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I consider myself pretty tech-savvy, but I'm still completely lost as to whether Bitcoin is basically a pyramid scheme set to crash massively, or something huge

I consider myself pretty tech-savvy, but I'm still completely lost as to whether Bitcoin is basically a pyramid scheme set to crash massively, or something huge that will continue climbing. I probably should've taken the time to mine some back when my friends were doing it and tried convincing me too. Ah well. (Queue heated comments from both sides. Discussing bitcoin is like bringing up religion AND politics at the dinner table at the same time)

deleted 9y ago
[deleted]
loceng 9y ago
It is very much like a decentralized global pyramid scheme, unfortunately there's no concise resource to explain it all clearly - primarily because there's no VC money pumped into anti-crypto assets that are structured and incentivized like a pyramid scheme, e.g. the most popular blockchains such as Bitcoin and Ethereum's Ether. The issue is the unreasonable amount of wealth transfer that would occur if and as society adopts the crypto-assets more and more, and as bad actors manipulate society to take part - whether through lobbying or bribing politicians or worse; there essentially can be a wealth transfer of 40% plus for people having done nothing except trying to perpetuate this system.
- ataturk 9y ago
  And when is the last time you got something for nothing?
hikarudo 9y ago
"This time it's different!"
growt 9y ago
You'll probably do better with an understanding of economics than tech in predicting a crash.
viach 9y ago
For me Bitcoin is neither pyramid nor something which will last forever. I think it is a great experiment in human psychology/nature and in this sense, it's outcome is not destroyable and the facts about people it brought up will be known and usable (for various applications) forever.
AznHisoka 9y ago
My view is that its egotistic to pretend to know whats going to happen. even the financial experts dont know. So i just put 1% of my net worth into it, set a price alert for $20,000 and try not to check the price (or read any stories on it) If i ever get the alert, great. if not, no big deal.
- ideonexus 9y ago
  This is my strategy. It's a very volatile, high-risk investment, but one I'll hate myself for missing out on should it take off. So I've bet what I'm willing to lose on it (<1% for me) and told myself I won't read any news on it so I won't invest more or get scared into selling. And yet here I am. :)
vazamb 9y ago
(i am somewhat familiar with the tech but don't follow the business side of bitcoin) what I find weird is the forks. A major selling point of bitcoin is that there will ever be only 21 Mio coins. You know, unless there is a hard fork and now there are suddenly twice as many coins. Presumably one of the resulting coins' value will drop but you are still creating value out of thin air, something that the crypto people hate about fist currency run by a central bank. I also don't really know what to think about it. I am sure blockchain tech will be hugely successful in the banking and government sector and maybe (a comment I read yesterday) once it is proven to work the central banks will issue blockchain based currency. But bitcoin as a store of value? I don't know...
- joosters 9y ago
  The forked currencies behave very oddly. When bitcoin forked, the bitcoin price didn't change but the new coins had a non-zero value (something like 10-20% of btc, if I remember). So some extra value was created out of thin air. It makes little sense!
  - acjohnson55 9y ago
    Hypothetically, Bitcoin would have the sum of all these values if there were no fork. But in reality, it's a massive bubble.
- ForHackernews 9y ago
  > I am sure blockchain tech will be hugely successful in the banking and government sector Are you? Why? So far, no bitcoin/blockchain advocates have been able to explain to me a single non-illegal use case that isn't better served by a traditional, centralized database. A single large Postgres instance could handle all the global transaction volume of bitcoin, and it would be faster and orders of magnitude more energy efficient, too. (Cue bitcoin people telling me about how it's 'trustless', and I should just trust the miners, devs and exchanges and hurry up and buy some)
  - xiphias 9y ago
tluyben2 9y ago
> set to crash massively It crashed multiple times this year with a lot of people crying 'told you so' and 'it's all over'. But that didn't happen. There might be a big, longer period, crash coming, but since China dropped out, it seems to be pretty stable (including altcoins). I still wouldn't call it investment, but it's safer than most gambles. But sure, never put money you cannot miss as it is a gamble.
simias 9y ago
