Jeez louise. I guess I give up on my stop misusing the term Ponzi scheme rant. Doge is all sorts of terrible things but it does not meet the traditional technical definition of a ponzi scheme when all of the gains to investors are generated via sale of assets on the open market and they have been totally honest about the nature of the asset from day one (it's a joke, it's a toy, don't take it seriously), and there is no structure of payouts that ensures that money from specific investors gets funneled to other specific investors based on seniority. It literally meets none of the criteria except for the sole fact that people that bought early made money(which is true of literally any asset that has gained in value over a time period).
But I guess Ponzi has been officially redefined to "speculative asset that is in a bubble" at this point if that's what the regulators are going with.
Except what do you call the thing Bernie Madoff did now? Because that had nothing to do with "speculative asset in a bubble".
> The missing part is just the central administrator.
No, the missing part is the actual fraud.
Bernie Madoff for example literally lied about assets under management. Dogecoin is just a digitally scarce ledger, with all there is to know about it publicly and clearly available.
It's not fraudulent, just silly--it was built as a joke after all.
It's a decentralized Ponzi scheme. That's the real magic of the blockchain: diffusion of responsibility. Nobody's guilty if everyone is.
The overwhelming majority of the liquidity and price action is driven by Tether which of course is backed by thin air. This fake money is used to pump up the price to drive in real money which can then be used to pay off the earlier investors. Taken in isolation no part of the system individually forms a classical Ponzi scheme. However, put the pieces together and it start to look awfully suspicious.
> The stock market is pumped up by dollar printing, but nobody calls the S&P a Ponzi scheme, because again, nobody lied.
That's not really how the financial system works. Money enters circulation when someone takes out a loan. It leaves circulation when that loan is repaid. It is low interest rates that cause an increase in asset values.
> Would you please elaborate on the connection between Doge and Tether?
Tether is 65% of the liquidity in the entire crypto space. Check out the chart for Bitcoin, I think it's even higher for alts but the DOGE coinlib chart isn't right today. [1]
> I can get Doge without ever using Tether. Not that I have any Doge.
That's my point, USDT is printed - unbacked - pushing the price of Doge up, which drives retail enthusiasm, and retailers then purchase Doge with real dollars.
There's other schemes too, I mean, at one point in 2017 99% of all of the world's Litecoin trading volume was two bots at Coinbase trading back and forth between eachother. [2]
> That's not really how the financial system works. Money enters circulation when someone takes out a loan. It leaves circulation when that loan is repaid. It is low interest rates that cause an increase in asset values.
But unlike me and my credit lines, the US Gov has no credit limit. It's akin to printing, since it takes out new loans to service its current debts and operational expenses.
The FED is mandated to purchase US bonds.
I do think you make a good point about Tether artificially inflating the price, but I do see that as Tether's issue. Not that it won't tank crypto prices, just that it's not Doge that's fraudulent.
> But unlike me and my credit lines, the US Gov has no credit limit. It's akin to printing, since it takes out new loans to service its current debts and operational expenses.
I think that's partially true. For the most part debt isn't held at the Fed, and in steady state the Fed unwinds their balance sheet over time. They hold $4.5T - a lot by any measure - but not out of the $28T total outstanding. The majority of that is held domestically by US entities. The next major holder is Japan.
The Fed isn't mandated to purchase bonds, per se, they have the ability to should circumstances necessitate. Their mandate is to maximize employment in the United States and to maintain a low, predictable rate of inflation. They have this tool in their chest to achieve these goals.
The US government has "no credit limit" in the same way your Amex charge card has "no credit limit." It's limited in how much it can borrow by its ability to service debt and also its ability to find new holders of its debt. That's not limited per se, but it's certainly not unlimited either.
After all a loss in confidence would lead to buyers demanding higher interest rates which could be catastrophic.
If it’s decentralised, it’s not a Ponzi scheme, by definition.
Where are the guaranteed returns? Where’s the person taking money from one, giving it to the “last” investors?
Where’s the fraud?
He neither owns DOGE nor does he have his own exchange. He and everyone else is abusing DOGE as a pump and dump, which it even wasn’t designed for, as it was just a joke.
It attracts pump and dumb schemes, but it’s not a Ponzi scheme, those are very different things.
