What do you think of adding a low% of crypto allocation

[PDXTabs]

Is it me or does every crypto zealot sound like the have some kind of persecution complex?  They all seem to repeat "Everyone is against us, we will overcome, drink the Kool-Aide and join us".  Cults always end the same way. 

I only know a few people who dabbled in crypto along with myself in 2016-2017 and never had more than vacation money in this.  Everyone I know has made money, but not one believes this will change anything in the future.  It's also still not a legitimate trading vehicle for anything otherwise there wouldn't be a 33% discount from BTC to GBTC.  One price has to be fake, either one that trades on regulated exchanges or one that trades in 3rd world servers?   

That's because cryptocurrencies can help persecuted populations. As a jew I don't want my wealth confiscated like has been historically.

Does cryptocurrency really help with this?

Let's say that tomorrow all of your assets are frozen and you are legit persecuted and you want to get to another country and claim asylum (or if you are lucky enough you have a second passport). But you don't have any money. How do you get there?

Now imagine that 10% of your net worth was in XMR in offline wallets.

Which position would you rather be in?

EDITed to add - that's not an investment per say, it is not speculating that XMR will go up, it's just a hedge against loss of access to your traditional assets.

[the_gastropod]

Let's say that tomorrow all of your assets are frozen and you are legit persecuted and you want to get to another country and claim asylum (or if you are lucky enough you have a second passport). But you don't have any money. How do you get there?

Now imagine that 10% of your net worth was in XMR in offline wallets.

Which position would you rather be in?

EDITed to add - that's not an investment per say, it is not speculating that XMR will go up, it's just a hedge against loss of access to your traditional assets.

For the 99%+ of people buying cryptocurrencies on exchanges that have to abide by KYC regulations, any moderately competent government will know you have these holdings—even if they've been moved to hardware wallets. If you're being persecuted this aggressively, there's a non-negligible likelihood you're doing to be violently threatened to give up that hardware wallet too. Cue https://xkcd.com/538/

[PDXTabs]

Let's say that tomorrow all of your assets are frozen and you are legit persecuted and you want to get to another country and claim asylum (or if you are lucky enough you have a second passport). But you don't have any money. How do you get there?

Now imagine that 10% of your net worth was in XMR in offline wallets.

Which position would you rather be in?

EDITed to add - that's not an investment per say, it is not speculating that XMR will go up, it's just a hedge against loss of access to your traditional assets.

For the 99%+ of people buying cryptocurrencies on exchanges that have to abide by KYC regulations, any moderately competent government will know you have these holdings—even if they've been moved to hardware wallets. If you're being persecuted this aggressively, there's a non-negligible likelihood you're doing to be violently threatened to give up that hardware wallet too. Cue https://xkcd.com/538/

Indeed, if you are holding crypto for persecution reasons you should:
1. Not leave a paper trail.
2. Never disclose what you have to any government or person.
3. Break it up into more than one wallet.

This is easier than you might think. There are multiple websites on the non-dark web where you can find people who will trade XMR for USD.

As long as you never sell any of it I don't believe that you are breaking any tax laws with this plan.

[ChpBstrd]

Is it me or does every crypto zealot sound like the have some kind of persecution complex?  They all seem to repeat "Everyone is against us, we will overcome, drink the Kool-Aide and join us".  Cults always end the same way. 

I only know a few people who dabbled in crypto along with myself in 2016-2017 and never had more than vacation money in this.  Everyone I know has made money, but not one believes this will change anything in the future.  It's also still not a legitimate trading vehicle for anything otherwise there wouldn't be a 33% discount from BTC to GBTC.  One price has to be fake, either one that trades on regulated exchanges or one that trades in 3rd world servers?   

That's because cryptocurrencies can help persecuted populations. As a jew I don't want my wealth confiscated like has been historically.

Are people really piling into crypto to avoid a scenario where someone else steals their wealth? People are losing tens of millions on every hack, with no recourse, and no one cares. 

It's like a plan to redistribute wealth to computer hackers and away from bros who get investment advice from YouTube. It's like we've set up a version of the Olympic games for hacking, and the prizes are to become a multi-millionaire.

[Blender Bender]

Is it me or does every crypto zealot sound like the have some kind of persecution complex?  They all seem to repeat "Everyone is against us, we will overcome, drink the Kool-Aide and join us".  Cults always end the same way. 

I only know a few people who dabbled in crypto along with myself in 2016-2017 and never had more than vacation money in this.  Everyone I know has made money, but not one believes this will change anything in the future.  It's also still not a legitimate trading vehicle for anything otherwise there wouldn't be a 33% discount from BTC to GBTC.  One price has to be fake, either one that trades on regulated exchanges or one that trades in 3rd world servers?   

That's because cryptocurrencies can help persecuted populations. As a jew I don't want my wealth confiscated like has been historically.

Are people really piling into crypto to avoid a scenario where someone else steals their wealth? People are losing tens of millions on every hack, with no recourse, and no one cares. 

It's like a plan to redistribute wealth to computer hackers and away from bros who get investment advice from YouTube. It's like we've set up a version of the Olympic games for hacking, and the prizes are to become a multi-millionaire.

Well said.

[FreelanceToFreedom]

Crypto is interesting to me, and I hold a very small amount of a few tokens.

But what is more interesting to me is the underlying blockchain technology. I think people get caught up in the price movements and FOMO of the tokens themselves, but don't understand that the tokens are simply made for paying fees to interact with the underlying blockchain. So ETH is literally just a token that enables you to access and utilize the Ethereum blockchain. At least that was the original concept!

I am still learning about blockchain and won't claim to be an expert. But I do know that an incredible number of extremely intelligent people are flocking to blockchain projects en masse. Not investing in crypto, necessarily, but leaving prestigious tech jobs in order to pursue blockchain startups and ventures. I think it was an episode of the Tim Ferris show where he said he had never seen so many intelligent people drop everything to pursue a new technology.

Sure, there's definitely a gold-rush aspect to it. But there's also genuine excitement in the tech industry about the future potential of blockchain. And that alone is enough to grab my interest.

tl;dr many tokens are completely worthless and/or massively overhyped, but I personally believe that some type of blockchain/smart contract tech will likely play a much bigger role in the world than it does today. Whether that's an existing blockchain or one that has yet to be created is anyone's guess.

[Blender Bender]

Crypto is interesting to me, and I hold a very small amount of a few tokens.

But what is more interesting to me is the underlying blockchain technology. I think people get caught up in the price movements and FOMO of the tokens themselves, but don't understand that the tokens are simply made for paying fees to interact with the underlying blockchain. So ETH is literally just a token that enables you to access and utilize the Ethereum blockchain. At least that was the original concept!

I am still learning about blockchain and won't claim to be an expert. But I do know that an incredible number of extremely intelligent people are flocking to blockchain projects en masse. Not investing in crypto, necessarily, but leaving prestigious tech jobs in order to pursue blockchain startups and ventures. I think it was an episode of the Tim Ferris show where he said he had never seen so many intelligent people drop everything to pursue a new technology.

Sure, there's definitely a gold-rush aspect to it. But there's also genuine excitement in the tech industry about the future potential of blockchain. And that alone is enough to grab my interest.

tl;dr many tokens are completely worthless and/or massively overhyped, but I personally believe that some type of blockchain/smart contract tech will likely play a much bigger role in the world than it does today. Whether that's an existing blockchain or one that has yet to be created is anyone's guess.

Smart as realizing that they can steal lily pops from babies in the light of the day. Become programmer and issue your own crypto. Pump it, get rich. Tell them that you use blockchain. They will be delighted to throw fiat on you.

[erjkism]

Is it me or does every crypto zealot sound like the have some kind of persecution complex?  They all seem to repeat "Everyone is against us, we will overcome, drink the Kool-Aide and join us".  Cults always end the same way. 

I only know a few people who dabbled in crypto along with myself in 2016-2017 and never had more than vacation money in this.  Everyone I know has made money, but not one believes this will change anything in the future.  It's also still not a legitimate trading vehicle for anything otherwise there wouldn't be a 33% discount from BTC to GBTC.  One price has to be fake, either one that trades on regulated exchanges or one that trades in 3rd world servers?   

That's because cryptocurrencies can help persecuted populations. As a jew I don't want my wealth confiscated like has been historically.

