How can PirateAt40 not be a Ponzi Scheme or otherwise damaging Bitcoin ?

[Xian01]

I've been giving some thought to how he's able to continue the payouts he's making, and something doesn't add up.

It seems like a classic Ponzi, but with his recent activity of market moving, something more sinister and damaging seems afoot.

Something is rotten in the state of Denmark.

[CoinCidental]

I've been giving some thought to how he's able to continue the payouts he's making, and something doesn't add up.

It seems like a classic Ponzi, but with his recent activity of market moving, something more sinister and damaging seems afoot.

Something is rotten in the state of Denmark.

bitcoin is bigger than PirateAt40  or even SilkRoad

bitcoin will still  be around ,when they are  long gone

[knight22]

If they sell all their bitcoin, a lot of people including myself will buy them at lower rate so you can be sure it won't be over.

[LoupGaroux]

In addition to giving it some thought, you might want to give it some actual study. An awful lot of folks are depending on pirate, and a whole lot of market cap is tied up in his schema. There is a considerable body of work out there reviewing and discussing what he is doing, you would be well served to read up before starting a new thread with baseless fears.

[CoinCidental]

it only needs 1 filthy rich person to look at bitcoin and think "thats a great idea,i could use it for X,Y and Z  ,im buying this "  to make it a runaway success

although ,1 filthy rich person could also pay a criptograper to copy bitcoin and mine the first milion or two coins  himself and call them billgates-coin or whatever

then encourage investors to pick it up by offering discounts into his other product if they are purchased  with

the so -called coin

very interesting to see how it goes and where it all ends up .........

[Xian01]

In addition to giving it some thought, you might want to give it some actual study.  There is a considerable body of work out there reviewing and discussing what he is doing, you would be well served to read up before starting a new thread with baseless fears.

 Respectfully, not sure if this post is sarcasm or what, but if you could kindly point me in the direction of some Google search or Forum queries I should run, I'd be happy to read up further on any studies.

 I'm not sure which studies you would be referring to.

An awful lot of folks are depending on pirate, and a whole lot of market cap is tied up in his schema.

Again, not sure if this is sarcasm or not. I'm merely trying to understand how his "schema" works.

[mp420]

It is definitely a ponzi.

By the way, financial experts were sure Madoff's scheme must be ponzi already in the late 90s. SEC's incompetence about the basics of finance lead them to ignore the warnings.

Madoff only paid a few percentage points above market average, annually, so it took some expertise and ability to grok numbers to be sure. The kind of returns he was paying out could have come from front-running but the scale of the scheme was too large for that to have worked.

Pirate's scheme is a lot more obvious scam. I can believe those kinds of returns from a legit business but no one in their right mind who's running something that profitable will want to borrow money at such insane rates. Even if it's drug money laundering or something, it's utterly unbelievable he couldn't borrow money at credit card rates or even lower, at least at this point. If I was running something like that I'd have paid off all the astronomical-interest initial debt by now and would have set up a front that could get loans from banks at market rates.

[CoinCidental]

It is definitely a ponzi.

By the way, financial experts were sure Madoff's scheme must be ponzi already in the late 90s. SEC's incompetence about the basics of finance lead them to ignore the warnings.

Madoff only paid a few percentage points above market average, annually, so it took some expertise and ability to grok numbers to be sure. The kind of returns he was paying out could have come from front-running but the scale of the scheme was too large for that to have worked.