To the OP point, that's just not a ponzi scheme. If the early investors were getting some kind of dividend that was actually just new investor inflows repurposed, then sure. But something with an advertised market value, that is just people buying and selling the shares, is not a ponzi scheme by itself. It's just misuse of the word. Pump and dump, sure. Ponzi scheme, no.
>It's not fraudulent, just silly--it was built as a joke after all.
You know, I'm not sure its so crazy to disregard that part if you're a regulator. Wouldn't scams just use this as cover? "Oh it's a joke, but people are making real money off of it. wink wink. It's silly but it's going up and up!"
Are you sure there is no lying involved with Dogecoin? What has the average buyer been told before they invest? What are their beliefs going into the scheme?
I’m not saying they have been lied to, but it definitely wouldn’t surprise me if they have?
That is still fraudulent behavior. If said stockbroker has made millions by lying to investors into making bad deals, that stockbroker needs to go to jail.
Exactly, it’s disingenuous to pretend we don’t know what people are talking about when they call it a Ponzi scheme. If on end of the value-creation spectrum we have a local, family-owned shoe factory and at the other we have Ponzi’s scheme itself where would you place Dogecoin? It’s not at the extreme, but it’s definitely closer to the latter. The question is how close it needs to be for it to be illegal.
I'm not saying it's not bad. I'm not sure under which US law you'd be claiming it's illegal.
Should Beanie Babies have been illegal? Were Beanie Babies a ponzi scheme? If you answer yes to those questions, just understand that your evaluation of how the US legal system should work is not even in the same ballpark as where it currently stands, regardless of merit.
But those are all totally irrelevant to whether it meet's a specific set of criteria to be a Ponzi scheme. I'd be curious for you to lay out your specific definition of a ponzi scheme under which specifically both this and madoff are ponzi scheme but doesn't include every other asset that is in a bubble and doesn't involve your subjective assessment of if it is good or bad.
I guess, where would you place a publicly traded stock that doesn't pay dividends or do buybacks? Old investors are literally being paid by newer investors, but it doesn't indicate any fraud.
A growth stock is engaged in an ongoing value creation process. In your scenario, it is also subject to all of the public disclosure requirements consistent with being a publicly traded company.
Ok, but now you're moving the goalpost. Does "new investors paying old investors" make something a Ponzi scheme or not? The legal definition is much more specific.
> A growth stock is engaged in an ongoing value creation process.
It's popular on HN to complain that companies like Facebook or Amazon destroy value. Or do you mean, create value for shareholders? Facebook and Amazon have never paid a dividend. If you buy stock and hold it all the way to bankruptcy (all companies die, eventually), you will have received no value.
> public disclosure requirements
Dogecoin, stupid as it is, is far more transparent than the machinations of any corporation.
Companies have a book value, which is the value of their assets after their liabilities, to which their shareholders are ultimately entitled.
Many of the tech companies do share buybacks, which increases the ownership of the shareholders who hold the stock.
The value of a share is predicated on the belief that the company will start to pay dividends at some point. Apple, Cisco, Intel, Microsoft all pay dividends at this point.
If the executive team at Amazon or Facebook came out to say "we will never pay a dividend"; firstly, there would be a shareholder revolt and the board of directors would be removed and replaced; secondly, there would also probably be a massive shareholder lawsuit against the directors personally for violating their fiduciary obligations.
If you're talking about a company that produces no revenue and has no assets, and exists only as a tradeable stock, then I agree that it's close to doge.
I keep seeing this argument cropping up and it’s really not a useful comparison.
If you buy a share, you generally buy (a) a vote that you can use to kick out the board and replace them with someone who will pay a dividend, and (b) a share of the assets of the company if it’s dissolved.
Those are both tangible rights, the crypto ponzi scheme offers nothing of the sort.
Cryptocoin is a certificate [of uniquity], which are assets. Ponzi schemes are something totally different, sometimes done with currencies and sometimes with assets such as cryptocoins, but the coin itself can't be a ponzi scheme by definition.
No. The important distinction is that in a Ponzi scheme, the central administrator lies about the underlying product. Like all scams, it's based on maximizing information asymmetry between the seller and buyers. Cryptocurrencies are open-source and 100% verifiable, and thus no one is lying about them. Because of this, it's on the buyer if they don't understand what they are buying.