Cryptocurrencies have a niche use, mainly to buy things on the black market but also for small peer-to-peer international payments when other options are not practical. For this reason I don't expect that cryptocurrencies will completely disappear any time soon. However the value of bitcoin is mainly driven by speculation at this point, a currency that's so volatile is very difficult to use if you're a business. At best you accept it at the current exchange rate and you immediately convert it to fiat. Anything else is very risky. But that might be temporary, eventually the exchange rate might stabilize, at which point speculation could be vastly reduced and it would work better as a currency. That's kind of a chicken-and-egg problem though, in order for the exchange rate to stabilize you must attach a real world value to the currency by buying and selling things, paying taxes etc... But that won't happen as long as the exchange rate is so volatile. I'm also very much unconvinced that a deflationary currency can work at all in the long run or that bitcoin will end up fixing the problems its proponents say it will, but that's up for debate.
- Jommi 9y ago
  Your first sentence mostly fits Bitcoin, but misses the point on most of the other cryptocurrencies.
  - simias 9y ago
    Please do enlighten me then, what do other cryptocurrencies offer? I also think my first sentence applies to bitcoin and ethereum which together have a bigger market cap than all the other cryptocurrencies added together.
    - Jommi 9y ago
      >Please do enlighten me then, what do other cryptocurrencies offer? Other cryptocurrencies can provide: - Private, near untracable ways of doing payments - Efficient, near 0-cost ways of transfering funds. >I also think my first sentence applies to bitcoin and ethereum which together have a bigger market cap than all the other cryptocurrencies added together. "Cryptocurrencies have a niche use, mainly to buy things on the black market but also for small peer-to-peer international payments when other options are not practical. For this reason, I don't expect that cryptocurrencies will completely disappear anytime soon." If you want to talk about Bitcoin and Ethereum, say Bitcoin and Ethereum, and not "Cryptocurrencies". Bitcoin is not anonymous. Bitcoin has high transaction cost. Ethereum is not anonymous. Ethereum has a comparable high transaction cost. These facts mean buying on the black market, and small international payments are not ideal to do with these cryptocurrencies.
AnonToday 9y ago
Bitcoin isn't a pyramid scheme. It just does not have any value. Fools and their money are easily parted. (The comments on this site have as much or more value.) The Fractional reserve system is(), (Dollar, Pound, Euro, etc.) They require a constant recreation of debt to keep going. (less a pyramid more just Ponzi)
Jommi 9y ago
It's a virtual currency with a limited supply, but with a constantly growing interest(demand). This interest is not primarily driven by bitcoin's inherent qualities but more through: 1. Using bitcoin to acquire other cryptocurrencies 2. Promises of future profits 3. Getting "free money" by having bitcoin (Bitcoin cash, bitcoin gold) The first one might actually be healthy, while 2 and 3 are most close to a pyramid scheme / "tulip mania" style scenario. One thing is for sure. No one knows what exactly is going to happen.
weddpros 9y ago
There's no pyramid scheme. It's a hyped asset, to say the least, but there's no pyramid. Like a hyped startup, it doesn't do much yet, but it is promising, so people buy it. It may be "worth" much or zero in the end, it all depends on the final outcomes. It's also the easiest/cheapest/most open asset to trade (depending on where you trade). In the long term, Bitcoin can be seen as a safe heaven in case of economic chaos, like gold, but way easier to buy and hold. It can also be seen as an interesting economic experiment: what if currency wasn't managed by a government? Or you can give trading a try for a few $$ as a gamble (with more chances of success than in a casino). It's also a useful currency in some cases: I'm a "digital nomad" which my bank can't seem to understand. Getting my Debit Card to work online from a foreign country, with an ever changing phone number (they insist on using SMS as a 2FA), sounds like an obstacle to them, but not to BTC.
- jstanley 9y ago
  > Like a hyped startup, it doesn't do much yet It does plenty already. I live almost exclusively on Bitcoin. I only get income in Bitcoin, I pay with Bitcoin whenever possible, and I have a Bitcoin-funded debit card for when that's not possible.
  - pawelwentpawel 9y ago
    Does the company that you work for receive their income in Bitcoin too?
    - weddpros 9y ago
      you could always use bitwage (never tried)
    - jstanley 9y ago
      I work for myself. My customers pay in Bitcoin.
  - ataturk 9y ago
