>If the crypto community wants to demonstrate that it isn't a giant Ponzi scheme, why not come up with

a product that does anything at all?

Exactly. I would consider a token that follows something like Friedman's k-percent rule ( https://en.wikipedia.org/wiki/Friedman's_k-percent_rule ), a legitimate token.

A token like this would jettison its pyramidal character. If it took off, it might convince me that there is value beyond scamming late adopters.

I haven't seen any gaining much traction however.

Tokens are neither deflationary nor inflationary. The idea that an asset is deflationary or inflationary implies that the supply of the asset determines its price. This is incorrect from a theoretical standpoint, as well as from what empirical evidence tells us. It's a misapplication of the Quantity Theory of Money. QTM is a theory of money, it doesn't apply to stocks, tokens, assets in general, or in situations where there are competing currencies.

> The idea that an asset is deflationary or inflationary implies that the supply of the asset determines its price.

Isn't this one of the most basic properties of supply and demand, though?

I mean,what do you expect to happen if your supply is artificially capped and early adopters start to pump up demand for the stuff they own?

In fact, isn't that the whole point of these schemes? I mean,do you know anyone who decided to waste their own money subsidizing anything related to crypto? Each and every single evangelist and proponent of crypto is invested in getting in cheap and pumping it up to get out with the maximum possible markup.

> Isn't that one of the most basic properties of supply and demand though.

The most basic property of supply and demand is that price is determined by the interaction of supply and demand, so a fixing the supply alone determines nothing at all about its value, which is why the incessant pumping is necessary. The cryptoproponent's argument that cryptocurrencies must increase in value because there are hard limits on their growth rate is a cargo cult version of the law of supply and demand made to serve the pump

How would I rectify that against the model of supply and demand, where increasing supply without increasing demand would result in its price deflating?

I don't understand the question.

If you were to take an introductory economics course the first day would prove you wrong. Resouce scarcity combined with increasing demand means prices go up. It most certainly applies when all currencies are designed to operate in the same way because they then move in concert and there is no alternative to counter this.

> Resouce scarcity combined with increasing demand means prices go up.

And? The demand for an asset is tied to its utility. You can't just assume that the demand will continue to increase forever, but that's exactly what the notion of "deflationary asset" implies.

> In reality, non-deflationary cryptocurrencies have been tried on various occasions. Surprise! None of them have taken off because "number doesn't go up".

I am curious to see what will happen when the everything bubble pops

If people don’t react in an angry way that’s the clear signal from society that it wants a certain % of ponzi and scams to be allowed and tolerated

Much like it tolerates gambling , lottery and games of chance which are all zero sum games

> I am curious to see what will happen when the everything bubble pops

… the market is flooded with cheap video cards and we finally have a feast. Unless I die waiting, which is what will probably happen. Please, God, Jesus, Allah, Rama, whoever; I've been waiting far too long already.

The video game industry is literally 10x more scummy than the cryptocoin industry.

edit: keep downvoting me morons. what is microtransactions? literally the same bullshit you bitch about like NFTs and IPOs.

and the video game industry is not just scum for that, but for the terrible code they write and how they drag down the entire computing industry with pervasive poor engineering

what is steam? origin? epic store? literally webshit like a cryptocurrency wallet + vendor lock in + a bunch of mutually incompatible software deliberately made that way in the interests of the vendors instead of using open standards

Monero is inflationary, but it has some other features (untraceability) that drive demand. It hasn't experienced the same swings that the gold-like cryptos have, though.

Isn't Ether (on ethereum), the second most valuable token after bitcoin, non-deflationary? There's no cap and the monetary policy changes regularly. I don't think anyone believes that there is a hard cap. Same is true for BNB, Tether and SOL the third, fourth and fifth most popular coins.

What are you talking about? Random shit-coins that have deflationary economics?

after EIP-1559 eth is now deflationary, part of/related to the switch to proof of stake.

https://btcpro.com/2021/09/05/eth-becomes-deflationary-burn/

Isn't that Dogecoin? (although inflation rate itself is deflationary - dropping from 5% pa about now to 2% in about 20 years)

Yes, sort-of, the supply grows by a fixed absolute quantity every year. I don't really consider it to be a serious attempt at a useful cryptocurrency though.