If you're an early investor in Facebook and sell, then a later investor is paying for your profits. That isn't a ponzi scheme. It's missing the fraud part where the money isn't really there. Investors may own doge coins that are in a speculative bubble, but they actually have the doge coins they bought. Bernie Maddof's clients didn't have the shares he said they did because he never bought the shares with their money.
Gold is a ponzi scheme according to your definition.
The only way to argue that it isn't but Doge is is based on your subjective opinion of "creating value" but if you take your subjective opinion out of it, they fit the exact same criteria you listed.
you're viewing it through a modern (and historically wrong) perspective. I would say our ancestors were incredibly SMART. Imagine yourself in the 15th century. Sorry. 15th century, BC. You want to transact with someone else, but you don't know whether or not to trust them. You need some sort of THING that you can minimally destructively validate is what it is to establish trust in an intersubjective fashion.
Well, hey, there is this material that is soft (so you can nondestructively rub off a bit of it) that has a unique color (due to some wierd relativistic quantum mechanics), so that you can have a series of standards that you can test against to evaluate the purity of the material and verify how much of it you have:
you can verify the quality of the THING, you don't need a mass spectrometer, you don't need analytical chemistry, you don't need a blockchain or GPU computations.
No, any kind of purely speculative investment meets that definition. That is exactly what the other poster is saying. It is a misunderstanding to say that such an asset is a Ponzi scheme.
> It's also a scheme in which early investors are paid by later investors, not by any form of value creation.
This is not correct, since a lot of people hodl. This is 100% buying something that might increase or decrease in value. If it decreases, is it then a "reverse ponzi scheme"?
Actually, we could create a real ponzi cryptocurrency, where older wallets get interest from newer wallets. Or that part of the value regularly gets transferred back to the previous transacted wallet. Now THAT would be a ponzi scheme!
It seems like a pyramid scheme, not a ponzi scheme. I thought one of the hallmarks of a ponzi scheme was faked financials and/or dividends being paid fraudulently.
No, in a typical investment, you don't really care about what the market thinks, if your time horizon is long enough. Investments generate cash or utility to the owners.
Dogecoin doesn't generate any value, it consumes it. It's fully dependent on market sentiment. It's a negative-sum game.
> No, in a typical investment, you don't really care about what the market thinks, if your time horizon is long enough. Investments generate cash or utility to the owners.
I don't think you can describe a "typical" investment in this way. Many investments lose value in the long run. Many investments value go to 0 in the long run. Your time horizon being long enough doesn't help here. In fact, it is actually what hurts you.
> If there was a stock that advertised it self as never going to pay dividends/buybacks, I'd totally call it a ponzi scheme.
I kind of understand what you mean, but I still feel like that situation would be different than cryptocurrencies. If you are buying stocks you have an ownership stake in the underlying asset. For example, you have the ability to affect change in the policy not to pay dividends/buybacks. So in a sense even in this case you still have something of value.
But with cryptocurrencies you can't affect others in this way. You are all entirely independent actors and the value of your currency is really what someone will pay. It's just a medium of exchange no more no less.
no buying amazon stock pre profit wasn’t a ponzi. because actual value was being created and there is even physical assets backing the value. and presumably some future cash flow to justify the current price.
I feel the EU did a much better job at solving cross border payments than crypto has. So I would say crypto is really only interesting for illegal stuff in places with working banks.
As long as I do transactions within the EU they are easy and cheap. Which is s good thing the EU forced the banks to do.
It's worth noting that the quote from Kashkari isn't even included, so without looking at some other source we don't know whether he even used the word Ponzi. Or for that matter, whether he illiterately said "a Ponzi" like this article does, or please-for-the-love-of-god included the word "scheme." This article is kind of crap in other ways too, and I have branded it a shitty (sic). On Twitter so-and-so said this and then so-and-so said this (not quoted), and a year ago he also said this!
Someone on Twitter started a poll on how to pronounce Doge and Kashkari replied, "The right pronunciation is pon-zi." It's probably just an ill-considered joke and not intended to be taken literally. Someone in his position should be less careless though.
Seems like a narrow understanding of a ponzi scheme based on a particular execution of the concept.
I think Doge could still be correctly branded a ponzi scheme, since the returns for an investor is essentially tied to the number of suckers that buy into it after them. An early investor can take a "structured payout" by selling off the asset once the hype-cycle is creating more and more suckers who buy into the idea.