Does cryptocurrency really help with this?

It's hard for someone to kick down your door and just steal your crypto sure, but it's not a currency . . . so a population that wants to persecute you could just camp out at the crypto exchanges for when you want to make the crypto usable, couldn't they?

Then you look at all the neo-nazis who have gained wealth from cryptocurrency . . . https://www.splcenter.org/hatewatch/2021/12/09/how-cryptocurrency-revolutionized-white-supremacist-movement.  It seems tricky to say that this is a clear benefit for persecuted populations.

If necessary you could just send the cryptocurrency to a friend/relative/associate to hold so that the persecuting population couldn't  access to it. Sure, they could torture you to make you tell them where you sent it, but they can never really get access to the cryptocurrency unless the person sends it back. 

With regards to camping out at exchanges, there are so many decentralized exchanges that allow you to swap from one currency to another with no central authority saying who can and can't use the service. Sure, to perform an electronic bank transfer and get local currency in your bank account you would need to go through a centralized exchange at some point though. But you can also just make direct barter for local currency 1 on 1 with a person through localbitcoins or something like that.

And on the Nazi issue... there was actually an incident where the internet nazi kid Nick Fuentes had 500k from his bank account completely drained by the federal government. This is an issue that can really affect anyone anywhere. https://www.worldtribune.com/doj-confiscated-bank-account-500000-from-nick-fuentes/

[Blender Bender]

I feel like a troll here 😀. Sorry, will limit my posts.

[ChpBstrd]

Is it me or does every crypto zealot sound like the have some kind of persecution complex?  They all seem to repeat "Everyone is against us, we will overcome, drink the Kool-Aide and join us".  Cults always end the same way. 

I only know a few people who dabbled in crypto along with myself in 2016-2017 and never had more than vacation money in this.  Everyone I know has made money, but not one believes this will change anything in the future.  It's also still not a legitimate trading vehicle for anything otherwise there wouldn't be a 33% discount from BTC to GBTC.  One price has to be fake, either one that trades on regulated exchanges or one that trades in 3rd world servers?   

That's because cryptocurrencies can help persecuted populations. As a jew I don't want my wealth confiscated like has been historically.

Does cryptocurrency really help with this?

It's hard for someone to kick down your door and just steal your crypto sure, but it's not a currency . . . so a population that wants to persecute you could just camp out at the crypto exchanges for when you want to make the crypto usable, couldn't they?

Then you look at all the neo-nazis who have gained wealth from cryptocurrency . . . https://www.splcenter.org/hatewatch/2021/12/09/how-cryptocurrency-revolutionized-white-supremacist-movement.  It seems tricky to say that this is a clear benefit for persecuted populations.

If necessary you could just send the cryptocurrency to a friend/relative/associate to hold so that the persecuting population couldn't  access to it. Sure, they could torture you to make you tell them where you sent it, but they can never really get access to the cryptocurrency unless the person sends it back. 

With regards to camping out at exchanges, there are so many decentralized exchanges that allow you to swap from one currency to another with no central authority saying who can and can't use the service. Sure, to perform an electronic bank transfer and get local currency in your bank account you would need to go through a centralized exchange at some point though. But you can also just make direct barter for local currency 1 on 1 with a person through localbitcoins or something like that

Let's look at the string of fragile systems and assumptions that must be in place for a person to use cryptocurrency to escape repression:

1) A working, secure, and private internet connection and electricity. This assumption might fail in the event of a solar flare, internet-wide malware vulnerability, local unrest, or authoritarian lockdown. Would you submit your passwords through China's great firewall, where you know for sure someone is watching you? How about through an African internet cafe?

2) Existence of trustworthy exchanges. I.e. in the future, exchanges must not have been banned or compromised to the point they are untrustworthy. They have to be legit businesses, not some bullshit supposedly based on a rogue Caribbean island, but who knows, right? More and more countries are banning cryptocurrencies, so at what point do the exchanges themselves become either underground or sketchy third-world operations? You'd never know until they day you tried to go back to fiat currency, and even then ponzi schemes can make payments to early investors.

3) A device not infected with malware. A significant percentage of the people who lose their entire crypto balances do so because they had spyware on their computer. Tough luck. There's practically no law enforcement, no insurance, and no recourse.

4) Secure password storage. In the event you had to flee unrest or crisis, how will you transport your passwords? Will they be stored on a steal-able laptop? Will it be written in a note folded into your shoe? Or will you make it simple enough to be guessable within the first few million tries of a cracking program?

5) A way to trade your crypto for fiat. So you've escaped persecution with your login information tatooed on your private parts in morse code disguised as moles, and landed in a place where crypto exchanges are legal. You set up a brand new burner phone with your last $30, log into your crypto exchange, and then what? How do you sell your crypto and acquire enough local currency to rent a hotel tonight? You'll need to depend on the banking system (brick and mortar banks, PayPal-like forms, credit card companies, etc.) to receive transfers of local currency from your exchange account in a format the hotel will accept*. But of course, if they are still dependable, what did you need to use crypto for?

*Unless you think the exchanges will set up some parallel economy to serve you, which would somehow not have the same vulnerabilities as the existing banking system, and would thereby be a relevant solution for this "last mile" problem.

The traditional banking system is vulnerable to #1 only. In the event of #3 and #4 your bank will likely work with you to confirm your identity in person and restore access or use insurance to cover the losses. Similarly, if the plan is to entrust your life savings to a friend in a non-persecuted population or in a place without unrest so that the bad guys can't torture the password out of you, you could have just given them a suitcase of cash or done a wire transfer at that point.

[erjkism]

Is it me or does every crypto zealot sound like the have some kind of persecution complex?  They all seem to repeat "Everyone is against us, we will overcome, drink the Kool-Aide and join us".  Cults always end the same way. 

I only know a few people who dabbled in crypto along with myself in 2016-2017 and never had more than vacation money in this.  Everyone I know has made money, but not one believes this will change anything in the future.  It's also still not a legitimate trading vehicle for anything otherwise there wouldn't be a 33% discount from BTC to GBTC.  One price has to be fake, either one that trades on regulated exchanges or one that trades in 3rd world servers?   

That's because cryptocurrencies can help persecuted populations. As a jew I don't want my wealth confiscated like has been historically.

Does cryptocurrency really help with this?

It's hard for someone to kick down your door and just steal your crypto sure, but it's not a currency . . . so a population that wants to persecute you could just camp out at the crypto exchanges for when you want to make the crypto usable, couldn't they?

Then you look at all the neo-nazis who have gained wealth from cryptocurrency . . . https://www.splcenter.org/hatewatch/2021/12/09/how-cryptocurrency-revolutionized-white-supremacist-movement.  It seems tricky to say that this is a clear benefit for persecuted populations.

If necessary you could just send the cryptocurrency to a friend/relative/associate to hold so that the persecuting population couldn't  access to it. Sure, they could torture you to make you tell them where you sent it, but they can never really get access to the cryptocurrency unless the person sends it back. 

With regards to camping out at exchanges, there are so many decentralized exchanges that allow you to swap from one currency to another with no central authority saying who can and can't use the service. Sure, to perform an electronic bank transfer and get local currency in your bank account you would need to go through a centralized exchange at some point though. But you can also just make direct barter for local currency 1 on 1 with a person through localbitcoins or something like that

Let's look at the string of fragile systems and assumptions that must be in place for a person to use cryptocurrency to escape repression:

1) A working, secure, and private internet connection and electricity. This assumption might fail in the event of a solar flare, internet-wide malware vulnerability, local unrest, or authoritarian lockdown. Would you submit your passwords through China's great firewall, where you know for sure someone is watching you? How about through an African internet cafe?

2) Existence of trustworthy exchanges. I.e. in the future, exchanges must not have been banned or compromised to the point they are untrustworthy. They have to be legit businesses, not some bullshit supposedly based on a rogue Caribbean island, but who knows, right? More and more countries are banning cryptocurrencies, so at what point do the exchanges themselves become either underground or sketchy third-world operations? You'd never know until they day you tried to go back to fiat currency, and even then ponzi schemes can make payments to early investors.

3) A device not infected with malware. A significant percentage of the people who lose their entire crypto balances do so because they had spyware on their computer. Tough luck. There's practically no law enforcement, no insurance, and no recourse.