I suspect any coin attempting price-stability (minimum requirement for a useful currency) would need some kind of central bank to control and guarantee the supply. (We have that already too! It's called Tether and it ain't great.)

> I don't really consider it to be a serious attempt at a useful cryptocurrency though.

was being widely used for tipping when the lightning network was just a twinkle in btc's eye

seems to have declined for that purposed, but was the reason i have a small bag still. maybe missed my chance to sell at $0.70 but my original $70 bag i got to tip an openra server ended up doing quite nice ;)

someday my doge will hit $1

Dogecoin is a copy+paste of bitcoin with a few config values changed.

That's why it shares the inflationary model.

The reason bitcoin is often described as deflationary is that many coins are lost, and the inflation is somewhat priced-in.

How is Bitcoin inflationary? Even without coin lossage (a ridiculous concept in any other financial system, short of literally setting your money on fire), the network is programmed to eventually stop minting coins. Fixed supply on increased demand (if it’s the economic substitute we’ve all been promised) is the precondition for deflationary movement. No amount of “pricing in” changes that.

Even if we assume a fixed global supply of bitcoins (which is a big assumption because it assumes bitcoin deposits at institutions will always be backed by full reserves), that doesn't mean that the supply of bitcoins in a particular economic area will be fixed. It most certainly won't, unless international trade stops.

> which is a big assumption because it assumes bitcoin deposits at institutions will always be backed by full reserves

Where is this assumption coming from? I have never heard this before.

> that doesn't mean that the supply of bitcoins in a particular economic area will be fixed. It most certainly won't, unless international trade stops.

Putting non-competing sectors of the economy in competition against each other for a slice of a fixed monetary supply is another basic and sufficient precondition for deflation. There’s a very good reason we don’t do that currently.

> Where is this assumption coming from? I have never heard this before.

The global supply of bitcoins is fixed if and only if financial institutions are not allowed to hold fractional reserves against deposits.

Maybe I’m missing something obvious here, but it’s not clear why (1) any bank would offer a Bitcoin denominated account, or (2) how it even makes sense to perform fractional banking against Bitcoin. You can’t change the underlying amount in the ledger and the ledger is the value source, unlike physical Federal Reserve Notes.

Well, crypto-exchanges already offer deposit accounts backed with reserves. If at any point the reserve ratio falls below 1 (we don't know if this has already happened), the quantity of bitcoins in circulation will increase as a result of that.

I know of some cryptocurrency exchanges that offer stablecoins, which are a dollar-denominated asset that’s (theoretically) backed by cash in the bank. We’ve seen plenty of evidence that the largest stablecoin players are actually fraudsters.

I don’t know of any exchange that offers a deposit account that’s dollar-denominated but backed by cryptocurrency. I can think of lots of reasons for that, FDIC regulations being the least of them. But again, even that wouldn’t make the number of bitcoins in circulation increase: it would be an unstable (and illegal) financial fiction.

I'm talking about bitcoin-denominated accounts backed with bitcoins. These are the standard exchange accounts that most people have.

Okay. In what world would any retail consumer accept a Bitcoin-denominated account based on marginal Bitcoin reserves? Exchanges would be forced to purchase on the open market to meet their withdrawals during demand, which would cause another deflationary spiral. It’s a nightmare scenario with no conceivable upside compared to actual currency.

And again, this is before we get to the problem of “the government lets you do this.”

I don't think you're following me. This isn't some hypothetical scenario. It's common for people who own bitcoin to have their bitcoins deposited at some exchange. Since exchange customers are unlikely to withdraw all their bitcoins simultaneously, exchanges don't have to keep 100% reserves. For instance, they can lend out some of the reserves, or they can use them for whatever purposes they want. When this happens the quantity of bitcoins in circulation goes up. To all effects and purposes, new bitcoins have been created and put in circulation.

I hope that I'm not following, because what you just described is both crazy and illegal.

Cryptocurrencies are currently considered securities under US law. You can't just pop unrealized securities into existence when a prospective investor asks you for them: it's akin to naked shorting. That's why the stock market has "market makers," i.e. firms that provide low-latency settlement of securities in exchange for a small part of the spread.