    Which sounds impressive, but are you making at least $100K/yr US in Bitcoin?
Delmania 9y ago
Best advice I have heard is to learn about the blockchain and look at something like Ethereum. If buying Bitcoins feels to risky, don't invest, but blockchain technologies will certainly have a role to play in the future.
wyager 9y ago
You can’t expect to reason about this without some background in economics. Instead of telling you what I think (because to you I’m indistinguishable from all the other people responding with random guesses), I’m going to suggest that you read some introductory texts about economics and finance and you can probably form some reasonable opinions yourself.
kibrad 9y ago
"whether Bitcoin is basically a pyramid scheme set to crash massively, or something huge that will continue climbing" --- you can say the same thing about regular money
- kgwgk 9y ago
  Regular money doesn’t climb.
  - mywittyname 9y ago
    Sure it does. The USD has surged in value in the past few years. It's gone up like 20% against most other major world currencies in the past five years.
    - kgwgk 9y ago
      4% p.a. doesn’t look like climbing to me...
      - mywittyname 9y ago
        Well, it is in the up direction, at least.
petercooper 9y ago
I probably should've taken the time to mine some back when my friends were doing it and tried convincing me too. Ah well. The thing I keep telling myself is if I'd mined even 1000 bitcoins (which was viable at the time I first learnt about it) I'd have totally sold out at $10.. there is zero chance I would have made it to $1000 :-D
- bbarn 9y ago
  I sold my 200 at 40. Something for nothing, right? /facepalm
  - deleted 9y ago
    [deleted]
  - abledon 9y ago
    not sure if not ever mining/buying, or doing the above would be more frustrating haha
- coryfklein 9y ago
  It doesn't have to be all or nothing. The proper strategy would be to sell a percentage at $10. In fact, if you started in 2011 with 1000 BTC and every year you sold 50% then today you'd have (by my rough calculations): 8 BTC (worth about $50k) $160k USD Of course it's not the millions you'd have if you just held each time, but for many that is a life changing amount of money and you would have obtained it in a responsible manner that doesn't just rely on the value of Bitcoin shooting to the moon.
mo87 9y ago
Back in 2002-2005, I knew a whole lot of "tech-savvy" people with top-notch pedigree, who never believed FB/Youtube/Twitter etc would scale as no one had ever built a "many-to-many", pseudo real-time network at that kind of scale before (both technically/financially). Let alone a bunch of 20 year olds. I was quite convinced by their arguments. Where I was wrong was believing technical arguments mattered. What matters is the psychology of the herd.
- wolco 9y ago
  The worst group to validate new ideas against are developers.
  - cableshaft 9y ago
    Pretty much. They'll tell you a hundred reasons why any single idea you have could never work, for technical or other reasons. I say this as a developer, and I've been guilty of this before.
jboggan 9y ago
I would say that the current bull run in Bitcoin is mainly due to folks with early stakes in ICOs taking their money and running from Ethereum.
oldboyFX 9y ago
It's a pyramid scheme in a sense that you depend on others to keep buying the bitcoin. If everyone suddenly lost trust in bitcoin you would lose everything, because technically, it has zero real value. That's why all the "bitcoin enthusiasts" keep hyping it up. They know that once the mania stops, people who didn't cash out will be left holding the bag. Currently, it's nothing more than a speculative asset. You might as well invest in high-yield risky stocks. The blockchain itself is pretty great though.
- googletazer 9y ago
  Another "blockchain without bitcoin" post. You can't have one without the other.
- jon_smark 9y ago
  > It's a pyramid scheme in a sense that you depend on others to keep buying the bitcoin. Please don't use the expression "pyramid scheme" lightly, because there are actual pyramid schemes out there, and we want the expression to keep its power so we can warn people against them. Bitcoin may be in a bubble, but it's definitely not a pyramid scheme.
- coryfklein 9y ago
  It does not have "zero real value" - it definitely competes well against established money transfer services like Western Union. You can send $1000 to your mom in Japan for a $5. That is a good enough value for money transfers that Bitcoin won't ever go completely to $0 value while Western Union can charge $20 for the same service. And that is at current bitcoin price. Since the fee is paid in bitcoin, if the price drops down to $100/bitcoin then you can send $1000 for pennies.
ryanmarsh 9y ago
If you're pretty tech-savvy then the Satoshi's white paper should help. Have you read it?