The fact that it was a joke has been diluted from the mass media, mostly due to irresponsible messaging by idiots like Elon.
>>I think Doge could still be correctly branded a ponzi scheme, since the returns for an investor is essentially tied to the number of suckers that buy into it after them. An early investor can take a "structured payout" by selling off the asset once the hype-cycle is creating more and more suckers who buy into the idea.
The problem with this "definition" of a Ponzi scheme is that any transaction with a future payout directly or tangentially related to people buying into it qualifies. Homeownership is a Ponzi scheme. Employment is a Ponzi scheme. Software is a Ponzi scheme. Investing is a Ponzi scheme. Life itself is a Ponzi scheme. What GP is getting at is there should be a more specific definition that properly identifies the required element of fraud (as defined by the law) in a Ponzi scheme but doesn't demonize mass risk taking and losses that come with it. Very few people being l end up winners any endeavor. Loss alone doesn't make Dogecoin fraudulent anymore then it does the lottery.
"I think Doge could still be correctly branded a ponzi scheme"
No, the essential element of deception is absent. A Ponzi scheme involves deceiving investors. Doge isn't deceiving anyone. It's upsetting people, especially celebrity establishment types looking to make headlines, but that's not deception.
Naturally when the bubble pops the losers will claim they were deceived. They'll be fools and their claims will be specious but in a world where most 'problems' are self-inflicted they'll find an ample number of said celebrity establishment types to indulge that narrative and invent new regulators and criminalize more things...
Paying off early investors with new sources of investment is legal and the difference between that and a Ponzi scheme is that it occurs transparently; the later investors presumably know what they're investing in. Just as they do with Doge. That is until they lose and employ people to help them pretend otherwise.
>I think Doge could still be correctly branded a ponzi scheme, since the returns for an investor is essentially tied to the number of suckers that buy into it after them
Seems like most of the responses ignore the fact that there's actual value creation in every other market, that is completely lacking with doge. It's a joke with no real-world utility.
Did you know terms evolve in English and often come to mean similar though not exactly the same thing after some decades or centuries? Of course it doesn't exactly match the original scheme of Charles Ponzi (even Madoff didn't), but there are enough similarities for it to be an apt comparison
Probably worth highlighting that I could not find a single direct reference to Neel Kashkar (the person who apparently said that, actually saying that it's a Ponzi scheme.
He used "dumpster fire" in past, which is quite different.
He knows that it's not a Ponzi scheme, because there is no fraud. It's like the dollae, stocks, interest, money printing and some VC investments, etc. which aren't usually Ponzi scheme either because it's not illegal.
> Except what do you call an actual ponzi scheme now?
Yeah, that's the problem with bandying words around without care to their meaning.
This is happening with fascists/ Nazis more often lately in society. I feel that's a bad thing because there are still torch carrying Nazis out there, they're dangerous, and now we don't have a word for them that carries the same weight. It gets watered down when you use it to refer to anyone center or right of center politically.
Jordan Peterson is a Canadian, mostly liberal, left of center academic and the press frequently refers to him as fascist. That just doesn't work.
Speaking of bandying words, when Peterson refers to himself as a classical British liberal, he means free market and not progressive. The NYTimes rates him as conservative leaning.
Yeah, no. Peterson is conservative in literally any country in the world. Advocating for traditional gender roles, saying women might not be suited for the workplace, advocating for strict hierarchies and so on is deeply conservative. His belief in genetic predeterninism of societal structures and of thought patterns - masqueraded as Jungian archetypes - is indicative of a worldview just one logical step from the far right. I don't know if any country in the world where he would left of center religion notwithstanding.
I say this as someone who watched at least 150 hours of Peterson and who used to follow much of his views.
> Advocating for traditional gender roles, saying women might not be suited for the workplace, advocating for strict hierarchies and so on is deeply conservative.
Those are strawman arguments. That's not what he advocates at all. He definitely does argue there are fundamental differences between men and women and what the ramifications of those differences are - that's obvious to anyone, even children. We can argue about those ramifications, but not that there are differences. I don't see how you go from there to your argument, logically.
> His belief in genetic predeterninism of societal structures and of thought patterns - masqueraded as Jungian archetypes - is indicative of a worldview just one logical step from the far right.
