@recusant
Money has a few attributes. It is a store of value, a unit of account, and a means of exchange.
At this moment, every crypto I'm aware of is terrible for any of these things, and #bitcoin is particularly bad.
As a store of value, you don't know what it's going to be valued at from hour to hour, day to day, week to week. Is a Bitcoin going to cost $3000? $200,000? Depends on the whims of a fickle market. Could be $0 tomorrow, it isn't like Bitcoin is useful for anything, you can't even pay your taxes with it.
This precludes it as a unit of account. You'd be sending someone out to reprice all your goods hourly.
All that's left is use as a medium of exchange, but we know Bitcoin at least is horrid for that. When I use my bank card, the money comes out basically immediately. With my visa, basically the same thing. Both transactions are basically free both to me and to the merchant. By contrast, Bitcoin takes forever to use and costs a lot to use. During the last boom, investment alone locked up bitcoin transactions for a month so virtually no transactions even went through. If you used bitcoin in one or two major Walmarts, you'd completely destroy its ability to function.
Frankly, fiat money is imperfect, but valuable, relatively stable, and transferrable. It is the thing to beat. My money loses value, but not very quickly -- a couple percent per year, generally speaking (obviously we're in a weird moment in history). I know from day to day and even from year to year basically how much value money has and how much money my stuff is worth. If I'm saving for a house, or a car, or a shopping trip, I know how much money I'm going to need, and I can transfer the money cheaply and quickly. Every store takes my fiat money, and when it comes time to pay taxes, everyone needs to hold enough fiat money to pay the government so there's a built-in demand.
Finally, bitcoin is spoken of as a means to avoid regulation, but we know that's false. First, if you do something the government doesn't like with your bitcoin, they can easily trace the transactions. Second, we've seen the entire world regulate bitcoin transactions, including Turkey who banned it outright.
So it isn't a store of value, it isn't a unit of account, it isn't a means of exchange, it isn't a means to avoid regulation. Why would anyone buy bitcoin?
The only reason people buy bitcoin is that others are buying bitcoin. If people take profits from bitcoin, it is paid for solely by newer investors.
Meriam-Webster defines a Ponzi scheme as "an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks"
This is in contrast to normal investment where you buy a share of something that has or produces value besides simply being an investment. One doesn't buy bonds to hold bonds, they buy bonds because they are promised that because they buy the bond, they will be paid interest. One doesn't buy stocks to hold stocks, they hold stocks because those businesses will either pay dividends to shareholders or they will use profits derived from running the business. Say what you will about the valuation of Google, Facebook, Amazon, Apple, each of these companies has massive revenue sources other than investors, where Bitcoin really does not. Miners aren't making their profits on the huge number of transactions Bitcoin does on a b2c basis, they're making their profits on the massive new investment in bitcoin.
For those reasons it is by definition a ponzi scheme.
Money has a few attributes. It is a store of value, a unit of account, and a means of exchange.
At this moment, every crypto I'm aware of is terrible for any of these things, and #bitcoin is particularly bad.
As a store of value, you don't know what it's going to be valued at from hour to hour, day to day, week to week. Is a Bitcoin going to cost $3000? $200,000? Depends on the whims of a fickle market. Could be $0 tomorrow, it isn't like Bitcoin is useful for anything, you can't even pay your taxes with it.
This precludes it as a unit of account. You'd be sending someone out to reprice all your goods hourly.
All that's left is use as a medium of exchange, but we know Bitcoin at least is horrid for that. When I use my bank card, the money comes out basically immediately. With my visa, basically the same thing. Both transactions are basically free both to me and to the merchant. By contrast, Bitcoin takes forever to use and costs a lot to use. During the last boom, investment alone locked up bitcoin transactions for a month so virtually no transactions even went through. If you used bitcoin in one or two major Walmarts, you'd completely destroy its ability to function.