4) Secure password storage. In the event you had to flee unrest or crisis, how will you transport your passwords? Will they be stored on a steal-able laptop? Will it be written in a note folded into your shoe? Or will you make it simple enough to be guessable within the first few million tries of a cracking program?

5) A way to trade your crypto for fiat. So you've escaped persecution with your login information tatooed on your private parts in morse code disguised as moles, and landed in a place where crypto exchanges are legal. You set up a brand new burner phone with your last $30, log into your crypto exchange, and then what? How do you sell your crypto and acquire enough local currency to rent a hotel tonight? You'll need to depend on the banking system (brick and mortar banks, PayPal-like forms, credit card companies, etc.) to receive transfers of local currency from your exchange account in a format the hotel will accept*. But of course, if they are still dependable, what did you need to use crypto for?

*Unless you think the exchanges will set up some parallel economy to serve you, which would somehow not have the same vulnerabilities as the existing banking system, and would thereby be a relevant solution for this "last mile" problem.

The traditional banking system is vulnerable to #1 only. In the event of #3 and #4 your bank will likely work with you to confirm your identity in person and restore access or use insurance to cover the losses. Similarly, if the plan is to entrust your life savings to a friend in a non-persecuted population or in a place without unrest so that the bad guys can't torture the password out of you, you could have just given them a suitcase of cash or done a wire transfer at that point.

1) A working, secure, and private internet connection and electricity.

You can have keep your private keys safe offline in a hardware wallet for most cryptocurrencies. The pin/password is pretty simple usually, and if you really want to you could memorize your 12-24 word seed phrase so that you don't even need to write it down anywhere.


2) Existence of trustworthy exchanges.

This isn't really a problem, there are a ton of centralized/decentralized exchanges that have been trusted with billions of dollars. Coinbase is publically traded company. 


3) A device not infected with malware

This is a risk, no doubt. Proper security and common sense can help prevent hackers.  I know someone who has millions of dollars in crypto stored on a computer that has never been hooked to the internet. Depositing the money on it is weird and above my pay-grade, so I have never done anything like that, but it is possible.

4) Secure password storage.

if you want to, you could memorize your 12-24 word backup phrase.

5) A way to trade your crypto for fiat.

There are tons of centralized/decentralized exchanges that let you trade for USD stable coins. Most exchanges let you withdraw to a bank account. If you don't have a bank account, there are websites that help you trade crypto for cash, or if you know someone personally you could just make a deal with them and avoid the banking system all together.



"The traditional banking system is vulnerable to #1 only. In the event of #3 and #4 your bank will likely work with you to confirm your identity in person and restore access or use insurance to cover the losses. Similarly, if the plan is to entrust your life savings to a friend in a non-persecuted population or in a place without unrest so that the bad guys can't torture the password out of you, you could have just given them a suitcase of cash or done a wire transfer at that point."

You trust sending a suitcase full of cash through the mail? I would never do that lol.  A wire transfer will only work if the government hasn't confiscated your assets already.

-

[PDXTabs]

1) A working, secure, and private internet connection and electricity. This assumption might fail in the event of a solar flare, internet-wide malware vulnerability, local unrest, or authoritarian lockdown. Would you submit your passwords through China's great firewall, where you know for sure someone is watching you? How about through an African internet cafe?

The blockchain lives on the internet. You don't need "secure internet" any more than you need "secure internet" to check your online banking with a secure TLS connection. The internet isn't secure, period. The only thing you can do is use reasonably safe cryptographic protocols.

2) Existence of trustworthy exchanges. I.e. in the future, exchanges must not have been banned or compromised to the point they are untrustworthy. They have to be legit businesses, not some bullshit supposedly based on a rogue Caribbean island, but who knows, right? More and more countries are banning cryptocurrencies, so at what point do the exchanges themselves become either underground or sketchy third-world operations? You'd never know until they day you tried to go back to fiat currency, and even then ponzi schemes can make payments to early investors.

You need to find someone, somewhere, that will trade your crypto for cash or cash equivalents. This exists today.

3) A device not infected with malware. A significant percentage of the people who lose their entire crypto balances do so because they had spyware on their computer. Tough luck. There's practically no law enforcement, no insurance, and no recourse.

This is actually a problem. Really paranoid security researchers go to BestBuy, buy a laptop, and immediately re-image it. That's probably overboard.

4) Secure password storage. In the event you had to flee unrest or crisis, how will you transport your passwords? Will they be stored on a steal-able laptop? Will it be written in a note folded into your shoe? Or will you make it simple enough to be guessable within the first few million tries of a cracking program?

Secure password storage is an issue. But the cracking thing isn't, or at least it shouldn't be depending on the currency and the wallet. To be more specific I recently had to recover an XMR offline paper wallet and even knowing the password it took a long time to recover the electronic wallet. This is because it is a cryptographically intensive process. Also, if you screw it up, you don't know. You just end up with a wallet with 0 XMR in it.

5) A way to trade your crypto for fiat. So you've escaped persecution with your login information tatooed on your private parts in morse code disguised as moles, and landed in a place where crypto exchanges are legal. You set up a brand new burner phone with your last $30, log into your crypto exchange, and then what? How do you sell your crypto and acquire enough local currency to rent a hotel tonight? You'll need to depend on the banking system (brick and mortar banks, PayPal-like forms, credit card companies, etc.) to receive transfers of local currency from your exchange account in a format the hotel will accept*. But of course, if they are still dependable, what did you need to use crypto for?

Crypto-for-cash is a thing today. But obviously if you are worried enough to keep a bunch of cryptocurrency in offline wallet(s) you should probably also have some cash money and maybe even some gold.

[GuitarStv]

This is a pretty good in-depth summary of the current state of crypto and NFTs:
https://www.youtube.com/watch?v=YQ_xWvX1n9g&ab_channel=FoldingIdeas

[zing12]

This is a pretty good in-depth summary of the current state of crypto and NFTs:
https://www.youtube.com/watch?v=YQ_xWvX1n9g&ab_channel=FoldingIdeas

Wild. I have been a skeptic for a while and don't own any crypto, but I never fully made the pyramid scheme connection til now. It's just an MLM scheme that targets bros instead of moms.

A few years ago, I thought that "well I'm skeptical on the value of it as a currency, but I think there could be interesting applications of blockchain technology" and now I'm not even so sure of that lol.

[bacchi]

This is a pretty good in-depth summary of the current state of crypto and NFTs:
https://www.youtube.com/watch?v=YQ_xWvX1n9g&ab_channel=FoldingIdeas

Wild. I have been a skeptic for a while and don't own any crypto, but I never fully made the pyramid scheme connection til now. It's just an MLM scheme that targets bros instead of moms.

A few years ago, I thought that "well I'm skeptical on the value of it as a currency, but I think there could be interesting applications of blockchain technology" and now I'm not even so sure of that lol.

Blockchain didn't invent the  consensus algorithm. To put it another way, distributed agents can be used without silly PoW or PoS algorithms that waste CPU cycles or require money (or "money").

[Telecaster]

I am still learning about blockchain and won't claim to be an expert. But I do know that an incredible number of extremely intelligent people are flocking to blockchain projects en masse. Not investing in crypto, necessarily, but leaving prestigious tech jobs in order to pursue blockchain startups and ventures. I think it was an episode of the Tim Ferris show where he said he had never seen so many intelligent people drop everything to pursue a new technology.

That was the episode focused on NTFs I believe.  The crypto-experts he's had on invariably have had brilliant careers in tech before focusing on blockchain.  No question the brain power of people in this sector is off the charts. 

But there are two problems that seem to be insurmountable, and really it is just one problem:   They are just making collectables.  For example, in the NTF episode, they discussed how you could have a metaverse/game world where all the objects are NTFs and therefore authenticable and transferrable--even between games.  That's cool, but I don't see what problem they are solving unless there is a big market for authenticable virtual stuff. 

The second problem which is part of the first problem is these guys are so focused on technology none of them have thought about how money works in the real world.   Bitcoin was intended to be money.  But it wasn't designed to be money, it was designed to be a collectable.   Therefore it doesn't work as currency and will never work as currency. 

[DaTrill]

Wall Street vampires will such every drop of profit out of this Ponzi scheme.  The juice on trading cryptos is the only thing attracting WS, nothing to do with usage or adoption. 