deleted 9y ago

[deleted]

loceng 9y ago

It is very much like a decentralized global pyramid scheme, unfortunately there's no concise resource to explain it all clearly - primarily because there's no VC money pumped into anti-crypto assets that are structured and incentivized like a pyramid scheme, e.g. the most popular blockchains such as Bitcoin and Ethereum's Ether. The issue is the unreasonable amount of wealth transfer that would occur if and as society adopts the crypto-assets more and more, and as bad actors manipulate society to take part - whether through lobbying or bribing politicians or worse; there essentially can be a wealth transfer of 40% plus for people having done nothing except trying to perpetuate this system.

ataturk 9y ago
And when is the last time you got something for nothing?

hikarudo 9y ago

"This time it's different!"

growt 9y ago

You'll probably do better with an understanding of economics than tech in predicting a crash.

viach 9y ago

For me Bitcoin is neither pyramid nor something which will last forever. I think it is a great experiment in human psychology/nature and in this sense, it's outcome is not destroyable and the facts about people it brought up will be known and usable (for various applications) forever.

AznHisoka 9y ago

My view is that its egotistic to pretend to know whats going to happen. even the financial experts dont know. So i just put 1% of my net worth into it, set a price alert for $20,000 and try not to check the price (or read any stories on it) If i ever get the alert, great. if not, no big deal.

ideonexus 9y ago
This is my strategy. It's a very volatile, high-risk investment, but one I'll hate myself for missing out on should it take off. So I've bet what I'm willing to lose on it (<1% for me) and told myself I won't read any news on it so I won't invest more or get scared into selling. And yet here I am. :)

vazamb 9y ago

(i am somewhat familiar with the tech but don't follow the business side of bitcoin) what I find weird is the forks. A major selling point of bitcoin is that there will ever be only 21 Mio coins. You know, unless there is a hard fork and now there are suddenly twice as many coins. Presumably one of the resulting coins' value will drop but you are still creating value out of thin air, something that the crypto people hate about fist currency run by a central bank. I also don't really know what to think about it. I am sure blockchain tech will be hugely successful in the banking and government sector and maybe (a comment I read yesterday) once it is proven to work the central banks will issue blockchain based currency. But bitcoin as a store of value? I don't know...

joosters 9y ago
The forked currencies behave very oddly. When bitcoin forked, the bitcoin price didn't change but the new coins had a non-zero value (something like 10-20% of btc, if I remember). So some extra value was created out of thin air. It makes little sense!
- acjohnson55 9y ago
  Hypothetically, Bitcoin would have the sum of all these values if there were no fork. But in reality, it's a massive bubble.
ForHackernews 9y ago
> I am sure blockchain tech will be hugely successful in the banking and government sector Are you? Why? So far, no bitcoin/blockchain advocates have been able to explain to me a single non-illegal use case that isn't better served by a traditional, centralized database. A single large Postgres instance could handle all the global transaction volume of bitcoin, and it would be faster and orders of magnitude more energy efficient, too. (Cue bitcoin people telling me about how it's 'trustless', and I should just trust the miners, devs and exchanges and hurry up and buy some)
- xiphias 9y ago

tluyben2 9y ago

> set to crash massively It crashed multiple times this year with a lot of people crying 'told you so' and 'it's all over'. But that didn't happen. There might be a big, longer period, crash coming, but since China dropped out, it seems to be pretty stable (including altcoins). I still wouldn't call it investment, but it's safer than most gambles. But sure, never put money you cannot miss as it is a gamble.

simias 9y ago

Cryptocurrencies have a niche use, mainly to buy things on the black market but also for small peer-to-peer international payments when other options are not practical. For this reason I don't expect that cryptocurrencies will completely disappear any time soon. However the value of bitcoin is mainly driven by speculation at this point, a currency that's so volatile is very difficult to use if you're a business. At best you accept it at the current exchange rate and you immediately convert it to fiat. Anything else is very risky. But that might be temporary, eventually the exchange rate might stabilize, at which point speculation could be vastly reduced and it would work better as a currency. That's kind of a chicken-and-egg problem though, in order for the exchange rate to stabilize you must attach a real world value to the currency by buying and selling things, paying taxes etc... But that won't happen as long as the exchange rate is so volatile. I'm also very much unconvinced that a deflationary currency can work at all in the long run or that bitcoin will end up fixing the problems its proponents say it will, but that's up for debate.