Frankly, fiat money is imperfect, but valuable, relatively stable, and transferrable. It is the thing to beat. My money loses value, but not very quickly -- a couple percent per year, generally speaking (obviously we're in a weird moment in history). I know from day to day and even from year to year basically how much value money has and how much money my stuff is worth. If I'm saving for a house, or a car, or a shopping trip, I know how much money I'm going to need, and I can transfer the money cheaply and quickly. Every store takes my fiat money, and when it comes time to pay taxes, everyone needs to hold enough fiat money to pay the government so there's a built-in demand.
Finally, bitcoin is spoken of as a means to avoid regulation, but we know that's false. First, if you do something the government doesn't like with your bitcoin, they can easily trace the transactions. Second, we've seen the entire world regulate bitcoin transactions, including Turkey who banned it outright.
So it isn't a store of value, it isn't a unit of account, it isn't a means of exchange, it isn't a means to avoid regulation. Why would anyone buy bitcoin?
The only reason people buy bitcoin is that others are buying bitcoin. If people take profits from bitcoin, it is paid for solely by newer investors.
Meriam-Webster defines a Ponzi scheme as "an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks"
This is in contrast to normal investment where you buy a share of something that has or produces value besides simply being an investment. One doesn't buy bonds to hold bonds, they buy bonds because they are promised that because they buy the bond, they will be paid interest. One doesn't buy stocks to hold stocks, they hold stocks because those businesses will either pay dividends to shareholders or they will use profits derived from running the business. Say what you will about the valuation of Google, Facebook, Amazon, Apple, each of these companies has massive revenue sources other than investors, where Bitcoin really does not. Miners aren't making their profits on the huge number of transactions Bitcoin does on a b2c basis, they're making their profits on the massive new investment in bitcoin.
For those reasons it is by definition a ponzi scheme.
@recusant I've often made the analogy to the late 1990s.
There was a dot com bubble in part because of Allan Greenspan's monetary policies, but also because people thought "the Internet is the Future". Most of the giants from that era are simply gone. Yahoo was considered a wonderkind, it's basically gone. AOL was considered titanic as it was merged into time-warner to become AOL Time Warner, but even that merger became a de-merger because AOL wasn't a player in the tech economy like they thought they'd be. Turbolinux was the fastest growing IPO in history, it's gone.
Facebook didn't exist yet. Amazon still sold books. Netflix sent out DVDs through the mail. Google didn't exist yet. Apple was on the verge of bankruptcy.
If you invested in most of the "sure bets" of the age, you would have lost your shirt, because the crossroads between technology and business hadn't been arrived at yet.
I could see a future where cryptocurrency or the like are actually used routinely, but either not with the current players, or not with one of the players we would ever expect. Just because it's priced high today doesn't mean it's going to be a good choice in the future.
I think there's going to have to be a few conditions before a really established cryptocurrency comes about.
1. A major currency shock. I think this is coming in the upcoming stagflationary depression, and possibly the US either defaulting on its debt or inflating away the value of its debt.
2. A user friendly interface. Most people can't use most cryptos right now.
3. A cryptocurrency with a relatively stable value and high throughput must exist and be recognized.
4. An agreement between major powers to accept that crypto instead of or in addition to their fiat currency.
The first one will have to happen before we see any real movement.
I have a feeling that a crypto that succeeds won't be just some thing some hackers threw together as well. There'll likely have to be some sort of central authority managing things because in the real world people forget their pins and lose their bank cards.
There was a dot com bubble in part because of Allan Greenspan's monetary policies, but also because people thought "the Internet is the Future". Most of the giants from that era are simply gone. Yahoo was considered a wonderkind, it's basically gone. AOL was considered titanic as it was merged into time-warner to become AOL Time Warner, but even that merger became a de-merger because AOL wasn't a player in the tech economy like they thought they'd be. Turbolinux was the fastest growing IPO in history, it's gone.
Facebook didn't exist yet. Amazon still sold books. Netflix sent out DVDs through the mail. Google didn't exist yet. Apple was on the verge of bankruptcy.
If you invested in most of the "sure bets" of the age, you would have lost your shirt, because the crossroads between technology and business hadn't been arrived at yet.