Again strawnan, he definitely argues it's part of the picture, but not the whole picture. Anyone who takes just one side in the nature vs nuture debate is out to lunch. It's obviously both.
I don't think your characterizations are balanced or correct.
He believes the differences between men and women necessitates different social roles for men and women in the whole of society, and literally gave the example of women in the workplace.
He argued that the structure of DNA is encoded into the human brain. You can say nature vs nurture, but saying that the human brain is literally encoded with what is necessary for scientific discovery is going a step beyond.
Saying that you need an IQ over a certain number to do a job is also wayyyy over anything reasonable.
Nature vs nurture is a core determinant of conservatism. Being far in the scale of nature and hierarchy is only consistent with right-wing ideologies.
> He believes the differences between men and women necessitates different social roles for men and women in the whole of society, and literally gave the example of women in the workplace.
He definitely talks about the differences between men and women. Nowhere does he say women shouldn't be in the workplace. That's an extremely conservative, even radically conservative view. Source?
> He argued that the structure of DNA is encoded into the human brain. You can say nature vs nurture, but saying that the human brain is literally encoded with what is necessary for scientific discovery.
Source? I'm just not sure what to make of it without context. The way you present it, it sounds crazy. But I could also interpret in several non crazy ways.
> Saying that you need an IQ over a certain number to do a job is also wayyyy over anything reasonable.
It's an over generalization. But it's also largely true. You won't be successful as a software engineer, a quant, a mathematician, a physicist, etc with lower than average iq. People in those industries skew way above the average for good reason.
> Nature vs nurture is a core determinant of conservatism. Being far in the scale of nature and hierarchy is only consistent with right-wing ideologies.
That's seems true. It's also interesting because there is an empirical answer to how much is nature vs nurture. Unlike political views which are largely value tradeoffs as opposed to right or wrong - up to a point anyway.
Please don't misquote me. He said that he is not sure that women can coexist in the workplace. Yes, this is very conservative.
He did not limit himself to quants, SotfEng, Physicists, etc..., he cited minimum IQs for jobs in many sectors, for example saying that you can't be a machinist if you have under average IQs.
The figure he quoted for software engineers IIRC was around 118, meaning that 80% of people can't be productive software engineers, which is completely bullshit.
He went as far as to say that people under 80IQ are simply not productive in society, which is what insane.
But more to your point, IQ strongly correlates with academic performance. Actually, the SAT is basically an IQ test. They correspond to academic performance much more strongly than actual job performance in almost every field.
Knowing this, is the observation that fields which require high grades to get into have higher IQs as descriptive as it seems on the first take? Not really.
How about the fact that IQ is actually very variable on the individual level across time?
That's not to say that anyone can become one of those occupations. I don't think everyone can become a good programmer. But I know enough high-IQ people that could never grok how to program clean code to know as much. Perhaps the third factor is correlated to IQ in some way, I don't know. But it's really stupid to say someone of average intelligence can't become a good programmer or even a good physicist.
> Please don't misquote me. He said that he is not sure that women can coexist in the workplace. Yes, this is very conservative.
I quoted you exactly, but I misinterpreted what you're saying. I do recall him saying something to that effect. That basically there are dynamics between men and women that make it difficult for them to cohabit in the workplace. Keep in mind that expressing uncertainty is not the same as saying women shouldn't cohabit in the workplace, or that they can't cohabit in the workplace, or even that they can't perform more or less equally with men in the workplace. Personally I think he's making a bigger issue out of that than what it really is.
> The figure he quoted for software engineers IIRC was around 118, meaning that 80% of people can't be productive software engineers, which is completely bullshit.
You can be a software engineer with a lower IQ, but I might not hire you or want to work with you. There's not some magic number, and IQ is also just a flawed proxy for intelligence - which is just one of the real underlying prerequisites. In this job market you can definitely find work, but you likely won't be at Netflix or Google.
> He went as far as to say that people under 80IQ are simply not productive in society, which is what insane.
If that's what he said, obviously it's wrong. They're not likely to be as productive a member of society as people with an IQ of 100, generally speaking. That also seems pretty self-obvious. Without sources, I'm taking you at your word with all your recollections here, and they're out of context. It could just have been exaggerating for effect.
> But more to your point, IQ strongly correlates with academic performance. Actually, the SAT is basically an IQ test. They correspond to academic performance much more strongly than actual job performance in almost every field.
