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Cryptocurrency Is a Giant Ponzi Scheme

47 points by chaseha 5y ago

vmception 5y ago
I like permissionless ponzi schemes more than permissioned ponzi schemes.
fwip 5y ago
This article is largely correct. You can argue that it's "not technically a Ponzi," but rather some other type of scam, but the semantics are not interesting. The following excerpt is a point that many seem to miss. > In fact, investors won’t — on average — be able to cash out for even as much as they put in. Much of that money went to cryptocurrency mining. Recent analysis shows that around $25 billion and growing has already gone to Bitcoin miners, who, by best estimates, are now spending $1 billion just on electricity every month, possibly more. > That money is gone forever, having been converted to carbon and released into the atmosphere — making cryptocurrencies even worse than traditional Ponzi schemes. Most of the money lost in Bernie Madoff’s infamous Ponzi was eventually clawed back and returned to investors. Much of the money put into cryptocurrency, even if courts could trace back tangled webs of semi-anonymous cryptocurrency transactions, can never be recuperated.
lariati 5y ago
I really would love a browser plugin that removes all mention of crypto/web3/etc.. I am just so bored with reading about anything to do with the entire space, pro or con. An inescapable argument about basically nothing. How do I opt out completely?
oversocialized 5y ago
So is social security and fractional reserve banking, yet no one is trying to stop those.
jonnydubowsky 5y ago
Written in 2018?
- fwip 5y ago
  No, the year and month are in the URL.
- nsonha 5y ago
  It sounds like that at first but all the events in the article are very current.
Mountain_Skies 5y ago
Mostly but as long as you're not the one holding the last tulip, you can profit greatly. It does bother me to see how many young people are being taught it's an investment rather than a game of economic chicken. Then again, so much in our modern economy is that way that one can hardly blame them from not seeing the danger.
- sitkack 5y ago
  Most investments are Ponzi schemes including all forms of currency. I don't want to get into an argument about the short term investments and liquidity in the markets, bla bla bla. They could be tools, but they end up becoming the ends. Why?
  - prepend 5y ago
    This is not true at all as most investments have some intrinsic thing of value. A stock is a predicted stream of future earnings. A Ponzi scheme produces nothing and only survives through new investment. Stocks don’t need future investment as they can just pay out dividends forever based on the companies earnings. Equating these two things seems fraudulent at worst and stupid at best.
    - sitkack 5y ago
      People rocking Robin Hood are not investing. Institutional investors are investing. > Equating these two things seems fraudulent at worst and stupid at best. Please.
  - deleted 5y ago
    [deleted]
- boppo1 5y ago
  > young people are being taught it's an investment rather than a game of economic chicken. I mean, crypto is sorta garbage, but so are all the fiat currencies. Orthodox economics apparently says it's totally cool to print money to support ditch-digging because it makes jobs reports look good. The US Fed itself acknowledges in its own reports that the US is financially unsustainable. Does anyone see how this doesn't just collapse sometime in the next 50 years? Unless we start a big war with China...
robcohen 5y ago
Same arguments from both sides, different day. So tired of the self-righteousness of both sides. The reality is that there are use-cases that are useful today with crypto. The reality is also that the vast majority of money in crypto is there for speculative reasons, not fundamental value. That's fine, it's a bet, stop caring about where people put there money. If you don't want to make a speculative bet, then don't. If you made a speculative bet and it paid off, no you are not a genius. No one cares, no one shows shit about fuck, let's all stop pretending and just understand that speculation != investment grade and allow for people who want to take significant risk on speculative bets.
- k__ 5y ago
  Yes, the critique became quite boring in the last year. "You're burning the world!" "We are saving the world!" Both are obviously BS.
  - atoav 5y ago
    Last time I checked (2021) the CO2 emissions of one bitcoin transaction was equivalent to driving over 2000 km in an average middle european car from the same year (see: https://www.forbes.com/sites/philippsandner/2021/11/19/bitcoin-co2-emissions-from-an-investor-perspective-and-how-to-compensate-them/?sh=3850e748c1ca https://www.forbes.com/sites/philippsandner/2021/11/19/bitco...) Unless I made an error here, or that study is flawed this seems to me like a ridiculously huge amount?
    - k__ 5y ago
      To be fair, Bitcoin proponents don't even see this as critique, they say it's by design and everything more efficient would jeopardize their goals, lol.
    - rjakobsson 5y ago
      This is a false comparison.
      - 5y ago
aww_dang 5y ago
Even if I were to accept all of the fearful arguments against cryptocurrency, a prohibition of cryptocurrency would still be the greater evil in my view. Even if it is 'irrational' as described by some behavioral economists, how can we accept that the behavioral economist who is accusing the consumer of irrationality is himself entirely rational. The premise is nonsensical in my view. Differing actors employ their individual agency towards unique ends which cannot be evaluated from a position of imperfect information. Value is subjective.
- eklavya 5y ago
  You made a whole lot of sense, almost as much as cryptocurrency :)
labrador 5y ago
I'm bored with this topic. I've done a deep dive on it and it does nothing for me. I'm not a gambler or a gamer. It seems to be very exciting for those that are.
Trumpi 5y ago
Bitcoin was meant to be fiat money, but one without any central bank. Instead, it is being treated as a financial instrument where you make an "investment" and you can buy almost nothing with it. If you're being sold Bitcoin or any other crypto as an "investment" where you might receive a "return", you're participating in a Ponzi scam. If you're buying crypto so that you can use it to make a payment (e.g. Lightning payment to your favourite podcaster, or buying a pizza), then ok carry on.
TAKEMYMONEY 5y ago
The author makes the common mistake of conflating market manipulation with a Ponzi scheme. This is unfortunate, because we've seen real Ponzi schemes that use crypto (Bitconnect, PlusToken, Onecoin) and it makes it harder to talk about them when "Ponzi scheme" gets so watered down.
- rufus_foreman 5y ago
  I admire you for fighting the good fight, but I think I've given up on it. I tried. Ponzi scheme in the vernacular now just means any sort of speculation. Tulips, crypto, whatever, it's all Ponzi schemes. Which makes it harder to describe frauds like the one Charles Ponzi perpetrated but oh well.