[Telecaster]

Pet peeve:  There is no aspect of crypto that meets the definition of a Ponzi scheme.  It does appear to be a speculative bubble.  Things tend to get tedious and boring when we get pedantic like I'm doing, but definitions are important.   Crypto is not a Ponzi scheme. 

[FLBiker]

It's interesting to see the "stop government from seizing your assets" argument for crypto.

I'm a pretty pessimistic guy, government-wise -- I mean, I literally moved to Canada from the US a couple of year ago so that my family could have two passports, just in case.  At the same time, I have very little fear of the government seizing my assets.  Or, to put it another way, I think the odds are much greater that crypto could go to zero, or my wallet could get hacked, or whatever.  Plus, in a world where "the government" (meaning either Canada or the US, in my case) is seizing the assets of its citizens indiscriminately, I'm probably screwed regardless.  Unless you're imagining a world where the government seizes your assets, but grocery stores, hospitals, utilities, etc. all continue to function as per usual (despite the fact that only folks who kept assets in crypto would be able to afford them).  I'm just trying to get my head around this scenario.

[StashingAway]

Plus, in a world where "the government" (meaning either Canada or the US) in my case is seizing the assets of its citizens indiscriminately, I'm probably screwed regardless.  Unless you're imagining a world where the government seizes your assets, but grocery stores, hospitals, utilities, etc. all continue to function as per usual (despite the fact that only folks who kept assets in crypto would be able to afford them).  I'm just trying to get my head around this scenario.

I think think the romanticized zombie movies and the like have let imaginations run with what an actual collapse would look like.

[GuitarStv]

Pet peeve:  There is no aspect of crypto that meets the definition of a Ponzi scheme.  It does appear to be a speculative bubble.  Things tend to get tedious and boring when we get pedantic like I'm doing, but definitions are important.   Crypto is not a Ponzi scheme.

It's a decentralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

Ponzi Scheme:  A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves.

With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse.


That seems to fit bitcoin reasonably well.  Early investors are paid when they cash out by the liquidity provided by new investors.  The value of bitcoin depends entirely upon new money coming into the system.  Bitcoin itself generates little or no legitimate earnings.  A large number of investors cashing out would crash Bitcoin.


Pyramid scheme:  A pyramid scheme is a fraudulent system of making money based on recruiting an ever-increasing number of  "investors."  The initial promoters recruit  investors, who in turn recruit more investors, and so on. The scheme is called a "pyramid" because at each level, the number of investors increases. The small group of initial promotors at the top require a large base of later investors to support the scheme by providing profits to the earlier investors.

This also seems to fit reasonably well.  Bitcoin early adopters are virtually all shills/evangelists bent on recruiting more investors. Due to the deflationary nature of bitcoin,  the earlier you get in the greater the rewards.  In order to allow those early investors with large numbers of bitcoin to cash out, it's necessary that a large base of later investors support the scheme buy purchasing their bitcoin.



Story seems to check out.

[BeanCounter]

Pet peeve:  There is no aspect of crypto that meets the definition of a Ponzi scheme.  It does appear to be a speculative bubble.  Things tend to get tedious and boring when we get pedantic like I'm doing, but definitions are important.   Crypto is not a Ponzi scheme.

It's a decentralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

Ponzi Scheme:  A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves.

With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse.


That seems to fit bitcoin reasonably well.  Early investors are paid when they cash out by the liquidity provided by new investors.  The value of bitcoin depends entirely upon new money coming into the system.  Bitcoin itself generates little or no legitimate earnings.  A large number of investors cashing out would crash Bitcoin.


Pyramid scheme:  A pyramid scheme is a fraudulent system of making money based on recruiting an ever-increasing number of  "investors."  The initial promoters recruit  investors, who in turn recruit more investors, and so on. The scheme is called a "pyramid" because at each level, the number of investors increases. The small group of initial promotors at the top require a large base of later investors to support the scheme by providing profits to the earlier investors.

This also seems to fit reasonably well.  Bitcoin early adopters are virtually all shills/evangelists bent on recruiting more investors. Due to the deflationary nature of bitcoin,  the earlier you get in the greater the rewards.  In order to allow those early investors with large numbers of bitcoin to cash out, it's necessary that a large base of later investors support the scheme buy purchasing their bitcoin.



Story seems to check out.

Absolutely!!!

Some guys from my hometown started a token last summer. It was advertised heavily to locals and really driven on hometown pride in a struggling Midwestern manufacturing town. I was invited to a FB group about the coin by an old elementary school friend and through that I followed along as they all continued to hype this coin with absolutely zero utility. (The "white paper" was hilarious) Lots of boys posting HODL, and "diamond hands" etc. etc.
This went on for about six months and ultimately the group of early buyers cashed out, advertising and promotions stopped and the thing tanked to $0.
If that isn't a MLM/pyramid scheme/ponzi scheme then I don't know what is.

The sad thing is that all these awesome, hard working, blue collar folks who got caught up in the hype that people they knew from their hometown were building this "investment" for them lost money that they couldn't afford to lose.
(I actually got booted from the FB group for pointing out that it wasn't an investment)
And this is why I want crypto to fail. It's not an investment. It has no utility and is simply a collectable where the value of the collectable is strictly driven by others who bought in (or paid celebrities) to hype it up.

I'm 44 and FI. I did it by investing in Index funds and a few individual stocks of companies that I thought were good during recessions. (walmart, dollar tree, united health group, Microsoft, Apple etc. Stuff that I saw people struggling in my hometown still buying with what little they had) Becoming FI takes discipline and patience, not genius. There actually isn't anything magical about it. I've never had to HODL.

[lifeanon269]

Ponzi Scheme:  A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves.

With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse.


That seems to fit bitcoin reasonably well.  Early investors are paid when they cash out by the liquidity provided by new investors.  The value of bitcoin depends entirely upon new money coming into the system.  Bitcoin itself generates little or no legitimate earnings.  A large number of investors cashing out would crash Bitcoin.


Pyramid scheme:  A pyramid scheme is a fraudulent system of making money based on recruiting an ever-increasing number of  "investors."  The initial promoters recruit  investors, who in turn recruit more investors, and so on. The scheme is called a "pyramid" because at each level, the number of investors increases. The small group of initial promotors at the top require a large base of later investors to support the scheme by providing profits to the earlier investors.

This also seems to fit reasonably well.  Bitcoin early adopters are virtually all shills/evangelists bent on recruiting more investors. Due to the deflationary nature of bitcoin,  the earlier you get in the greater the rewards.  In order to allow those early investors with large numbers of bitcoin to cash out, it's necessary that a large base of later investors support the scheme buy purchasing their bitcoin.



Story seems to check out.

Haven't frequented these forums much lately and figured I would drop in, but I see that the quality of discussion here hasn't improved much.

Sorry, you're being disingenuous about what a ponzi scheme and pyramid scheme actually are. It is like you've wrote the definition out and then proceeded to ignore what you just wrote simply to say that it applies to bitcoin.

A ponzi scheme is a scheme designed to enrich someone by defrauding others. You take people's money through fraud and telling them that you're investing their money into something when you're not. Anyone that wants to get money out of the scheme you must pay them from the money you're stealing from others. In order to continually make money through this fraud scheme, you must continue to steal money from people otherwise the scheme collapses. Investors don't actually own anything at all in a ponzi scheme. The second they give their money to the ponzi fraudster, they were scammed. A ponzi scheme, by definition promises returns on an investment where no returns are to be had. The ponzi fraudster is pocketing money of victims that are expecting a return above and beyond the money they put into the scheme. You wrote that equivalently in your definition, but it seems as if you're ignoring that definition when trying to apply it to bitcoin.

This literally does not fit the definition of bitcoin at all. Contrary to your claims, bitcoin doesn't require new investors or money into the system in order for it to have value. By your assessment, every commodity is a ponzi scheme. If there are only 100 people on earth that own, use, and value bitcoin and they all value it at $100 dollars equivalently, then it doesn't take 100 more people to have it continually valued as such. This is a basic understanding of market economics that you're ignoring. At some point, just purely by population limitations, there will be a stabilization of the number of new people owning bitcoin. That doesn't mean the price of bitcoin will collapse because the people that do own and use bitcoin will continue to value it according to what the market dictates. Bitcoin could remain at today's price of $36,500 perpetually if the market dictated it even without requiring a new influx of investors. Contrast that with an actual ponzi scheme that would collapse under such a scenario where the number of new investors stabilizes because the ponzi fraudster is stealing money behind their victims' backs.