Yes, it's just a proxy for intelligence, and it's flawed.
> Knowing this, is the observation that fields which require high grades to get into have higher IQs as descriptive as it seems on the first take? Not really.
Makes sense.
> How about the fact that IQ is actually very variable on the individual level across time?
Like any test, you can improve your score with practice and preparation. But often that's also making you smarter - intelligence is not fixed at birth. There's some part genetic potential, some part epigenetic adaptions to your environment, and some part learning. You can definitely set the goal of becoming more intelligent. Even if I do that, I'll never match Einstein, no matter how hard I try. But I can rise closer to the limit of my genetic/environmental potential.
> But it's really stupid to say someone of average intelligence can't become a good programmer or even a good physicist.
I don't think it's stupid at all. I think it's quite unlikely an average person would be good in those fields. Let's say we define good as one standard deviation above the mean (if it were just the mean, then we would use the term average, not good.) And if someone does pull it off against the odds, they may well have done so by becoming more intelligent.
Went looking for the press labeling Jordan Peterson a fascist. I found this article, associating him with intellectual foundations of fascism but not outright calling him one. This is the article Peterson flipped out about on Twitter, saying he would "slap" the author.
There was Lindsay Shepherd who was reprimanded by her supervisor for playing a clip of Peterson in class: as akin to “neutrally playing a speech by Hitler”. That's not the press though.
Usually, the word they use is alt-right. You might have more luck with that on Google.
Please dude, Peterson is a conservative and is in no way left of center except that he claims that so he can argue with other right wingers as the “liberal” of the group.
That said, there are a lot of fascists in the mainstream right now. And the number of swastikas (of a non-religious nature) is the highest its been since about 1945...
> Dogecoin branded as Ponzi by the president of the Federal Reserve Bank of Minneaopolis.
Important to note that this is the president of the Federal Reserve Bank of Minneapolis (misspelled in the article), not the Chair of the Federal Reserve, who leads what we generally think of as the "fed."
While true this is rather important in the finance world. Firstly, that one of the 12 regional reserves would call it thus, is something. Secondly, Kashkari (sidebar: best name ever for a banker) is considered the most soundly minded amongst those bankers, and incredibly well respected - even in these circles. If Kashkari is branding it thus, it means there's something to watch here.
I think the point is that if you want to name the office in four words without being misleading, you should go with something like "Minneapolis Federal Reserve President", not just "Federal Reserve Bank President". I'm familiar with the FRB structure and I did not pick up on that "president" was used and not "chair".
It seems to me that: the title they used is accurate, and if you want them to clarify it in order to diminish the reader's perception of the amount of power someone in that position has over policy, the issue is not with the article, but with your underestimation of how much influence and power Federal Reserve Presidents have.
It's fair to point out because people not in finance colloquially think of "bank president" as leader, not as "not leader, and not even actual president of the whole bank."
As for the influence of a Federal Reserve Bank of Minneapolis president, it's complicated. They're appointed by the board of directors of the Minneapolis Fed, and the directors are elected by the member banks — it's not a top-down process. To give perspective on size, the Minneapolis Fed has around $40 billion in assets, compared to the Fed's total of $8 trillion.
There's way more that also matters, but the Minneapolis Fed's president is nowhere near Jerome Powell in influence.
I don’t need to be a federal reserve chairman to reason that Doge is a Ponzi scheme. The problem is that people want to participate in Ponzis, for the most part, it turns out.
Crypto currencies today are basically all decentralized Ponzi schemes inflated in value by the very centralized tether that is is printing something like $4Bn a week of new tether with no US dollar currency known to be backing it: https://youtu.be/-whuXHSL1Pg
I noticed that too, but I don't think it really matters.
Even if Jerome Powell came out every day just to say "Fuck Doge, it's a scam", the response from crypto enthusiasts would be "That's exactly what you would say"
While the conclusion that "Doge pumping is a scam" is very likely correct, the sentiment that an adversary can't give an unbiased opinion is also correct. I'd value the opinion of an expert with no skin in the game more.
Alternatively, Kashkari's comments could be given more weight if he were willing to short Doge over a long-ish (~2 year) timeframe. Then he would stand to lose money if Doge held its value for longer than that timeframe (which would indicate that it has more value than he's stating that it has).