I can't find any evidence online that any reputable exchange is using its underlying reserves to cover multiple in-kind balances. If you have links to exchanges actually doing this, both I and the SEC would love to see them.

Edit: I'm struggling to even find links to people discussing this hypothetically online. I found this one on a wiki[1], where it's discussed in the abstract. And I found another thought piece from the Atlanta Fed[2]. But no indicator that any current above-board reserve is currently doing this.

[1]: https://en.bitcoin.it/wiki/Fractional_Reserve_Banking_and_Bi...

[2]: https://www.atlantafed.org/cenfis/publications/notesfromthev...

It can be crazy, in your opinion, but the fact is fractional reserve banking has been a standard practice in banking since the invention of banking. I don't know of any country where it's illegal. Whether it would be legal for crypto-exchanges, which typically don't have a banking license, to engage in fractional reserve banking I don't know. Even if it was illegal in the US, it could be legal in Cayman Islands, or elsewhere, and the result would be the same—an inflated supply of bitcoins circulating around the world. Also a lot of exchanges don't seem to be regulated at all. The ones that are regulated could just get a banking license.

Fractional reserve banking isn't the crazy or illegal part. It's not crazy or illegal because it makes sense in the context of currency, where the purpose is denominational value and facilitating value transfers. The crazy and illegal part is the idea of "fractional reserves" in the context of a fixed-supply security. There's no such thing.

I used the US as an example; what you're describing is illegal on every single major international exchange[1]. And as far as banking licenses go: the FDIC won't touch Gemini's actual non-third-party-custodial depository products with a ten foot pole, and they're about as clean as a cryptocurrency firm can be.

If you want cryptocurrencies to "succeed" in some nebulous sense, it would be good to get a start on the "not just good for crime" part of the equation. This isn't it.

[1]: https://en.wikipedia.org/wiki/Naked_short_selling#Regulation...

Yeah, well that's your opinion. I don't think that you know what you're talking about. At any rate, my point isn't about whether crypto-currency deposits backed by fractional reserves are legal or illegal. My point is that the idea that there is a fixed supply of bitcoins is a lie, a marketing narrative to fool gullible idiots into thinking that the price of bitcoin can only go up. And my answer to that is to say that is 1) it's not true that a limited supply ensures that the price can only go up, and 2) it's not true that the supply of bitcoin is fixed, because financial institutions can create additional bitcoins via fractional reserves, and because as a consequence of international trade the supply of bitcoins in different economic areas would fluctuate (sometimes wildly) creating periods of inflation and deflation, just like it happened during the gold standard.

It’s an argument of semantics, really: if it will eventually stop printing coins, I’d consider it inflationary until that point in time and non-inflationary thereafter. In practice, current holders are being diluted to subsidize the security of the network.

This isn’t consistent with the “priced in” position put forward by the original commenter. An asset class that is going to be fixed in quantity for the rest of time is an obvious target for pricing-in.

By that logic the USD has some inflation baked in too, it’s just that in Bitcoin’s case the number is exact and in USD it’s a guess. It’s really just arguing semantics, though. I get both sides’ arguments.

I don’t know about “baked in,” but of course the USD is inflationary: that’s been the explicit Fed policy for decades. It’s been the policy because small amounts of inflation have a measurable economic benefit.

But again: this doesn’t change the fact that Bitcoin is deflationary. It’s a fixed supply of coins on a ledger that every current stakeholder has a strong deflationary interest in. The fact that there might be inflationary forces internal to Bitcoin’s economy doesn’t change that.

I only meant that coins are still being created for now, so the proportion of coins that a specific person owns vs the total is constantly falling, like in any inflationary currency.

If you measure current ownership as a percentage of final issued coins rather than current issued coins, then you've already priced in the inflation.

That's an internal inflation effect, one that appears to have been amply priced into the current value of Bitcoin. Which is perfectly reasonable, since everybody can see that the future quantity of Bitcoin is fixed and/or diminishing, thanks to lossage.

In other words: like the US economy, Bitcoin can have both inflationary and deflationary forces internally. But the overall economic picture of Bitcoin is intrinsically deflationary.

Show me a stock anyone is interested in that isn’t expected to go up and reward early adopters.

