There are three things that someone can say about Bitcoin that gives you license to no longer listen to them when they are talking about Bitcoin. Without further adieu they are:
Bitcoin is a Ponzi scheme: This can be translated into "I don't know anything about Bitcoin, and/or I have no idea what a Ponzi scheme is." Peter Schiff was using this one (actually he used all three) and the interviewer had to stop and ask Peter if he knew what a Ponzi scheme even was. A short description is that someone sets up an opaque investment claiming that they deliver a guaranteed return. When people who were suckered in at the beginning attempt to divest themselves, the Ponzi operator pays them out with money that later suckers are contributing. Paying out to early investors amplifies the trust in the scheme operator and more suckers join in. The keys to refuting Bitcoin as a Ponzi scheme are that it does not meet any of the strict criteria of a Ponzi scheme. Ponzi operations are opaque where Bitcoin is about as transparent as value trading has ever been. Ponzi operations are centrally organized where Bitcoin is distributed. Ponzi schemes to not have second and third runs. When they collapse and unwind the fund is gone. Bitcoin price has gone through several "busts" and then it rebounds.
Bitcoin is a Pyramid scheme: This can be translated as "I have no idea what a pyramid scheme is. Dear God, what is Bitcoin." Again, a simple description of a pyramid scheme should be all that is needed to show why Bitcoin is not one. A pyramid scheme involves a single party recruiting friends and family to get involved and to recruit their friends and family and then sending a percentage of the involvement up the chain to the top. The idea is that the real work is recruiting and the scheme will last until there isn't another sucker to be found by the lowest tier. Bitcoin, however, is a free market. While the people first involved can and will benefit more than those late to the game, it is no different than an early investor in a company. It would seem that Bitcoin evangelists are just trying to find the next sucker to bolster the value of their stash. A true Bitcoin evangelist does not encourage speculation for speculations sake. They will talk about the value of Bitcoin as a tool in hopes that you will also see value in using it.
Bitcoin is the next Tulip Mania: This comparison is simultaneously the most absurd and the most relevant. It is absurd because most people are not talking about the actual happenings of the tulip price bubble, but what they in their modern 21st century ivory tower of knowledge consider to be a good example of people acting stupidly. Where it turns relevant is when you look at the actual story. Pulling tulips out of their 17th century context means not understanding how rare and prized they were and how difficult it was to get viable progeny. It was one of the first examples of the use of a speculative futures market and people who were not interested in acquiring tulips were purchasing tulips. This is relevant with Bitcoin because people are acquiring with no intention to use it. It seems beyond a reasonable doubt that speculation has a great deal to do with the current price of bitcoin. That is really where the comparison should end though. It is difficult to assess how it parallels tulips because 1) there is no futures market for bitcoin, you can really only directly acquire it and 2) even if there was a futures market, transferring and acquiring bitcoin is far easier than tulips so the futures market magnifier would be much smaller or that magnifier is already built in. There is also an issue of comparing the desirability of a tulip with the utility of a bitcoin especially when said utility would dampen the need for a futures market. While tulips may have been nice to have and would have been seen as a show of personal success, bitcoin should last a lot longer if it can prove to be a better way to get things done. There is always value in utility.
No comments:
Post a Comment