The same can be said for your reasoning for calling it a pyramid scheme. These things have very specific definitions to what they are.

https://en.wikipedia.org/wiki/Pyramid_scheme

It is easy to just toss out words like "ponzi scheme" or "pyramid scheme" as a criticism, but at the end of the day bitcoin doesn't fit those definitions. There are plenty of criticisms you could put out there toward bitcoin, but you lose credibility when you call it something with clear definitions for what they are that don't factually fit in this case. There have no doubt been actual ponzi schemes that have come and gone during the cryptocurrency craze. A vast majority of cryptocurrencies are scams at best and fraud is rampant in the space. A majority of them are solutions in search of a problem. But at the end of the day, if you're going to have credibility in a discussion about what bitcoin is and isn't, then we need to be truthful and genuine in the arguments we have for or against it.

Sorry, but Telecaster is right here and being disingenuous about what the definition of these things are isn't going to help anyone here. This is one of the reasons why I stepped back from these forums because of the poor balance of discussions that these threads have. It gets real tiring when crtics can't rise to the level of debate that is asked because as Telecaster said, it is just tiresome when definitions are skewed for the sake of making logical fallacies.

Pet peeve:  There is no aspect of crypto that meets the definition of a Ponzi scheme.  It does appear to be a speculative bubble.  Things tend to get tedious and boring when we get pedantic like I'm doing, but definitions are important.   Crypto is not a Ponzi scheme. 

[the_gastropod]

If there are only 100 people on earth that own, use, and value bitcoin and they all value it at $100 dollars equivalently, then it doesn't take 100 more people to have it continually valued as such. This is a basic understanding of market economics that you're ignoring. At some point, just purely by population limitations, there will be a stabilization of the number of new people owning bitcoin. That doesn't mean the price of bitcoin will collapse because the people that do own and use bitcoin will continue to value it according to what the market dictates. Bitcoin could remain at today's price of $36,500 perpetually if the market dictated it even without requiring a new influx of investors.

I'd quibble with this. Miners exist, and take money out of the system. Therefore, new investors are required to "invest" money in to keep the price stable. Let's remember another important point: this is not part of a functioning economy—there is no circular flow of income. Bitcoin—and every other cryptocurrency—works only in terms of the conventional currency system..

When you buy $100 of Bitcoin, you're just giving an older investor $100 in exchange for their tokens—minus a little bit for transaction fees you pay to the miners. You then can effectively do nothing with that until you eventually decide to sell it, converting it back to some number of US dollars, which will require some new sucker to enter the game, to pay you out.

Why do people enter the system? This is imperative to understand. Virtually every investor in cryptocurrency invests into the system because the number goes up. The number goes up because an increasing number of people have spent an increasing amount of money to pay out older investors. A stable Bitcoin—even if that could exist—would lose the vast majority of its interest and investors.

I don't think anyone is being disingenuous describing cryptocurrencies as Ponzi schemes or pyramid schemes. While cryptos may not meet the strictest definitions of ponzis/pyramits, the distinctions are effectively meaningless and, imo, boring. The mechanisms of fraud are much the same. I've seen people use the term "Nakamoto Scheme" to describe it, and it's effectively a hybrid Ponzi/Pyramid scheme with the "strength"—from the perspective of the fraudster—of both and the weaknesses of neither. It promises high investment returns, takes very little effort to invest in, recruits new participants as self-interested evangelists of the scheme. It's not presently illegal, as it's still largely regarded as "TECHNICAL INNOVATION!", so has been largely looked over by regulators. Quibbling about the precise semantics of "Ponzi scheme", I think is missing the point. This is massive fraud happening in front of us all.

[PDXTabs]

Pet peeve:  There is no aspect of crypto that meets the definition of a Ponzi scheme.  It does appear to be a speculative bubble.  Things tend to get tedious and boring when we get pedantic like I'm doing, but definitions are important.   Crypto is not a Ponzi scheme.

It's a decentralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

The US dollar is a centralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

[the_gastropod]

The US dollar is a centralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

Nobody expects the US dollar to produce a return on investment.

I'm perplexed at the outrage, here. Like... the mechanisms of fraud are nearly identical between ponzis and cryptocurrencies. The details that don't precisely match the definition aren't meaningful. I think this is a pretty funny and hyper-anal take on a "early retirement" message board, where the owner very much does definitionally still do "work". Yet, the term "retirement" is useful to describe Pete's situation, as people are very familiar with it, and it's, for all intents and purposes, true that he is retired.

[MustacheAndaHalf]

Pet peeve:  There is no aspect of crypto that meets the definition of a Ponzi scheme.  It does appear to be a speculative bubble.  Things tend to get tedious and boring when we get pedantic like I'm doing, but definitions are important.   Crypto is not a Ponzi scheme.

It's a decentralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

Bitcoin's code is open source, for all to view.  Every Bitcoin transaction is on the blockchain, for all to view.  What percentage of Ponzi schemes have 100% transparency?

[PDXTabs]

The US dollar is a centralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

Nobody expects the US dollar to produce a return on investment.

Nobody today does (that's called deflation, and is not unknown to the US dollar). But also, I do not believe that there is any fundamental reason you couldn't create an inflationary crytopcurrency. In fact, to the extent that (some people) arguably want cryptocurrency to be a currency it would be a very good thing.

But that gets us to a different question: what is it? If it's a currency you want it to go down in value (like the US dollar usually does). But that's obviously not what most of the people on this thread are talking about.

[lifeanon269]

I'd quibble with this. Miners exist, and take money out of the system. Therefore, new investors are required to "invest" money in to keep the price stable. Let's remember another important point: this is not part of a functioning economy—there is no circular flow of income. Bitcoin—and every other cryptocurrency—works only in terms of the conventional currency system..

When you buy $100 of Bitcoin, you're just giving an older investor $100 in exchange for their tokens—minus a little bit for transaction fees you pay to the miners. You then can effectively do nothing with that until you eventually decide to sell it, converting it back to some number of US dollars, which will require some new sucker to enter the game, to pay you out.

This is factually untrue. Miners are not required to take money out of the system. Miners are paid for the work they're doing with transactions fees that are paid in bitcoin. They could theoretically pay their electric bills in bitcoin, therefore new investors are not "required". Just because the system exists within our current economy does not mean that it can't exist outside of it. The world could theoretically switch to a bitcoin based monetary system and it would function just fine. It doesn't NEED fiat currencies to exist, therefore the argument that because bitcoin is currently operating within our current fiat monetary system it is a ponzi scheme is a fallacy. As I said, a ponzi scheme would collapse under such scenarios, bitcoin wouldn't. There are many pockets of economies all around the world that are functioning on bitcoin. Is it a minuscule amount compared with the whole? Absolutely. But claiming the contrary just so you can make a disingenuous argument that it is a ponzi scheme shows your bias and privilege here.

Your argument is akin to attacking the inventor of the automobile because they're riding a horse. Operating within the confines of our current systems does not preclude something from operating without it. Again, another fallacy being pushed.

I'm not arguing that there aren't many people out there that are looking to bitcoin in the hopes of quick riches. There certainly are. But, you're so laser focused on that aspect of it that you erroneously resort to calling it a ponzi scheme and you end up overlooking the fact that there are more and more people using bitcoin every day because they have no other financial option except bitcoin.

[mjr]

lifeanon is 100% correct

[Telecaster]

It's a decentralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

Ponzi Scheme:  A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves.

With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse.

That seems to fit bitcoin reasonably well.  Early investors are paid when they cash out by the liquidity provided by new investors.  The value of bitcoin depends entirely upon new money coming into the system.  Bitcoin itself generates little or no legitimate earnings.  A large number of investors cashing out would crash Bitcoin.

Pyramid scheme:  A pyramid scheme is a fraudulent system of making money based on recruiting an ever-increasing number of  "investors."  The initial promoters recruit  investors, who in turn recruit more investors, and so on. The scheme is called a "pyramid" because at each level, the number of investors increases. The small group of initial promotors at the top require a large base of later investors to support the scheme by providing profits to the earlier investors.