I could see a future where cryptocurrency or the like are actually used routinely, but either not with the current players, or not with one of the players we would ever expect. Just because it's priced high today doesn't mean it's going to be a good choice in the future.
I think there's going to have to be a few conditions before a really established cryptocurrency comes about.
1. A major currency shock. I think this is coming in the upcoming stagflationary depression, and possibly the US either defaulting on its debt or inflating away the value of its debt.
2. A user friendly interface. Most people can't use most cryptos right now.
3. A cryptocurrency with a relatively stable value and high throughput must exist and be recognized.
4. An agreement between major powers to accept that crypto instead of or in addition to their fiat currency.
The first one will have to happen before we see any real movement.
I have a feeling that a crypto that succeeds won't be just some thing some hackers threw together as well. There'll likely have to be some sort of central authority managing things because in the real world people forget their pins and lose their bank cards.
@recusant The average transaction fee for bitcoin is presently about 18USD. This year it's been as high as 60USD.
https://ycharts.com/indicators/bitcoin_average_transaction_fee
As you mentioned, a credit card not used for credit (that's another service, and one Bitcoin doesn't provide) is free of charge per transaction.
The fee with my bank for unlimited transactions on debit, no fees on that bank's ATMs, and free to send money through email is 12USD/month, and if there's more than about 3200USD in the account the monthly fee is waived entirely.
https://ycharts.com/indicators/bitcoin_average_transaction_fee
As you mentioned, a credit card not used for credit (that's another service, and one Bitcoin doesn't provide) is free of charge per transaction.
The fee with my bank for unlimited transactions on debit, no fees on that bank's ATMs, and free to send money through email is 12USD/month, and if there's more than about 3200USD in the account the monthly fee is waived entirely.
@recusant
While Bitcoin ATMs are a fast way of getting BTC and cash, this speed comes with a high cost. A transaction at a BATM usually incurs a fee between 7 and 15 percent, in addition to a spread applied directly into the BTC price (this is usually for ATMs that use exchanges to facilitate their transfer). https://www.atmia.com/news/ultimate-guide-on-how-to-use-a-bitcoin-atm-in-2020/12131/
So not $18, but not practically free either.
Now, as for transferring from wallet to wallet, the way the sequence works is you add the transfer to the blockchain, and the miners verify it. Once enough miners have verified the transaction, then it is considered to be complete.
So you could potentially pay nothing for a bitcoin transaction, but that's not likely to be realistic because that transaction will never be picked up by a miner -- they'll be busy processing more expensive transactions basically forever. The cost of a transaction doesn't depend on the size of the transaction, it's an amount per transaction measured in satoshis per byte, and each transaction makes up about 230 bytes. One satoshi costs about 0.2 US cents, so it isn't a lot to start, but it adds up quickly.
In late 2017, transactions that cost even $10 were taking a month to complete or being dropped entirely.
While Bitcoin ATMs are a fast way of getting BTC and cash, this speed comes with a high cost. A transaction at a BATM usually incurs a fee between 7 and 15 percent, in addition to a spread applied directly into the BTC price (this is usually for ATMs that use exchanges to facilitate their transfer). https://www.atmia.com/news/ultimate-guide-on-how-to-use-a-bitcoin-atm-in-2020/12131/
So not $18, but not practically free either.
Now, as for transferring from wallet to wallet, the way the sequence works is you add the transfer to the blockchain, and the miners verify it. Once enough miners have verified the transaction, then it is considered to be complete.
So you could potentially pay nothing for a bitcoin transaction, but that's not likely to be realistic because that transaction will never be picked up by a miner -- they'll be busy processing more expensive transactions basically forever. The cost of a transaction doesn't depend on the size of the transaction, it's an amount per transaction measured in satoshis per byte, and each transaction makes up about 230 bytes. One satoshi costs about 0.2 US cents, so it isn't a lot to start, but it adds up quickly.
In late 2017, transactions that cost even $10 were taking a month to complete or being dropped entirely.
- replies
- 0
- announces
- 0
- likes
- 0