Pirate's scheme is a lot more obvious scam. I can believe those kinds of returns from a legit business but no one in their right mind who's running something that profitable will want to borrow money at such insane rates. Even if it's drug money laundering or something, it's utterly unbelievable he couldn't borrow money at credit card rates or even lower, at least at this point. If I was running something like that I'd have paid out all the astronomical-interest initial debt by now and would have set up a front that could get loans from banks at market rates.

a pyramid /ponzi can run for years, it has happened before so pirate may be able to continue
raking it in and win all those bets against him .........before it collapses because mathmatically
it has to collapse

there is no way the bitcoin market is large enough to clear 10%+ a week  or paying out nearly  half a million
dollars a week on interest alone

[Draino]

If I was running something like that I'd have paid off all the astronomical-interest initial debt by now and would have set up a front that could get loans from banks at market rates.

i keep seeing people say this, but if he had to buy the estimated 200k+ BTC instead of borrow it, wouldn't that affect the exchange rate quite a bit and potentially make whatever it is he's (theoretically) doing with them not work?

[mp420]

If I was running something like that I'd have paid off all the astronomical-interest initial debt by now and would have set up a front that could get loans from banks at market rates.

i keep seeing people say this, but if he had to buy the estimated 200k+ BTC instead of borrow it, wouldn't that affect the exchange rate quite a bit and potentially make whatever it is he's (theoretically) doing with them not work?

I could do that without affecting the market price all that much. Just buy 10k BTC a day on MTGox, or even better, buy $50k worth of BTC a day regardless of the price. Every time it looks like that's going to trigger a rally, wait a few days.

[Xian01]

Another thread about the same old theory?!?  Why not just add your two cents to the dozens of other threads claiming the same thing?

 Apologies for the topic-necro then. Didn't mean to rustle anyone's jimmies.

 I was hoping for some responses like "No, it's not a ponzi, or damaging otherwise for this, this and this reason..." or "His market moving and pricing manipulation is nothing to worry about."

 I'm not trying to claim anything; merely try to gain an understanding of how he works and which mechanisms he is employing to maintain his payouts.

 Sorry, I'm a bit new to these forums (mainly reading the mining sections), it's only recently I've taken an interest in the long-term economic aspects of BTC, and became curious after watching pirate in action on IRC and reading the ensuing chaos (... and it was my first time visiting the IRC chat. What a show !)

 In retrospect, I should have fully digested the Economics subforum before making this query, but I don't have the time at the moment. Again, apologies for the topic-necro.
 

[DeathAndTaxes]

Your asking two unrelated things.

Is it a Ponzi?  You aren't going to solve this here.  Hell some of Madoff victims didn't believe it was a ponzi AFTER he was arrested.

Is it damaging to Bitcoin?  Is a USD based ponzi/scam/fraud/theft damaging to the dollar?

Bitcoin is a medium of exchange.  Period.   It isn't the morality police.  It isn't the "that interest rate is too high so ban it" agency.   It isn't the commission to prevent idiots from losing their money.  It is a medium of exchange.  People are choosing to exchange their Bitcoins for the potential to get more in the future. 

Bitcoin is working.  If it is a legit business Bitcoin is working.  If it is a scam Bitcoin is still working.

[DarkEmi]

It seems kinda obvious that no one will see pirate this week end and that he will just vanish

The whole thing is a bait in my opinion, a "grand final" in some sort

Edit : if he show himself he will probably avoid pictures and anything that can trace back people to him

[LoupGaroux]

My post was intended to be educational rather than sarcastic, I welcome new members here with genuine questions. I cannot offer you a Google education on what he is doing, because nobody knows for certain how he is doing it. Rumors on this board abound... he is the clearinghouse for Silk Road funds, he is laundering money for the Russian mafiya, he is selling controlled substances paid for with bitcoin proceeds, he is the Grand Master of All Arbitrageurs and controls massive bot trading on all exchanges... take your pick. All are equally speculative, and each caries its own merits, and laughable guesses.

I think the far better stance to take on this is: are you comfortable investing in the unknown? Or taking a piece of brokered unknown through any of the Pass-Through programs? Is not understanding the foundation of where the returns come from a safe enough place for your investments? Realize that he could be sitting on literally millions of bitcoins from the early days that cost him next to nothing. He controls (or influences) enough of the float in total bitcoins that he can pretty much set the values at whatever level he wants merely by the suggestions of a market move. And he is bringing the early adopter return rates down to a much more sustainable level. This make the scheme, whatever it is, much more manageable for a much longer period.