“If the stock community wants to demonstrate that it isn't a giant Ponzi scheme, why not come up with a non-deflationary stock, which will not massively reward 'early adopters' at the expense of everyone else, in perpetuity?”

> Show me a stock anyone is interested in that isn’t expected to go up and reward early adopters.

Eve though you framed your challenge as a "no true Scotsman" argument, history is packed with IPOs that tanked after the companies went public.

https://money.howstuffworks.com/10-biggest-ipo-flops.htm

Last year Uber dropped considerably when it's IPO got out of the gate.

The main mistake of your argument is trying to compare something with tangible value with schemes driven by speculation and fear of missing out.

> Last year Uber dropped considerably when it's IPO got out of the gate.

Some exchanges or other cryptocurrency businesses fizzle out.

Bitcoin price gets hit on world stability news.

> The main mistake of your argument is trying to compare something with tangible value with schemes driven by speculation and fear of missing out.

People have no idea what TSLA is planning on doing besides "cool car", and ape into the stock because of FOMO. Address this?

Maybe some people behave as you indicate but this is neither the common or original intent. TSLA is only one frothy example but they still (a) make things, (b) have a historical record, (c) report on past, present and forecasted performance, (d) have widely accepted "value", (e) can be readily exchanged for something else of value, (f) have governance that is ultimately responsible for performance, even if they're not the major cause of said performance.

Everybody investing in the stock market is not a Reddit day trader.

No one was interested in it. :)

I don’t see why stocks have tangible value and tokens used to interact with a network don’t. A stock is a vacuous unverifiable virtual piece of paper. At least if you have a Bitcoin or Ether you can prove what you have and know how many there are.

https://www.bloomberg.com/opinion/articles/2017-02-17/dole-f...

Most stocks don’t even have dividends any more so what else is a stock for other than selling to the next greater fool?

A stock represents ownership in a company that makes things. The value of the stock is relative to the performance of the company, not the amount of fools available to sell to.

Crypto represents nothing and is backed by nothing other than sunk-cost.

> The value of the stock is relative to the performance of the company, not the amount of fools available to sell to.

A company might be destined to make twice their profits, yet if nobody believes they could, nobody will buy their stocks, leaving stock price the same. One might think, the stock price would certainly increase when the company realizes the profits, but it’s not the case either. The market could think that it was a one off event and the company wouldn’t continue growing. Therefore, nobody buys the stock.

> Crypto represents nothing and is backed by nothing other than sunk-cost.

Maybe sometimes. However, if a token is used to pay for blockchain services (such as shared-compute and -data services), the value of the token is at least in part based on the value of those services.

"The value of the stock is relative to the performance of the company"

This is one of the big lies.

> "The value of the stock is relative to the performance of the company"

That's true if companies are evaluated on their fundamentals.

If you start to deal with stocks as if they were meme coins, with no concern of cash flows or business models or profitability, and you add a decade of quantitative easing, then you get stocks like Tesla, and a stock market that's driven by the need to park free cash no matter how risky and absurd the investment is.

Stocks (aka securities) and other products also suffer from Ponzi schemes though. Hence the bureaucracy of the SEC and other governments tasked with regulating and policing the industry.

The SEC could be called many things, but “massive” isn’t one of them. They have fewer than 5,000 employees, which makes them microscopic on the federal government’s scale and virtually nonexistent proportional to the size of market they’re tasked with regulating.

Thanks for that. I had thought they were bigger based on their impact but compared to the FDA (14k) and USDA (100k) they are much smaller by head count. I’ve edited that adjective out of the original post.

I’m disheartened by how small the FTC and SEC actually are upon review.

Then stop acting like it’s a currency and/or infrastructure. If it just spirals indefinitely in value then it can’t be used as either. Pretty straightforward.

It's value is exactly determined by supply-and-demand. It's just as much a "foreign currency" as let's say Vatican Angelbucks. (We know that only a fixed amount of angelbucks will ever exist. So it's deflatory, and it has no earthly uses. But you can send it to your pals via PrayWire, so you can buy coffee with, and so on.)

And if you look at the price graphs it's not always going up. It's a synthetic currency with no real backing economy (and the transaction costs are insane). Pretty straightforward.

