Deep. Very deep. The exact same thing can be said about money. It only works only if people agree it works. When you exchange your work for money, you are taking a risk. When you keep your money in the bank you are taking a risk. What if all of a sudden everyone stops accepting money?
I really wish we would stop with the Ponzi scheme non-sense. Nobody believes that there is some sort of economic activity that is sustaining the growth. It’s really no different that buying stocks on an exchange. Risky? yes. Speculative? yes. Ponzi? Nope.
This Bitcoin - Ponzi scheme association is used to fear-monger and to stop people from ever learning about it (you don’t want to be the sucker that falls for the scheme, do you?)
Actually, the difference is quite substantial. Stocks are fractional ownership of businesses and businesses create value by transforming inputs into an output that is worth more than the inputs combined. In comparison, bitcoin is a virtual commodity, and commodities (virtual or otherwise) don't produce anything, this is why they're sometimes called non-productive assets. This means bitcoin cannot create wealth. If somebody get rich by investing in bitcoin it must be always at the expense of other bitcoin investors.
Bitcoin is a security for an electronic trading game that takes inputs and gives back less than that input.
Then on top of that there is this technological/economic quasi religion that is a random bundle of economic half truths but the followers beliefs are reinforced by the price going up.
Ethereum creates value by providing an infra for dApps that provide financial instruments (like deposits, lending, etc) which also create value.
Bitcoin payments are settled by "miners". It's therefore the miners who provide the service of settling bitcoins transactions, not the bitcoins themselves (which are the things being transacted from one wallet to another). Yes, miners create value by providing this service, and they get paid for it with transaction fees. However owning bitcoin doesn't confer you ownership rights of the bitcoin mining business, therefore owning bitcoin is completely not like owning shares of a bank which does confer such rights.
What does getting rich mean? If you compare bitcoin to the USD, its value “increases”. But if you compare bitcoin with bitcoin you have the same amount of bitcoin today you had yesterday. So what really happens is you can buy more goods with the same amount of btc, in time, because of its scarcity.
So bitcoin can create wealth in the sense that the quantity of goods you exchange for it increases over time (if people buy into using it that is).
Something scarce that has any demand at all will see a rocketing price for it. That’s what scarce means. Of course it’s supply and demand and all that jazz but usually scarcity + any kind of demand leads to a high price.
> you fail at elementary economics in a typical bitcoin-fan fashion
Instead of being condescending here is a tip for you: learn about bitcoin before writing it off. Who know, one day you might even change your mind.
> No school of economic thought claims such nonsense.
Can you google things? Do me and youself a favor and google "the scarcity principle"
Here I'll do it for you: https://www.investopedia.com/terms/s/scarcity-principle.asp
I guess some schools of economic thought do claim such nonsense. Maybe you should have a word with them.
But wait there is more: https://www.merriam-webster.com/dictionary/scarce
scarce: deficient in quantity or number compared with the demand : not plentiful or abundant
Wow, who would have guessed it's in the actual definition of the word?
And what would that school of economic thought be exactly?
> Wow, who would have guessed it's in the actual definition of the word?
The definition of the word 'scarce' implies the notion of high price?
if you believe in all the economic bs we are being fed, something scarce is going to increase in value until it's no longer scarce. that's literally the definition: deficient in quantity or number compared with the demand
If you want to go with that definition, then bitcoin isn't scarce by definition. Something can have a fixed supply and be abundant compared with the demand.
Yup. So the people who were in on it early will have significantly more bitcoin than anyone who gets it by the time its hard to get it.
I think it’s a little bit different depending on the style of investing. For Buffett-style value investing he’s making a bet on the profitability of the company itself and not the future price of the stock (obviously meme stocks work differently).
Bitcoins don’t generate profits (by themselves) so their utility depends more on the future market price (which of course isn’t driven by profits either).
The traditional investment it seems most similar to is gold, which has value because the supply is limited, it’s relatively easy to store/transport compared to bulkier materials, and there’s lots of liquidity due to others using it for the same purpose. Bitcoin seems to have the same sort of advantages (minus the industrial / jewelry applications, but it’s even easier to store and transact).
my point was that a case can be made that it’s an investment and the ponzi people need to take a deep breath.
BTC has no future cash flow and no expectation of future cash flow, of course everyone knows this.
It is an open ponzi scheme that you even kind of understand but you just don't use the language quite right. "Nobody believes that there is some sort of economic activity that is sustaining the growth"
You really mean to say that everyone knows it is a security with no payoff.
It really has nothing to do with fear mongering. An open ponzi is the best description.
Bitcoin is a special type of Ponzi scheme that uses energy input from miners to create the illusion there is a return in value over time. Like Rai stones, immutability comes from the work and risk, but the value of the object is itself held in the population's mind. This only "works" if everyone agrees it works. If everyone agrees it doesn't work then it doesn't work and isn't worth anything and the risk taken to "make" it is lost. This is why an allegory can be told that indicates it is the faith in such an object that brings it value.
Without enough people using said blockchain, it is both worthless and empty of meaning - no different than a scrape in the mud. A killer use case for crypto will make its utility valuable and inventible. A road is formed from wear of people agreeing the road goes somewhere.
The danger is the requirement for increases in power to the network, which both drives and is affected by the current value to fiat. We may yet wrap our planet with solar to drive our economic desire of "wealth".