I live in Baltimore, let's say I have some hypothetical friends who are always looking for a good hustle.
Now imagine if my friends got together for a new get-rich-quick-scheme, the scheme is very simple. They invent something called cracken (bitcoins) that they start selling on a few blocks in Hamsterdam.
The way you get crackens is to do laps around the blocks in Hamsterdam. Initially when the scheme was setup, you could get a whole lot of crackens by merely doing a few strolls around the block. Needless to say my friends made out like bandits, since, after all they created the scheme and could take advantage of the first-come-first-serve rules.
Unfortunately for the rest of the hood, the number of laps required to get the same number of crackens keeps going up and after a while even the fittest folks in the neighborhood cannot do the lapse required to earn crackens.
Cracken mania takes hold and infects the whole city. Those with crackens start trading these crackens for exorbitant sums of money. No one really knows why they are buying crackens but it is the hot new commodity so who cares.
How long do you think it will be before the feds show up and shut down this obvious fraud? My guess is, not too long.
It is quite astonishing that the bitcoin scam has been allowed to mushroom into what it is today. Forget the crypto mambo-jumbo, that is just fancy nerd-talk meant to sway those who are easily impressed by nerdy nomenclature.
Bitcoin and its derivatives are a basic pyramid scam, but they are actually worst for two reasons. First, given that they are internet based their reach is vast in a way that'll make scammers of yore drool.
Secondly, there is absolutely nothing of value sitting at the base of this pyramid, in other words this is not a case of your traditional pyramid scheme where there is some initial input of some actual value. Bitcoin literally came out of thin air by way of a crypto algorithm.
The logic behind justifying value out of nothing rest on the ignorant libertarian argument that the federal government prints money and bestows value on it so similarly anyone can create value as long as you can get someone to accept it. This is nonsense that betrays ignorance of economics. If it were the case that any central bank can just print money and bestow value on it that will be universally accepted without anything of true value underpinning it, there will be no poor countries in the world, just ask Zimbabwe.
Another poor logic underpinning bitcoin is the very idea of crypto mining. This is an obvious attempt to draw parallels with precious minerals. The problem of course is that precious minerals are real and have real uses. Gold for instance has all sorts of applications (ex electronics) beyond just its ornamental value. What exactly can I use my bitcoins for if I can't trade them to someone else for some other commodity of actual value?
Hopefully the authorities can jump in and shut this silliness down before it causes real harm to a lot of people, ie if it isn't too late already.
It cannot be a pyramid scheme, because there are a limited number of Bitcoins available!ReplyDelete
It's even less of a pyramid scheme than gold itself, because you can always mine more gold from the Earth (and more gold is falling onto Earth from meteorites all the time)!
It is much less of a pyramid scheme than the USD or the EUR or any other fiat money, that is printed continuously (thru "Quantitative Easings" what a scam!).
With bitcoin, there's a definite mathematical maximum number of bitcoins ever available : 20999999.9769 BTC. Notice that this number is not integral, this shows that the actual unit is not the BTC, but a subdivision thereof.
The number of bitcoins has been computed very precisely so that 1/100,000,000 bitcoin = 1 satoshi will eventually be worth about 1 US cent. 1 USD will eventually be worth 1 µBTC. (Of course, this will depend on the amount of printing, of "QE" that will have been done when we reach total acceptance).
No, the smart move for any government, would be to accept bitcoins as tax payment. The FBI already owns a large amount of BTC. They should be moved to the US government central bank reserves (not necessarily the Fed, mind you! but a proper central bank). Granted, I wouldn't expect that to occur before 1 BTC = 400,000 USD or more. It will occur eventually.
It is a pyramid. A pyramid scheme relies on having a few early movers sitting at the top of the value chain and hoping the base will keep expanding to increase their take.Delete
The more people buying bitcoins (and now tokens), the better it is for those who got in early, this is the definition of a pyramid scheme.
The finite nature of bitcoins themselves means nothing, if anything it accelerates the scam by creating artificial scarcity.
Sorry you didn't get in early, many felt that way when the internet boom happened. Get over it and understand that there is over 300 billion dollars invested into this.Delete
There is definitely many reasons to use crypto over fiat though. Whether or not you are representing value by a bank note, a rock with a hole in it or a crypto token; liquidity and trustworthiness of a currency are what make it just that - a currency. You won't need an institution to manage trustworthiness as blockchain takes care of that, and the liquidity and usability will be beyond anything we have ever seen as a society (ie. REQ Network) . I expect Bitcoin will "pop" and die because it is archaic ; slow and expensive - not because it is seen as a scam. I expect the blockchain technology to change and grow many times over before something stabilizes the tech and do many things at once; to be all encompassing. This is a many year cycle, see Garters Hype Cycle.Delete
"It is a pyramid. A pyramid scheme relies on having a few early movers sitting at the top of the value chain and hoping the base will keep expanding to increase their take."ReplyDelete
With that definition all investments and speculative vehicles are pyramid schemes. Take a city for example, in the beginning there are a few early land owners owning almost all of the land and they sit at the top of the value chain hoping more people will want to move in to the city and thereby raising the value of their land. Are cities pyramid schemes? And if so, is it bad?
You are on the wrong side of HISTORYReplyDelete