47 points by chaseha 5y ago

I like permissionless ponzi schemes more than permissioned ponzi schemes.

fwip 5y ago

This article is largely correct. You can argue that it's "not technically a Ponzi," but rather some other type of scam, but the semantics are not interesting. The following excerpt is a point that many seem to miss. > In fact, investors won’t — on average — be able to cash out for even as much as they put in. Much of that money went to cryptocurrency mining. Recent analysis shows that around $25 billion and growing has already gone to Bitcoin miners, who, by best estimates, are now spending $1 billion just on electricity every month, possibly more. > That money is gone forever, having been converted to carbon and released into the atmosphere — making cryptocurrencies even worse than traditional Ponzi schemes. Most of the money lost in Bernie Madoff’s infamous Ponzi was eventually clawed back and returned to investors. Much of the money put into cryptocurrency, even if courts could trace back tangled webs of semi-anonymous cryptocurrency transactions, can never be recuperated.

lariati 5y ago

I really would love a browser plugin that removes all mention of crypto/web3/etc.. I am just so bored with reading about anything to do with the entire space, pro or con. An inescapable argument about basically nothing. How do I opt out completely?

oversocialized 5y ago

So is social security and fractional reserve banking, yet no one is trying to stop those.

jonnydubowsky 5y ago

Written in 2018?

fwip 5y ago
No, the year and month are in the URL.
nsonha 5y ago
It sounds like that at first but all the events in the article are very current.