This also seems to fit reasonably well.  Bitcoin early adopters are virtually all shills/evangelists bent on recruiting more investors. Due to the deflationary nature of bitcoin,  the earlier you get in the greater the rewards.  In order to allow those early investors with large numbers of bitcoin to cash out, it's necessary that a large base of later investors support the scheme buy purchasing their bitcoin.

Story seems to check out.

A common component between pyramid and Ponzi schemes is that they pay out returns and then collapse when there are not enough new investors to provide the promised returns.     Bitcoin does not pay returns and does not promise to pay returns.  So right there it cannot be a pyramid or Ponzi scheme, by definition. 

Another area that doesn't meet the definition is that pyramid and Ponzi scheme is that they both require new investors to pay off older investors.   Bitcoin's price isn't necessarily dependent on new investors.  The original investors can bid the price up or down.   That part doesn't meet the definition either. 

Another area where the definition breaks down is that pyramid and Ponzi schemes are a type of fraud.   Fraud requires malice.   Let me give you a couple examples:    Lets say the price of Beanie Babies is going through the roof.   I say, truthfully, I've made a lot of money owning Bean Babies.   Would you like to buy one?  You say yes and make the transaction.  The price of Beanie Babies now goes to zero.   Was there any fraud?  No.   I didn't misrepresent anything, and you got the Beanie Baby as promised.  If I sold you a different Bean Baby than the one I promised, that would be fraud, but it wouldn't be a pyramid or Ponzi scheme. 

Or lets say I am touting a tech stock that I own that seems to have huge promise.  You are impressed and buy some stock.  The company collapses and you lose your money.   Did I commit fraud?  Unless I made false statements the answer is no, and even then the answer is probably no.   If the company made false statements then they may have committed fraud, but I didn't.  If being a schill for tech stocks that later went bust were a crime then Jim Cramer would be serving a life sentence. 

Similarly, let's say someone is schilling for Bitcoin and you buy it based on their arguments,  and the price goes down, is that fraud?  The answer is no.   Even if they didn't believe what they are saying the answer is still no.  You got exactly what you thought you were getting.  On top of that though, the Bitcoin proponents here and elsewhere I've talked to seem to be true believers.  They really think Bitcoin is the way of the future.  It is not fraud to hold a certain vision of the future. 

[Telecaster]

The US dollar is a centralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

The US dollar does not require new investors in the dollar to pay off later investors.   

[GuitarStv]

Pet peeve:  There is no aspect of crypto that meets the definition of a Ponzi scheme.  It does appear to be a speculative bubble.  Things tend to get tedious and boring when we get pedantic like I'm doing, but definitions are important.   Crypto is not a Ponzi scheme.

It's a decentralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

Bitcoin's code is open source, for all to view.  Every Bitcoin transaction is on the blockchain, for all to view.  What percentage of Ponzi schemes have 100% transparency?

Your argument is that if I murder a person in broad daylight (in front of a police officer, a juggling clown, and 50 witnesses), no crime has been committed because a relatively low percentage of murders are committed that way?

[MustacheAndaHalf]

Pet peeve:  There is no aspect of crypto that meets the definition of a Ponzi scheme.  It does appear to be a speculative bubble.  Things tend to get tedious and boring when we get pedantic like I'm doing, but definitions are important.   Crypto is not a Ponzi scheme.

It's a decentralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

Bitcoin's code is open source, for all to view.  Every Bitcoin transaction is on the blockchain, for all to view.  What percentage of Ponzi schemes have 100% transparency?

Your argument is that if I murder a person in broad daylight (in front of a police officer, a juggling clown, and 50 witnesses), no crime has been committed because a relatively low percentage of murders are committed that way?

I think you're wrong that a low percentage of Ponzi schemes have full transparency.  I think it's zero, because revealing what happens is how a Ponzi scheme collapses.

Bitcoin has full transparency and hasn't collapsed, which is not the case for Ponzi schemes.

[ChpBstrd]

I don't think anyone is being disingenuous describing cryptocurrencies as Ponzi schemes or pyramid schemes. While cryptos may not meet the strictest definitions of ponzis/pyramits, the distinctions are effectively meaningless and, imo, boring. The mechanisms of fraud are much the same. I've seen people use the term "Nakamoto Scheme" to describe it, and it's effectively a hybrid Ponzi/Pyramid scheme with the "strength"—from the perspective of the fraudster—of both and the weaknesses of neither. It promises high investment returns, takes very little effort to invest in, recruits new participants as self-interested evangelists of the scheme. It's not presently illegal, as it's still largely regarded as "TECHNICAL INNOVATION!", so has been largely looked over by regulators. Quibbling about the precise semantics of "Ponzi scheme", I think is missing the point. This is massive fraud happening in front of us all.

I agree it is something new. Just as Ponzi schemes and pyramid/MLM schemes existed before they had a name, this sort of herd/social media driven frenzy and crash exists today, and will someday have a name. Just because an older name for a category of fraud isn't an exact fit doesn't make crypto any less of a scam. Similarly, the assignment of a name to the fraud by Webster's dictionary or whomever does not suddenly transform a thing from legit to fraudulent.

Crypto is not 100% a Ponzi because the creators of a coin usually pump it and dump it (as illustrated by @BeanCounter above), rather than gathering new rounds of investors to pay off the earlier investors who sell, in perpetuity until they're caught. Maybe this is a "one-cycle Ponzi" but the more clearcut description is basic investment fraud, like when a broker puts a client 100% into an obscure penny stock so they can sell their shares at a profit.

Similarly, it's not exactly a pyramid scheme because no one crypto investor receives a commission when a new ape is sold on plowing all their savings into ButtholeCoin(r) or whatever. That new ape's purchase is a drop in the bucket of a larger marketplace.

The mystery is how a pyramid scheme can exist when the participants are only indirectly compensated? Isn't it smarter, as a participant, to freeload and let everyone else do the hard evangelizing work? Well, social media turns that rationale on its head because now you can do a podcast or TikTok about ButtholeCoin(r), reach tens of thousands of people, and earn a profit from doing the evangelizing itself.

Now the mystery shifts to why so many people would gravitate to such a dumb podcast or subscribe to such dumb videos? Then, why would they be persuaded to spend their energy evangelizing an abstraction just to be a member of an online herd? The answer to that question is psychological, and includes the word "dopamine". I.e. doing so has intrinsic psychological rewards and feels good. There's an element of cultish identity involved too.

If I may humbly suggest a term to describe social-media-induced investment scams, how about "Dopaherd Scheme"?

 

[GuitarStv]

This is factually untrue. Miners are not required to take money out of the system. Miners are paid for the work they're doing with transactions fees that are paid in bitcoin. They could theoretically pay their electric bills in bitcoin, therefore new investors are not "required". Just because the system exists within our current economy does not mean that it can't exist outside of it. The world could theoretically switch to a bitcoin based monetary system and it would function just fine. It doesn't NEED fiat currencies to exist, therefore the argument that because bitcoin is currently operating within our current fiat monetary system it is a ponzi scheme is a fallacy. As I said, a ponzi scheme would collapse under such scenarios, bitcoin wouldn't. There are many pockets of economies all around the world that are functioning on bitcoin. Is it a minuscule amount compared with the whole? Absolutely. But claiming the contrary just so you can make a disingenuous argument that it is a ponzi scheme shows your bias and privilege here.

Your argument is akin to attacking the inventor of the automobile because they're riding a horse. Operating within the confines of our current systems does not preclude something from operating without it. Again, another fallacy being pushed.

The crux of this argument depends upon the assumption that some day it will be possible for bitcoin to function as a currency, and that miners will be able to buy the energy they need to do their job with bitcoin (instead of the current state where it's necessary to sell bitcoin and use a currency).

In response to that, I'd argue that some day bitcoin might not require a constant influx of money to go on.  Today though that's not how things operate.  New investors are required in current practice.

[Telecaster]

Pet peeve:  There is no aspect of crypto that meets the definition of a Ponzi scheme.  It does appear to be a speculative bubble.  Things tend to get tedious and boring when we get pedantic like I'm doing, but definitions are important.   Crypto is not a Ponzi scheme.

It's a decentralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

Bitcoin's code is open source, for all to view.  Every Bitcoin transaction is on the blockchain, for all to view.  What percentage of Ponzi schemes have 100% transparency?