Sorry, let me clarify. Stop acting like it’s a viable currency/infrastructure. I get that you can arbitrarily label anything as these.

Right, because I should wait days for banking wire transfers to get rescued out of the slush pile underneath a fax machine somewhere if I want to pay someone with a different bank.

Literal tens of billions of dollars are using these systems to great success. The numbers are refuting your arguments, and will continue to.

When we are all carrying counterfactual wallets, able to hold any number of cryptocurrency, or NFT ownership tokens (of the deed or lease to your house, social club entry etc), with social recovery from your closest family/friends when you smash your iPhone, then what will your argument against technology be, I wonder?

There was plenty of money working successfully in Enron, Madoff Investment Securities, and Evergrande, too.

The traditional systems that are apparently inscrutable to you move, in SWIFT’s case, $5 trillion (with a T) per day. These generally settle in a few minutes.

P.S. Transparently resorting to straw men like “if you doubt crypto then you just don’t like technology” is the sort of stuff that prevents people from taking this movement seriously.

> The traditional systems that are apparently inscrutable to you move, in SWIFT’s case, $5 trillion (with a T) per day. These generally settle in a few minutes.

Not open to you.

Gold has spiraled indefinitely in value and has been used as currency and/or infrastructure for thousands of years.

https://www.thebalance.com/gold-price-history-3305646

Early adopters in stocks are mostly the risk takers who funded or worked on the business to succeed.

That's not the same as forking something to do a pump and dump scheme.

Except DWAC perhaps, but that's already under investigation by the SEC. Which has no alternative in crypto land.

Although some stocks have pyramidal like behaviors, these are generally considered fraudulent and collapse in the long run.

Legitimate stocks are expected to be backed by the efficient creation of valuable products or services the company can sell at a profit. These profits are distributed to stock holders as dividends or reinvested in growing the profit potential. The value of a stock crucially stems from the rights to the future profits they give their holders. Legitimate stocks are not just about giving the money of late buyers of stocks to early buyers of stock.

The price of the stock reflects the underlying value though, out of a increasing pool of resources. Companies transmute inputs into outputs of greater future value. Every stock is not a GameStop competing to extract a bigger share of a limited pool of tullip investors.

The price of a stock reflects beliefs about the prospect for price growth [0]. Since these beliefs may be nth-order derivatives (i.e. I believe that other people believe that other people believe that ....), those beliefs have varying levels of connection to "underlying value".

[0] or, alternatively, dividend payouts, but that's a totally different story.

Stocks of boring but profitable companies that pay dividends.

I'm currently contributing at Alchemist (https://alchemist.wtf) which has an inflationary token: 1% of current total supply is minted every 14 days. Half of this inflation is redistributed to crucible holders (wallets) that participate in the ecosystem reward program and the other half is used to pay developers to work on several projects brought to life from within the community that the project gathered.

In my opinion the current challenge of the project as a whole is being able to monetize our products and return value to token/crucible holders but it has been less than a year of the project inception and we've done a lot of cool stuff.

It's digital gold. Is gold a Ponzi scheme? No.

It's the same as putting money into NASDAQ100 or SP500 and waiting for it to go up only. Is that a Ponzi scheme? No.

It's a volatile synthetic hedge against assets with real fundamentals.

Are speculative gold markets good though?

Not really. But the markets are not bad either. The bad things are all in the context. For these chains it's the insane energy inefficiency. (Storing the same thing over and over by itself makes little sense.)

And the whole "cryptobro culture" (which is the r/wallstreetbet culture, which is a nice essence of how fundamentally small markets are more about the humans who gamble/participate than about the economic properties of the products/stocks/currencies) is not simply bad/good either.

Modern monetary systems are not zero-sum. The central banks (and to a lesser degree the legislatures) can very effectively interact with the financial markets to achieve almost any desired outcome. Furthermore legislatures can and do tax whoever they want thanks to people with money having bank accounts.

The fact that now a lot of money is/was dumped into various blockchains doesn't mean much. It's just sitting here instead of sitting in a money market fund and doing nothing. Or instead of sitting in the central bank as required reserve.

there are a ton of cryptocurrencies where the supply grows every year. dogecoin, tezos, ethereum (this may have changed recently), etc

New Ether gets issued every year