Mountain_Skies 5y ago

Mostly but as long as you're not the one holding the last tulip, you can profit greatly. It does bother me to see how many young people are being taught it's an investment rather than a game of economic chicken. Then again, so much in our modern economy is that way that one can hardly blame them from not seeing the danger.

sitkack 5y ago
Most investments are Ponzi schemes including all forms of currency. I don't want to get into an argument about the short term investments and liquidity in the markets, bla bla bla. They could be tools, but they end up becoming the ends. Why?
- prepend 5y ago
  This is not true at all as most investments have some intrinsic thing of value. A stock is a predicted stream of future earnings. A Ponzi scheme produces nothing and only survives through new investment. Stocks don’t need future investment as they can just pay out dividends forever based on the companies earnings. Equating these two things seems fraudulent at worst and stupid at best.
  - sitkack 5y ago
    People rocking Robin Hood are not investing. Institutional investors are investing. > Equating these two things seems fraudulent at worst and stupid at best. Please.
- deleted 5y ago
  [deleted]
boppo1 5y ago
> young people are being taught it's an investment rather than a game of economic chicken. I mean, crypto is sorta garbage, but so are all the fiat currencies. Orthodox economics apparently says it's totally cool to print money to support ditch-digging because it makes jobs reports look good. The US Fed itself acknowledges in its own reports that the US is financially unsustainable. Does anyone see how this doesn't just collapse sometime in the next 50 years? Unless we start a big war with China...

robcohen 5y ago

Same arguments from both sides, different day. So tired of the self-righteousness of both sides. The reality is that there are use-cases that are useful today with crypto. The reality is also that the vast majority of money in crypto is there for speculative reasons, not fundamental value. That's fine, it's a bet, stop caring about where people put there money. If you don't want to make a speculative bet, then don't. If you made a speculative bet and it paid off, no you are not a genius. No one cares, no one shows shit about fuck, let's all stop pretending and just understand that speculation != investment grade and allow for people who want to take significant risk on speculative bets.

k__ 5y ago
Yes, the critique became quite boring in the last year. "You're burning the world!" "We are saving the world!" Both are obviously BS.
- atoav 5y ago
  Last time I checked (2021) the CO2 emissions of one bitcoin transaction was equivalent to driving over 2000 km in an average middle european car from the same year (see: https://www.forbes.com/sites/philippsandner/2021/11/19/bitcoin-co2-emissions-from-an-investor-perspective-and-how-to-compensate-them/?sh=3850e748c1ca https://www.forbes.com/sites/philippsandner/2021/11/19/bitco...) Unless I made an error here, or that study is flawed this seems to me like a ridiculously huge amount?
  - k__ 5y ago
    To be fair, Bitcoin proponents don't even see this as critique, they say it's by design and everything more efficient would jeopardize their goals, lol.
  - rjakobsson 5y ago
    This is a false comparison.
    - 5y ago

aww_dang 5y ago

Even if I were to accept all of the fearful arguments against cryptocurrency, a prohibition of cryptocurrency would still be the greater evil in my view. Even if it is 'irrational' as described by some behavioral economists, how can we accept that the behavioral economist who is accusing the consumer of irrationality is himself entirely rational. The premise is nonsensical in my view. Differing actors employ their individual agency towards unique ends which cannot be evaluated from a position of imperfect information. Value is subjective.

eklavya 5y ago
You made a whole lot of sense, almost as much as cryptocurrency :)

labrador 5y ago

I'm bored with this topic. I've done a deep dive on it and it does nothing for me. I'm not a gambler or a gamer. It seems to be very exciting for those that are.

Trumpi 5y ago

Bitcoin was meant to be fiat money, but one without any central bank. Instead, it is being treated as a financial instrument where you make an "investment" and you can buy almost nothing with it. If you're being sold Bitcoin or any other crypto as an "investment" where you might receive a "return", you're participating in a Ponzi scam. If you're buying crypto so that you can use it to make a payment (e.g. Lightning payment to your favourite podcaster, or buying a pizza), then ok carry on.

TAKEMYMONEY 5y ago

The author makes the common mistake of conflating market manipulation with a Ponzi scheme. This is unfortunate, because we've seen real Ponzi schemes that use crypto (Bitconnect, PlusToken, Onecoin) and it makes it harder to talk about them when "Ponzi scheme" gets so watered down.

rufus_foreman 5y ago
I admire you for fighting the good fight, but I think I've given up on it. I tried. Ponzi scheme in the vernacular now just means any sort of speculation. Tulips, crypto, whatever, it's all Ponzi schemes. Which makes it harder to describe frauds like the one Charles Ponzi perpetrated but oh well.