It's all about the fact that there's a not insignificant number of people who won't regard his comments at all due to his position. In fact will assume that he's being intentionally harmful due to his position.
Also, how do we measure "skin in the game" with crypto.
Is holding Doge skin in the game? What about crypto in general? What about currency? If the most fantastic promises of crypto come to pass, it'll replace fiat currency. So the success of crypto kind of comes at the expense of fiat. So by holding fiat, we could consider that skin in the game on some level.
>So by holding fiat, we could consider that skin in the game on some level.
Also yes. However, the leader of the fed is, for all intents and purposes, king fiat. There is no person with more interest in maintaining the current system than someone in charge of the fed.
> There is no person with more interest in maintaining the current system than someone in charge of the fed.
Sure there is; Fed Chair is a job, not an investment, and its a job taken by people who are politically well connected and likely to get other jobs, should they want them, based on those connections.
There lots of people who have proportionately more to lose from problems in fiat than the fed chair.
It is overall very interesting. And accurate in my opinion. Current batch of cryptos are very much an MLM. And I am saying this is a quiet sympathizer of crypto ( you know - actual crypto currency intended to bypass old gatekeepers with all the benefits and threats coming with it ). As it stands right now, the ridiculous push for centralization and greater control is everything crypto was trying to undermine.
It is possible that is emblematic of how we approach systems as a species, because everything seems to tend towards one or two major players.
Right now only monero, and to a much lesser extent bitcoin, still resemble the original promise of crypto.
Ethereum and smart contracts blockchain in general have real potential and utility imo. The use cases are still niche, but it's not a ponzi/MLM, not even close.
The Compound Finance smart contract, and similar contracts, let you deposit digital assets, including digital dollars, and earn borrowing fees from others who want to take on leverage. Unlike in traditional finance, the barrier to entry is relatively low, so there's lots of competition and the fees end up being very low meaning users keep most of the profits. Compare this to traditional stock brokers - unless you're in the 1% with a very fancy brokerage account, usually the broker retains 100% of the profits of lending your shares out, with a really good deal being when they share 50% with you.
As soon as stocks get meaningfully tokenized on the blockchain, I believe p2p lending of stocks will explode just as p2p lending of cryptocurrency has. It just makes sense for people to keep all the money their shares are earning from stock lending rather than give half or more of it to a brokerage.
It would also let stocks settle instantly and non custodially, so there's no "Robinhood had to halt stock purchases because they ran out of money" moment.
That's not to get into the fact that a lot of this is traditionally inaccessible from a lot of countries, and smart contracts are global by default.
When I bought my house, I paid the title escrow company thousands of dollars to perform a very simple service. Hold the deposit money in escrow, and release it specific parties based on certain conditions.
There's no reason in the future why that service couldn't be performed by an off-the-shelf smart contract for essentially nothing. Home buyer sends deposit money to the contract. If buyer exercises a contingency before date M, release money back. If user doesn't, transfer funds to home seller. In case of dispute, defer decision to a pre-agreed upon adjudication agent and pay said agent to render a decision.
There are so many stories like this in the plumbing of the financial system. It's ironic, because high finance is built upon layers and layers of complex abstraction. The way someone a sophisticated hedge fund decides how to allocates assets, hedge exposures, levers positions, manage risk, and execute trades is like something straight out of science fiction.
But the way the money actually moves from point A to point B is stuck in the 19th century. It's hard to overstate how much of the value collected by the financial industry is actually just handling the nuts and bolts of physically moving money around in a trusted way. For every quant building a derivatives pricing model based on stochastic calculus, there's a dozen low-level clerks sending each other wire instructions by fax and filling out boilerplate KYC notifications.
The hard part of escrow is where it meets the real world. The ability to determine when an event has taken place in the real world, without being tricked, is hard for automated blockchain agents. ("Smart contract" is a misnomer because they are pretty dumb and generally are not legally binding contracts.)
I'm not a huge crypo fanboy, but I think there are a ton of "killer apps" that are kinda being sorted out. Basically think of something that has a middleman in a financial transaction and remove it.
Distributed Betting Markets (Transaction locked up depending on outcome of a sports game)
Distributed Derivatives (financial instruments locked up based on price/date)
Distributed Insurance (If I'm a farmer, I could put money up based on rainfall, price of wheat, or other metrics).
