eliminates the need for many functions of the finance sector.
[+] [-] jqpabc123|5 years ago|reply
It is totally ineffective as a currency --- for a long list of reasons.
It's main utility is speculation. But this too is a fraud due to the fact that the speculation is managed, controlled and manipulated by unregulated exchanges which operate without oversight or transparency and with blatant and inherent conflicts of interest in some cases.
[+] [-] admin000001|5 years ago|reply
[+] [-] Andys|5 years ago|reply
[+] [-] mikeodds|5 years ago|reply
[+] [-] londons_explore|5 years ago|reply
[+] [-] jbj|5 years ago|reply
[+] [-] wryoak|5 years ago|reply
[deleted]
[+] [-] redflame7|5 years ago|reply
[deleted]
[+] [-] danielEM|5 years ago|reply
[+] [-] jbotz|5 years ago|reply
[+] [-] tromp|5 years ago|reply