Is it a ponzi? Don't know.

Is it damaging bitcoin? Nope, quite the contrary, it is fueling most of the ancillary markets that have developed, and created the breeding ground for literally dozens of ventures that are now working in this alternate economy, and has fostered the development of a sub-rosa distributed power broker cadre that has stabilized the value swings of bitcoin, without resorting to massive centralized banking control.

Is it a gut check and ethically acceptable to many to invest in such an unknown creature? Absolutely. But the vast majority of them happily accept the proceeds every single week.

[Xian01]

My post was intended to be educational rather than sarcastic, I welcome new members here with genuine questions. I cannot offer you a Google education on what he is doing, because nobody knows for certain how he is doing it. Rumors on this board abound... he is the clearinghouse for Silk Road funds, he is laundering money for the Russian mafiya, he is selling controlled substances paid for with bitcoin proceeds, he is the Grand Master of All Arbitrageurs and controls massive bot trading on all exchanges... take your pick. All are equally speculative, and each caries its own merits, and laughable guesses.

 Thank you for this summary. I had seen mentions of some of those theories on IRC and on BTC-E chat, but nothing as collected as your list.

 I do not plan on investing in any funds - I'm a miner and that's my investment there.

 I should have rephrased my initial question a bit; I'm not really concerned about Pirates activity damaging Bitcoin per-se, more like tarnishing it's image if his scheme collapses, in the same way I guess the Bitcoinica and prior MTGox hacks had "tarnished" the image... as if outsiders would say "Oh look at nascent Bitcoin and it's growing-pains with this latest bout of scamming thievery..."

[FreeMoney]

It seems kinda obvious that no one will see pirate this week end and that he will just vanish

The whole thing is a bait in my opinion, a "grand final" in some sort

Edit : if he show himself he will probably avoid pictures and anything that can trace back people to him

Really? It is obvious?

Like 10 to 1 obvious? Want to put up some coin vs me on that? We'll pick a few trustworth people who plan to go and if one of them sees him I win.

Edit: I'm not nearly as sure, but I'd take action on a picture too.

[barbarousrelic]

It seems clear to me that the crashing of a large Bitcoin fractional reserve bank or a Bitcoin Ponzi scheme would cause the value of a Bitcoin to increase, not decrease. When Bitcoin-denominated assets are found not to be redeemable for Bitcoins, the perceived supply of Bitcoins will shrink and the price will go up. What are everyone else's thoughts?

[molecular]

It seems clear to me that the crashing of a large Bitcoin fractional reserve bank or a Bitcoin Ponzi scheme would cause the value of a Bitcoin to increase, not decrease. When Bitcoin-denominated assets are found not to be redeemable for Bitcoins, the perceived supply of Bitcoins will shrink and the price will go up. What are everyone else's thoughts?

oh my god, the money supply will decrease! DEFLATION!! *runs around scared, waving arms*. noooooo! We need to increase mining reward to BTC 60 to make up for it!

[LoupGaroux]

Actually there has been a downward trend after each "crisis" in bitcoinland. When the Polish exchange went belly up, values dropped, then recovered. Mr. Bitcoin? drop and then back up in 60 days. Mt. Gox 1 & 2? same drop, faster recovery, flowed right into the +$30 halcyon days.TradeHill, Bitcoinica, Bruce Wagner, Puttaya, Zhou-tonging, Intersango, Bitcoinica 2, 3 & 4 (which is also Mt. Gox 3), and the early 2012 Crash all recovered within 90 days after an initial drop.

I believe it has little to do with the supply, and everything to do with the perception. Publicity begets newbies, newbies react badly to risk profiles, flight through fear creates downward trend, smart money snatches up cheap coins, value increases, new publicity begets new newbies and the cycle continues.

[Xian01]

Actually... <SNIP>

</thread>

 Thank you again.