Jommi 9y ago
Your first sentence mostly fits Bitcoin, but misses the point on most of the other cryptocurrencies.
- simias 9y ago
  Please do enlighten me then, what do other cryptocurrencies offer? I also think my first sentence applies to bitcoin and ethereum which together have a bigger market cap than all the other cryptocurrencies added together.
  - Jommi 9y ago
    >Please do enlighten me then, what do other cryptocurrencies offer? Other cryptocurrencies can provide: - Private, near untracable ways of doing payments - Efficient, near 0-cost ways of transfering funds. >I also think my first sentence applies to bitcoin and ethereum which together have a bigger market cap than all the other cryptocurrencies added together. "Cryptocurrencies have a niche use, mainly to buy things on the black market but also for small peer-to-peer international payments when other options are not practical. For this reason, I don't expect that cryptocurrencies will completely disappear anytime soon." If you want to talk about Bitcoin and Ethereum, say Bitcoin and Ethereum, and not "Cryptocurrencies". Bitcoin is not anonymous. Bitcoin has high transaction cost. Ethereum is not anonymous. Ethereum has a comparable high transaction cost. These facts mean buying on the black market, and small international payments are not ideal to do with these cryptocurrencies.

AnonToday 9y ago

Bitcoin isn't a pyramid scheme. It just does not have any value. Fools and their money are easily parted. (The comments on this site have as much or more value.) The Fractional reserve system is(), (Dollar, Pound, Euro, etc.) They require a constant recreation of debt to keep going. (less a pyramid more just Ponzi)

Jommi 9y ago

It's a virtual currency with a limited supply, but with a constantly growing interest(demand). This interest is not primarily driven by bitcoin's inherent qualities but more through: 1. Using bitcoin to acquire other cryptocurrencies 2. Promises of future profits 3. Getting "free money" by having bitcoin (Bitcoin cash, bitcoin gold) The first one might actually be healthy, while 2 and 3 are most close to a pyramid scheme / "tulip mania" style scenario. One thing is for sure. No one knows what exactly is going to happen.

weddpros 9y ago

There's no pyramid scheme. It's a hyped asset, to say the least, but there's no pyramid. Like a hyped startup, it doesn't do much yet, but it is promising, so people buy it. It may be "worth" much or zero in the end, it all depends on the final outcomes. It's also the easiest/cheapest/most open asset to trade (depending on where you trade). In the long term, Bitcoin can be seen as a safe heaven in case of economic chaos, like gold, but way easier to buy and hold. It can also be seen as an interesting economic experiment: what if currency wasn't managed by a government? Or you can give trading a try for a few $$ as a gamble (with more chances of success than in a casino). It's also a useful currency in some cases: I'm a "digital nomad" which my bank can't seem to understand. Getting my Debit Card to work online from a foreign country, with an ever changing phone number (they insist on using SMS as a 2FA), sounds like an obstacle to them, but not to BTC.

jstanley 9y ago
> Like a hyped startup, it doesn't do much yet It does plenty already. I live almost exclusively on Bitcoin. I only get income in Bitcoin, I pay with Bitcoin whenever possible, and I have a Bitcoin-funded debit card for when that's not possible.
- pawelwentpawel 9y ago
  Does the company that you work for receive their income in Bitcoin too?
  - weddpros 9y ago
    you could always use bitwage (never tried)
  - jstanley 9y ago
    I work for myself. My customers pay in Bitcoin.
- ataturk 9y ago
  Which sounds impressive, but are you making at least $100K/yr US in Bitcoin?

