While not intended to be an investment, BitCoin certainly can be treated as one. In particular, it is a speculative investment. This means if Bitcoin becomes more useful, it's value may increase. If it turns out that the usefulness is overestimated by the investors, then the value may go down. Speculative investments are not Ponzi schemes, though. A speculative investment IS very risky and you could lose a great portion of your investment (even all of it). This does not make it a scam, though.
I'm inclined to think that bitcoin is a ponzi scheme for a number of reasons:
1.
Quality of a currency - It fails this for me in terms of lacking the tangibility of gold. Now people will say that gold or fiat is not 'tangible', but the guns that enforce currencies are, and the fact that millions of ignorant people want to adorn themselves with gold, makes it a value for at least the next 100 years. I guess you could argue its not an investment, but would you make that case? You're expecting/hoping the price to go up aren't you? Capital gain anyone? That makes it at least the illusion of an investment, if not an actual one. This makes it ripe for a 'dump & dump'. Now, I look at efforts by some people to avoid the liquidity problem like the bros in NY who are setting up a listed fund. Such efforts strike me as great ways to increase one's liquidity at other's expense. These are Harvard guys.
2.
Bitcoin's usefulness - I've just been to a bitcoin conference in NZ. Unquestionably cryptocurrencies are 'useful'. The technology is amazing. This however does not mean 'coins' are valuable; only that the technology is useful. People will say the technology is the coin, but actually, one of its appeals is that it is scalable, open source, but that just means to be that it will be duplicated.
3.
Bitcoin's evolution - Some critics to me at the conference told me that bitcoin can develop insofar as the protocol can be changed. I'd like to know more about this. How a consensus can be reached to change it, because it strikes me as a rubbery problem. My understanding talking to everyone was that 'all parties' (miners, developers, users, et al) have to be satisfied to make changes. I was also told that architecture-wise, some changes are very hard to make. I was told this by developers.
4.
Inflation from mining - Bitcoin is limited to 21 million BTC. The implication is that there is 42% of inflation to arise over the next 10 years. That is plenty of timer for a new coin to develop without inflation. Why? No mining. Mining is a cost. I'm told that mining adds a cost of 10% to each coin, but that seems too high. Maybe they mean something else. Ultimately the cost is 42% over 10 years.
5.
Redemption - There is a problem getting bitcoins into something I really need - cash. I've heard that its hard to get the currency you want; which strikes me as a liquidity issue. It seems likely that banks will create their own coins, and that these will get far greater credibility. They have 10 years before the inflation of mining expires with bitcoin.
I'm inclined to have more trust in a scheme like Bitreserve, though again I don't hold that because the price of gold is falling and because rather than buy ounces of gold, I can get shares in a stock with millions of ounces of gold valued at nothing, trading at less than their cash holding. Now, the gold price is $1200/oz, the mining cost if $800/oz, so I'm looking at upside of 300/25=1200% in a few years. Scope for better of worse of course. They have a 2nd great project, they might get nationalised, they might strike very high grade intersections. Like bitcoin, you need a technical understanding to have confidence.
The reason I think its a ponzi scheme is that I think developers, having invested in the development of their coin, they want a pay-out. I think anarcho-capitalists, as many are, ethically believe 'market rules', so if you can make money on this 'unregulated market', then why not. Ethically, I think it eases their conscience not to consider the negatives. Its only after I got to the after-party of the bitcoin conference did people seem to agree with me. Everyone at the conference was saying 'you're not a programmer'. True, but I'm more of a generalist than them. They conveyed little understanding of markets and psychology.
Feedback please.
GAWWWDDDD Im so tired of people like you.
Hey, I learned about bitcoin today at 8 am.. .it's 6 pm and I think i found a flaw!! feedback please??
