Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse. | TigerDroppings.com

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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
13119 posts

Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


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quote:

Felix Salmon and many others have pointed out that a currency cannot succeed with a supply that is fixed, or if it grows too slowly. A currency is used to enter transactions; the more transactions there are, the more of the money you need. As the economy grows, a fixed-supply currency becomes worth more in terms of goods and services, and people begin to hoard it—expecting that if they wait a little longer, they will be able to buy more. Once hoarding takes over, circulation ends, and with it the function of the currency. Hoarding accounts for the large increase in the value of bitcoins; hoarding also sank Krugman’s baby-sitting scrip.


An even more fundamental problem with bitcoins, and indeed any private currency, is that there is no way to limit its supply. True, bitcoins cannot be manufactured beyond the limits set by Nakamoto. But there is no way to prevent future Nakamotos from creating bitcoin substitutes—say, bytecoin, or botcoin. If merchants are willing to accept bitcoins, they will be willing to accept the substitutes, especially as bitcoins become scarce and consumers scramble for substitutes. Nakamoto must have realized this because there are not enough bitcoins to substitute for the currencies around the world. The currency can only succeed if it is expanded or supplemented. But if there are no constraints on substitute digital currencies—and there aren’t—then the value of bitcoins will plummet as the subs begin to circulate. And once it becomes clear that there is no limit, people will realize that their holdings could become worthless at any moment, and demand for bitcoins and the other currencies will collapse, ending the experiment.


Unless a bitcoin has value as a currency, it has no value at all, and its price in dollars will fall to zero. A regular Ponzi scheme collapses when people realize that earlier investors are being paid out of the investments of later investors rather than from the returns on an underlying asset. Bitcoin will collapse when people realize that it can’t survive as a currency because of its built-in deflationary features, or because of the emergence of bytecoins, or both. A real Ponzi scheme takes fraud; bitcoin, by contrast, seems more like a collective delusion.




Given this, why all the enthusiasm for bitcoin? Partly, the technological ingenuity of the scheme, of course. And people have misinterpreted the run-up in price as a sign of success rather than failure. But more fundamentally, bitcoin unites futuristic left-wing Internet anarchism—the fantasy that the Web can provide the conditions for a governmentless society—with the cave-dwelling right-wing libertarianism of goldbugs who think a stable money supply can be established without government involvement. It is proof for both that government is not needed for much, or at all.



Yet history shows that private currencies always end in tears; if central banks sometimes abuse the trust we place in them, the alternatives are worse. The strangest feature of the bitcoin saga is that people who are so suspicious of government put their trust in Satoshi Nakamoto, who could be anyone, or anyones—eccentric academic researchers, mischievous Fed economists, DARPA, U.N. globalizers in black helicopters, a criminal syndicate, a bored 11-year-old Ukrainian genius. If Nakamoto is as amoral as he is ingenious, then he pocketed the early bitcoins and laughed himself to the bank.










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WikiTiger
LSU Fan
Member since Sep 2007
40721 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


You know what one of my favorite parts of bitcoin is? No one is forced to use it.





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rintintin
New Orleans Saints Fan
Life is Life
Member since Nov 2008
7710 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


Well considering BC can be divided almost infinitely, it is not necessarily a fixed supply, therefore his premise is faulty.





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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
13119 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

WikiTiger


Hey Wiki, you don't own any bitcoins, what makes you an authority on this subject?






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WikiTiger
LSU Fan
Member since Sep 2007
40721 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

you don't own any bitcoins


Why are all the bitcoin haters such morons? Do y'all not know how to read or do you intentionally ignore certain posts?

I have stated on multiple occasions that I won't discuss details of my financial life but that I do own somewhere between .00000001 and 21,000,000 bitcoins.






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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
13119 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

I have stated on multiple occasions that I won't discuss details of my financial life but that I do own somewhere between .00000001 and 21,000,000 bitcoins.





So you own .000000000000000000000001% or 100% of NOTHING






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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
56035 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


I currently have $14,485.22 in my checking account. It's still not hard to do.





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memphis tiger
LSU Fan
Memphis, TN
Member since Feb 2006
4316 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


That doesn't make it any less of a Ponzi scheme.

Most Ponzi schemes were based off of things people weren't forced to use.






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WikiTiger
LSU Fan
Member since Sep 2007
40721 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

That doesn't make it any less of a Ponzi scheme.


What is the definition of Ponzi scheme?






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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
13119 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


Hey Broke, you should invest in ABFS Notes, they're an alternative to low yield CDs, and safe





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Doc Fenton
LSU Fan
The Queen City
Member since Feb 2007
50814 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

Felix Salmon and many others have pointed out that a currency cannot succeed with a supply that is fixed, or if it grows too slowly.


This is false.

An economy might run into inefficiencies if its supply of currency gets too small, particularly its legal tender currency. For an individual currency itself that is just one of many within the wider economy, however, a stable supply is actually beneficial to its value. This is why American colonists loved the thaler and the Spanish pieces of eight so much.

By Gresham's Law, the stable currency will tend to be more for storage and transport, while currencies with higher supply growth rates will tend to be stored only sparingly and used more frequently for common transactions, but this does not make one currency more "successful" than the other. It simply means that the currencies tend to be utilized in different ways.






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WikiTiger
LSU Fan
Member since Sep 2007
40721 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

Doc Fenton


First time I've seen you in a bitcoin thread. Looking forward to hearing your thoughts






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LSURussian
LSU Fan
Baton Rouge
Member since Feb 2005
80707 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

What is the definition of Ponzi scheme?

Bitcoins....






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Doc Fenton
LSU Fan
The Queen City
Member since Feb 2007
50814 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


My interest in bitcoins is starting to gain momentum.

I think the current price might be in a bubble, and that there may be problems with limited liquidity at the moment, but there are more general principles at play here that should become interesting regardless of where the currency price happens to settle, or even whether or not bitcoins succeed as a currency relative to some other online currency that might supplant it.

I was skeptical at first about how this would change things, but after thinking about the whole Cyprus thing, I am slowly coming to the conclusion that old school Bretton-Woods-style capital controls are going to continue to become harder and harder for governments to implement, in part because of the proliferation of online schemes that will facilitate evasion.







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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
13119 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


Wiki, if you act now, I can get you in on Luvoo.com


This post was edited on 4/12 at 4:56 pm


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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
56035 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

What is the definition of Ponzi scheme?


quote:

Bitcoins....


FAP FAP FAP FAP FAP






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LSURussian
LSU Fan
Baton Rouge
Member since Feb 2005
80707 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned....
LINK






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ItNeverRains
LSU Fan
Franklin, TN
Member since Oct 2007
6268 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


Wiki gonna Wiki





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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
13119 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

LSURussian


You should look into International Postal Coupons






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WikiTiger
LSU Fan
Member since Sep 2007
40721 posts

re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.


quote:

Wiki, if you act now, I can get you in on Luvoo.com


nice edit. why didn't you leave your original post up?






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