Delmania 9y ago

Best advice I have heard is to learn about the blockchain and look at something like Ethereum. If buying Bitcoins feels to risky, don't invest, but blockchain technologies will certainly have a role to play in the future.

wyager 9y ago

You can’t expect to reason about this without some background in economics. Instead of telling you what I think (because to you I’m indistinguishable from all the other people responding with random guesses), I’m going to suggest that you read some introductory texts about economics and finance and you can probably form some reasonable opinions yourself.

kibrad 9y ago

"whether Bitcoin is basically a pyramid scheme set to crash massively, or something huge that will continue climbing" --- you can say the same thing about regular money

kgwgk 9y ago
Regular money doesn’t climb.
- mywittyname 9y ago
  Sure it does. The USD has surged in value in the past few years. It's gone up like 20% against most other major world currencies in the past five years.
  - kgwgk 9y ago
    4% p.a. doesn’t look like climbing to me...
    - mywittyname 9y ago
      Well, it is in the up direction, at least.

petercooper 9y ago

I probably should've taken the time to mine some back when my friends were doing it and tried convincing me too. Ah well. The thing I keep telling myself is if I'd mined even 1000 bitcoins (which was viable at the time I first learnt about it) I'd have totally sold out at $10.. there is zero chance I would have made it to $1000 :-D

bbarn 9y ago
I sold my 200 at 40. Something for nothing, right? /facepalm
- deleted 9y ago
  [deleted]
- abledon 9y ago
  not sure if not ever mining/buying, or doing the above would be more frustrating haha
coryfklein 9y ago
It doesn't have to be all or nothing. The proper strategy would be to sell a percentage at $10. In fact, if you started in 2011 with 1000 BTC and every year you sold 50% then today you'd have (by my rough calculations): 8 BTC (worth about $50k) $160k USD Of course it's not the millions you'd have if you just held each time, but for many that is a life changing amount of money and you would have obtained it in a responsible manner that doesn't just rely on the value of Bitcoin shooting to the moon.

mo87 9y ago

Back in 2002-2005, I knew a whole lot of "tech-savvy" people with top-notch pedigree, who never believed FB/Youtube/Twitter etc would scale as no one had ever built a "many-to-many", pseudo real-time network at that kind of scale before (both technically/financially). Let alone a bunch of 20 year olds. I was quite convinced by their arguments. Where I was wrong was believing technical arguments mattered. What matters is the psychology of the herd.

wolco 9y ago
The worst group to validate new ideas against are developers.
- cableshaft 9y ago
  Pretty much. They'll tell you a hundred reasons why any single idea you have could never work, for technical or other reasons. I say this as a developer, and I've been guilty of this before.

jboggan 9y ago

I would say that the current bull run in Bitcoin is mainly due to folks with early stakes in ICOs taking their money and running from Ethereum.

oldboyFX 9y ago

It's a pyramid scheme in a sense that you depend on others to keep buying the bitcoin. If everyone suddenly lost trust in bitcoin you would lose everything, because technically, it has zero real value. That's why all the "bitcoin enthusiasts" keep hyping it up. They know that once the mania stops, people who didn't cash out will be left holding the bag. Currently, it's nothing more than a speculative asset. You might as well invest in high-yield risky stocks. The blockchain itself is pretty great though.

googletazer 9y ago
Another "blockchain without bitcoin" post. You can't have one without the other.
jon_smark 9y ago
> It's a pyramid scheme in a sense that you depend on others to keep buying the bitcoin. Please don't use the expression "pyramid scheme" lightly, because there are actual pyramid schemes out there, and we want the expression to keep its power so we can warn people against them. Bitcoin may be in a bubble, but it's definitely not a pyramid scheme.
coryfklein 9y ago
It does not have "zero real value" - it definitely competes well against established money transfer services like Western Union. You can send $1000 to your mom in Japan for a $5. That is a good enough value for money transfers that Bitcoin won't ever go completely to $0 value while Western Union can charge $20 for the same service. And that is at current bitcoin price. Since the fee is paid in bitcoin, if the price drops down to $100/bitcoin then you can send $1000 for pennies.

ryanmarsh 9y ago

If you're pretty tech-savvy then the Satoshi's white paper should help. Have you read it?