Dear "Stolfi",
I have come across the page:
http://www.ic.unicamp.br/~stolfi/bitcoin/2014-02-17-HowToMakeSomeEasyMoney.htmlIt appears you formed the impression around February 2014 that bitcoin is a pyramid scheme. Since that date, however, you have thoroughly educated yourself on the technology, tacitly admitting that it constitutes an advance in CS and in economics. In any case, you no longer think being a pyramid is one of bitcoin's top six drawbacks.
The bitcoin prootocol was a promising solution to an old distributed computing problem, yes; and the blockchain started by Satoshi on 2009-01-03 was a technical experiment to test it, yes. But the experiment revealed some serious problems, which were not clearly seen at the time, and still have no solution in sight.
Economically, as a "deflationary decentralized pseudonymous irreversible currency", bitcoin still makes no sense to me.
As an investment, I believe that it is fairly well illustrated by that money-making circle on my website. The bitcoin system does not create any real wealth (food, homes, cars, boat rides, haircuts...) Unlike the dividends and valuation of typical company stocks, any proft that one can make from bitcoin, wether by short-term trading or long-term "hodling", will be someone else's loss.
If bitcoin crashes, or never rises above the current levels, the losers will be obvious -- namely, all those who bought high and had to sell low, or will die holding the bag. When an investor uses his sweat-earned 260 $ to increase his holdings by 1 BTC today, he is either giving that money to a Chinese miner, or is paying for a bottle of fine French wine on Risto's table, or a new pair of designer ties for the Winklevoss twins.
But even if bitcoin "goes to the moon", the mansions and lamborghinis that the bitcoin holders will acquire, when they finally start spending their bitcoins, will not have been created by bitcoin. By spending those tokens, the bitcoin holders will take real wealth from society, without giving any other real wealth in return. In that case, the losers will be harder to pin down, because (as in my money-spinning circle) the loss will be diffuse and moving from hand to hand. Still, the total loss of the "others" will be equal to the gain of the holders.
So, in either case, the economic effect of bitcoin will be the same as that of any pyramid or ponzi scheme: it will only transfer real wealth from the late adopters to the early adopters, without creating any real wealth by itself.
Ponzi schemes are usually planned and managed by one person, which is not the case of bitcoin; but that not an essential difference. As some Indian economist aptly put it, "bitcoin is not a
deliberate ponzi".
I believe that Satoshi did not intend bitcoin to be a pyramid scheme, and that it only became one a couple of years later, when other people started viewing (and pushing) it as a serious investment, rather than a computer experiment. To the extent that people like Risto, Sielbert and the Winkles are still selling it as a way to get filthy rich without working, even with due risk warnings, it is still a pyramid scheme.
Would you consider removing HowToMakeSomeEasyMoney.html?
Of course not.
EDIT: Actually, whether bitcoin flops or goes to the moon, the losses of the losers will be much greater than the profits of the winners, because a huge amount of real wealth will be consumed by mining. Thus, in that aspect, bitcoin is not just a ponzi, but an egregiously stupid kind of ponzi.
This is ridiculous.
Around half my income comes in the form of bitcoin payments for copywriting and communications work with clients around the world. Payments are typically $50-300 each. Without bitcoin, it would be utterly uneconomical to transfer those amounts through the traditional banking system. There's clear value there to me: the ability to access global work, without which this month I'd have trouble paying my mortgage and feeding my kids.
And yes, to pre-empt your next point, I do pay my mortgage in fiat. But I also keep some in bitcoin, because it's the best way of paying for goods and services globally, like the gigs on Fiverr I've been using to create material for communications campaigns using professionals around the world, and because the punitive bank rates make it smart to keep the money in the system rather than going via fiat. Some of those people, I imagine, will do the same, and some of them are only able to access the work I give them because I pay in bitcoin, rather than be extorted by a fiat transfer. Ever tried sending $5 across continents by fiat? A clue: Fiverr wouldn't be called Fiverr any more. And so the bitcoins go round, providing a useful and valuable service as a fast, cheap means of international currency transfer.
, etc. Really. But while you're pontificating about why it
work, you seem not to realise there are people like me who are able to pay the bills and create real value for other people because it
work.