Your argument is that if I murder a person in broad daylight (in front of a police officer, a juggling clown, and 50 witnesses), no crime has been committed because a relatively low percentage of murders are committed that way?

I'm not @MustacheAndaHalf but Ponzi schemes require deception to work.   Where is the deception with Bitcoin? 

[Telecaster]

Crypto is not 100% a Ponzi because the creators of a coin usually pump it and dump it (as illustrated by @BeanCounter above), rather than gathering new rounds of investors to pay off the earlier investors who sell, in perpetuity until they're caught. Maybe this is a "one-cycle Ponzi" but the more clearcut description is basic investment fraud, like when a broker puts a client 100% into an obscure penny stock so they can sell their shares at a profit.

Similarly, it's not exactly a pyramid scheme because no one crypto investor receives a commission when a new ape is sold on plowing all their savings into ButtholeCoin(r) or whatever. That new ape's purchase is a drop in the bucket of a larger marketplace.

Crypto is 0% a Ponzi scheme because it meets no definition of a Ponzi scheme. 

However, we already have a name for the phenomon:  Speculative bubble.  People hope the apes will be worth more in the future, so they are buying apes.  Not because they actually want to own apes.  Buying something with the hopes its value will increase is not a crime. 

[GuitarStv]

Pet peeve:  There is no aspect of crypto that meets the definition of a Ponzi scheme.  It does appear to be a speculative bubble.  Things tend to get tedious and boring when we get pedantic like I'm doing, but definitions are important.   Crypto is not a Ponzi scheme.

It's a decentralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

Bitcoin's code is open source, for all to view.  Every Bitcoin transaction is on the blockchain, for all to view.  What percentage of Ponzi schemes have 100% transparency?

Your argument is that if I murder a person in broad daylight (in front of a police officer, a juggling clown, and 50 witnesses), no crime has been committed because a relatively low percentage of murders are committed that way?

I'm not @MustacheAndaHalf but Ponzi schemes require deception to work.   Where is the deception with Bitcoin?

Have you talked to Satoshi?  Do you know if this was not invented for that reason. Before Bernie Madoff was convicted no one thought he was deceiving them either.

Could we start with the deceptive name?  Bitcoin is neither a coin, nor a currency.

[DaTrill]

Crypto is not 100% a Ponzi because the creators of a coin usually pump it and dump it (as illustrated by @BeanCounter above), rather than gathering new rounds of investors to pay off the earlier investors who sell, in perpetuity until they're caught. Maybe this is a "one-cycle Ponzi" but the more clearcut description is basic investment fraud, like when a broker puts a client 100% into an obscure penny stock so they can sell their shares at a profit.

Similarly, it's not exactly a pyramid scheme because no one crypto investor receives a commission when a new ape is sold on plowing all their savings into ButtholeCoin(r) or whatever. That new ape's purchase is a drop in the bucket of a larger marketplace.

Crypto is 0% a Ponzi scheme because it meets no definition of a Ponzi scheme. 

However, we already have a name for the phenomon:  Speculative bubble.  People hope the apes will be worth more in the future, so they are buying apes.  Not because they actually want to own apes.  Buying something with the hopes its value will increase is not a crime.

What is your definition of a Ponzi scheme?  Crypto/NFT is the definition of a Ponzi scheme from Wiki.

A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. The scheme leads victims to believe that profits are coming from legitimate business activity.

https://en.wikipedia.org/wiki/Ponzi_scheme

[lifeanon269]

The crux of this argument depends upon the assumption that some day it will be possible for bitcoin to function as a currency, and that miners will be able to buy the energy they need to do their job with bitcoin (instead of the current state where it's necessary to sell bitcoin and use a currency).

In response to that, I'd argue that some day bitcoin might not require a constant influx of money to go on.  Today though that's not how things operate.  New investors are required in current practice.

My point about the theoretical was to counter the point that bitcoin is a ponzi. The fact that it can, even theoretically, operate on its own as its own economy, proves that it isn't a ponzi scheme. It doesn't matter that it is operating within the confines of our fiat monetary system today (in fact everything currently does). That's irrelevant to the fact that by virtue of being possible it counters the claim that it is a ponzi scheme. It doesn't matter whether bitcoin someday is or isn't the world monetary reserve currency. It doesn't need to be for it to not meet the definition of a ponzi scheme. The fact that it could is enough here.

Just because there are new influxes of new investors today to bitcoin, doesn't mean that alone is the sole criteria of what makes a ponzi scheme a ponzi. There are so many investments today that are receiving new influxes of investors every day. That alone is not the determining factor for what is and isn't a ponzi scheme. Another logical fallacy being made. If a ponzi scheme could exist without an influx of new investors, then it probably would be the fraud scheme it is. This fact seems to be lost on you.

I guess I'll conclude with the following question: what makes bitcoin a ponzi scheme in your eyes and not similar to any other commodity or asset out there that is traded in our current monetary system?

Looks more like tulip mania to me.

http://en.wikipedia.org/wiki/Tulip_mania

I find it quite ironic that you've somehow managed to call bitcoin both a ponzi scheme while also comparing it to tulip bulbs (which are in no way a ponzi scheme). So which is it, is it a commodity craze like tulip bulbs or is it a ponzi scheme?? Both things can't be true here.

Or could it be that your line of arguments against bitcoin just happen to be the same tired and lazy arguments being made by people who don't have better arguments?

[the_gastropod]

A common component between pyramid and Ponzi schemes is that they pay out returns and then collapse when there are not enough new investors to provide the promised returns.     Bitcoin does not pay returns and does not promise to pay returns.  So right there it cannot be a pyramid or Ponzi scheme, by definition.

What do you call it when I sell my sick Bitcoins and buy rad moon lambos? I'd call that "a return". And where'd that return come from? Whoever bought my bitcoin—a new investor. This is pretty standard definition of "return" https://www.investopedia.com/terms/r/returnoninvestment.asp

And re: "does not promise to pay returns"... Are you for real? Have you ever talked to a Bitcoiner? Virtually everything they say is about promising huge returns. Any critique otherwise is "FUD". "Noiconers" are "ngmi" and will have to "have fun staying poor" while "diamond hands" "hodl" and bitcoin will "go to the moon". John McAfee (may he rest) predicted in 2017 that Bitcoin would hit $500k by 2020. Then he shortly thereafter upped it, to $1M. Michael Saylor—no stranger to fraud—also constantly recommends people mortgage their homes to buy more bitcoin to make sick gaaaaiinnnnnzzzz. Show me a single prominent Bitcoiner who doesn't promise huge gains.

Another area that doesn't meet the definition is that pyramid and Ponzi scheme is that they both require new investors to pay off older investors.   Bitcoin's price isn't necessarily dependent on new investors.  The original investors can bid the price up or down.   That part doesn't meet the definition either.

This is no different than a literal Ponzi scheme. 2 participants can continue to dump more money in. It'd be a silly thing that'd implode rather quickly, but it *could* be done and still be a Ponzi. Bitcoin is no different—for it to have the huge run-up it's had, it needs more participants. Too few would run out of money too quickly to keep the price inflating and maintain some minimum amount of liquidity.

Another area where the definition breaks down is that pyramid and Ponzi schemes are a type of fraud.   Fraud requires malice.   Let me give you a couple examples:    Lets say the price of Beanie Babies is going through the roof.   I say, truthfully, I've made a lot of money owning Bean Babies.   Would you like to buy one?  You say yes and make the transaction.  The price of Beanie Babies now goes to zero.   Was there any fraud?  No.   I didn't misrepresent anything, and you got the Beanie Baby as promised.  If I sold you a different Bean Baby than the one I promised, that would be fraud, but it wouldn't be a pyramid or Ponzi scheme.

Fraud does not require malice. It does require deception, but that can happen due ill-informed good intentions. One of the most popular examples of a Ponzi-scheme is that of Jan Lewan—The Polka King—who began his Ponzi-scheme with honest intentions of paying back his investors, and things quickly spiraled out of control for him, ultimately winding him up in jail. This was 100% fraud, even though he meant well.

Similarly, let's say someone is schilling for Bitcoin and you buy it based on their arguments,  and the price goes down, is that fraud?  The answer is no.   Even if they didn't believe what they are saying the answer is still no.  You got exactly what you thought you were getting.  On top of that though, the Bitcoin proponents here and elsewhere I've talked to seem to be true believers.  They really think Bitcoin is the way of the future.  It is not fraud to hold a certain vision of the future.

This is an interesting point. And this uncovers one interesting facet of cryptocurrencies: decentralized responsibility. Every bitcoin evangelist is, in some small respect, responsible for some fraud, I'd argue. But the brilliance is that there isn't one, wholly responsible and punishable entity. It's, in some respects, legalized fraud until we have better systems to deal with it.

[Telecaster]

Have you talked to Satoshi?  Do you know if this was not invented for that reason. Before Bernie Madoff was convicted no one thought he was deceiving them either.

Madoff was in actual fact deceiving people.   He was taking people's money and claimed to invest it, providing false statements showing high returns.  He created false stock transactions to create a "paper trail" to provide back up for his investment success.  In fact, the money was just kept in a bank account that Madoff would draw from to pay off people making redemptions.  When the redemptions exceeded the account balance the scheme collapsed. 

AFAIK, Satoshi only sold Bitcoin (and I don't actually know if he even sold any).  He never promised or paid returns.  He didn't create false transaction statements.  He didn't manage anyone's money.  The original white paper lays out in detail how Bitcoin works.   

So specifically, what action of his was fraud?  It is hard to argue that making money off an idea (if he even did) is illegal.   

[index]

It's not a Ponzi scheme or MLM. It is a collectible like gold, beanie babies, and tulip bulbs.

Does it have staying power like gold or is it the new beanie baby craze with less cuddly cuteness?

It's worthless as a currency as long as it is as volatile as it is. Sure people are bartering with it in Venezuela and Nigeria and you can use it to pay for less savory good and services, but who the hell cares? Digital currency has a future - but that digital currency will be issued by governments.

Real currency is backed by guns and power. China and now Russia have banned crypto and the US or EU could end BTC with a signature.     

[lifeanon269]

This is no different than a literal Ponzi scheme. 2 participants can continue to dump more money in. It'd be a silly thing that'd implode rather quickly, but it *could* be done and still be a Ponzi. Bitcoin is no different—for it to have the huge run-up it's had, it needs more participants. Too few would run out of money too quickly to keep the price inflating and maintain some minimum amount of liquidity.

This is where your fallacy fails though. You keep saying that bitcoin needs more participants. But that is factually not true as I've stated. A ponzi scheme serves no other purpose other than to enrich its creator (and maybe a few insiders). It will collapse simply because of the fact that it isn't sustainable. The more participants in the system there are, the more newer participants it requires to sustain itself. A ponzi scheme is exponentially more and more unstable and unsustainable. This is why all ponzi scheme eventually fail. This just isn't factually true or analogous to bitcoin whatsoever. Bitcoin can exist at a stable price without any additional new participants required and used within a circular economy. Just because there are new investors each day that own bitcoin is not the determining factor for being a ponzi scheme.

[the_gastropod]

It's not a Ponzi scheme or MLM. It is a collectible like gold, beanie babies, and tulip bulbs.

Does it have staying power like gold or is it the new beanie baby craze with less cuddly cuteness?

It's a collectible that vanishes overnight unless you pay the miners to keep it going.

[lifeanon269]

There are multiple examples of pump and dump schemes in this space just because some are lasting longer due to others being hyped up more doesn't mean deception wasn't the plan from the start.

There are absolutely pump and dump schemes in the cryptocurrency space along with a whole host of other fraudulent schemes the industry is ripe with. But this particular discussion was about the claims that bitcoin is a ponzi or pyramind scheme, both of which have very specific definitions that bitcoin most certainly does not meet.

[GuitarStv]

The crux of this argument depends upon the assumption that some day it will be possible for bitcoin to function as a currency, and that miners will be able to buy the energy they need to do their job with bitcoin (instead of the current state where it's necessary to sell bitcoin and use a currency).

In response to that, I'd argue that some day bitcoin might not require a constant influx of money to go on.  Today though that's not how things operate.  New investors are required in current practice.

My point about the theoretical was to counter the point that bitcoin is a ponzi. The fact that it can, even theoretically, operate on its own as its own economy, proves that it isn't a ponzi scheme. It doesn't matter that it is operating within the confines of our fiat monetary system today (in fact everything currently does). That's irrelevant to the fact that by virtue of being possible it counters the claim that it is a ponzi scheme. It doesn't matter whether bitcoin someday is or isn't the world monetary reserve currency. It doesn't need to be for it to not meet the definition of a ponzi scheme. The fact that it could is enough here.

Just because there are new influxes of new investors today to bitcoin, doesn't mean that alone is the sole criteria of what makes a ponzi scheme a ponzi. There are so many investments today that are receiving new influxes of investors every day. That alone is not the determining factor for what is and isn't a ponzi scheme. Another logical fallacy being made. If a ponzi scheme could exist without an influx of new investors, then it probably would be the fraud scheme it is. This fact seems to be lost on you.

Wouldn't it have seemed possible before he was caught for Bernie Madoff to have paid people back in a legitimate way at some future date too?  Even though a close examination of things would have pointed to probable dishonesty?

It's clearly not possible right now for Bitcoin to operate in the way you're talking about.  Therefore that can't be used as evidence that it's not a pyramid/ponzi scheme at the moment.

I guess I'll conclude with the following question: what makes bitcoin a ponzi scheme in your eyes and not similar to any other commodity or asset out there that is traded in our current monetary system?

I guess it would be how closely bitcoin appears to be following the dictionary definitions of both ponzi and pyramid schemes.

Looks more like tulip mania to me.

http://en.wikipedia.org/wiki/Tulip_mania

I find it quite ironic that you've somehow managed to call bitcoin both a ponzi scheme while also comparing it to tulip bulbs (which are in no way a ponzi scheme). So which is it, is it a commodity craze like tulip bulbs or is it a ponzi scheme?? Both things can't be true here.

Or could it be that your line of arguments against bitcoin just happen to be the same tired and lazy arguments being made by people who don't have better arguments?

I originally viewed crypto as a speculative commodity like beanie babies or tulips (as per the 8 year old comment).  It wasn't until boarder mentioned the ponzi/pyramid thing a page or so ago that I really seriously looked into how closely those definitions fit bitcoin.

I'm still undecided which fits better.

[the_gastropod]

This is where your fallacy fails though. You keep saying that bitcoin needs more participants. But that is factually not true as I've stated.

I've responded to this retort. One of the following is true:
1. You disagree that the lion's share of Bitcoin holders are Bitcoin hodlers because they expect to make a positive return
2. Bitcoin needs an ever-increasing number of participants to keep up the expectations of return

Remember: in aggregate, the total sum of returns Bitcoin investors can expect to receive is less than what they put in. (Miners must remove $ from the system to pay electrical bills, upgraded machinery, profit, etc. And exchanges—which virtually everyone uses—also take their cut). There is no value created anywhere, it is strictly a transfer of dollars with a lot of techno babble in between.

A ponzi scheme serves no other purpose other than to enrich its creator (and maybe a few insiders). It will collapse simply because of the fact that it isn't sustainable. The more participants in the system there are, the more newer participants it requires to sustain itself. A ponzi scheme is exponentially more and more unstable and unsustainable. This is why all ponzi scheme eventually fail. This just isn't factually true or analogous to bitcoin whatsoever. Bitcoin can exist at a stable price without any additional new participants required and used within a circular economy. Just because there are new investors each day that own bitcoin is not the determining factor for being a ponzi scheme.

Again, I don't think you've addressed my response. All of this seems to reasonably describe Bitcoin. Madoff's Ponzi lasted longer than Bitcoin has existed. Bitcoin's stability is, no doubt, aided by the massively suspicious stablecoin factory, Tether. Let's see how this plays out over the next couple decades!

[PDXTabs]

The US dollar is a centralized cross between a Ponzi scheme and a pyramid scheme. Disprove that statement.

The US dollar does not require new investors in the dollar to pay off later investors.

All currencies require a buyer and a seller to trade them. If I want to trade my USD for GBP I have to find someone that has GBP but wants USD. I'm not sure how this is different than BTC, ETH, or XMR except that the cryptocurrencies don't have central bankers. Also, I didn't buy my first cryptocurrency for it to appreciate in USD terms. I bought my first cryptocurrency to buy goods from markets that didn't accept USD, just like I might buy a foreign currency.