These aren't simpler, but they can be cheaper. Think insurance at a true market rate based on your specific details. No paying for advertising, or other cohorts with different risk profiles bundled.
Not saying that there aren't problems to be solved, or that it's worth it's current value, but there are some pretty cool stuff that you can do with it if they tech gets good enough. It's like an electric car, pretty terrible in a lot of situations previously, but if someone is able to come up with a good enough battery, the game changes.
> Distributed Betting Markets (Transaction locked up depending on outcome of a sports game) Distributed Derivatives (financial instruments locked up based on price/date) Distributed Insurance (If I'm a farmer, I could put money up based on rainfall, price of wheat, or other metrics).
Don't the executions of these contracts still depend on a (centralized) outside source of information which pretty much wrecks the decentralized aspect of the network?
Reading through this, I don't see any guarantee that your contract would be safe from bad oracles if the stakes are high enough and the attacker has adequate resources. If your attack is successful, you not only get steal the amount at stake in the contract, you steal what the good oracles have staked, and all with zero recourse.
Yes, there is not a guarantee, but the goal of these consensus mechanisms is to make the cost of attack greater than the reward.
In order for a successful attack, I believe you'd need to control a very large portion of all available REP. If your attack is successful, the value of your REP would likely go down (as the market is no longer trusted) so there's likely no economic incentive to do such an attack.
Can't speak to the others but insurance couldn't really work that way and compete on price with traditional insurers. The only way for the "policyholder" to be confident that an untrusted "insurer" will have the money to pay their claim is if the smart contract forces the "insurer" to fully collateralize it - e.g., to fund a trust or escrow account with the maximum amount of money that it could possibly be required to pay out in claims. For insurance to be attractive as a seller, you need to pool enough risks that you can generally hold a reserve that's much lower than the maximum possible loss amount because otherwise you need too much capital to fund it. You can get around this to some extent with reinsurance, but that's not eliminating risk pooling, it's just shifting it to a different balance sheet.
In theory crypto could cure cancer by funding a promising researcher via micro payments. But until that actually happens, crypto's use case is ransomware, buying drugs online, and being used as a way to "invest" in coins that have no cashflow.
The betting market, or crypto in general? I haven't used the betting market (augur) but certainly plan to. I enjoy PredictIt but the fees are crazy high.
One idea I've been playing with in my head for a bit is a blockchain/smart contract based approach to digital gaming/gambling.
I've devised a protocol for a blockchain-based RNG that can be used to tick the game state along, and a smart contract would transfer the pot to the winner. It would be quite liberating to play strategic games with random elements online without any trust in the platform required, even more so if you can get paid to do it!
Placing any significant amount of real money into a system when the platform can fudge the numbers around to make sure the house always wins is a non-starter IMO.
Data storage/transfer comes to mind.. consider the following:
1. you request a stored piece of data from me
2. i send an encrypted blob to you
3. you publish smart contract that accepts 1 argument(encryption key) against a sample of encrypted blob. successful execution transfers the balance to me
That's just a random example, but the smart contract portion ensures it's impossible for me to receive payment without you also receiving your data - and vice versa.
How would the smart contract confirm the decryption works... without having access to the key and data (and therefor making it all public?)
How does this protect against meaningless data being sent - all you've confirmed is that something can be decrypted... but says nothing about what is being decrypted.
What use case do you have for this. What situation is there where you need data from someone, but so little trust exists you can't pay them before or after the data is sent?
>How would the smart contract confirm the decryption works... without having access to the key and data (and therefor making it all public?)
The encryption is symmetric, and a sample of the encrypted blob is included with the smart contract, eg the first 2048 bytes. The 2048 bytes and hash of the decrypted original are included in the smart contract. The encryption key is the parameter supplied to the contract. This ensures that the key used to solve the contract is valid to decrypt the encrypted payload sent to the client. IE...if the contract can be solved, then the payer can use the same key sent to the smart contract to decrypt the blob you sent him.
> How does this protect against meaningless data being sent - all you've confirmed is that something can be decrypted... but says nothing about what is being decrypted.
See above. If the person who stored the data retained a checksum of the first 2048 bytes, they can compare the decrypted 2048 byte hash to the hash they have stored. Now they can be assured that key will decrypt the entire blob you sent them. You could mix it up, and use an arbitrary offset of a 2048 byte block size if paranoid.
> What use case do you have for this. What situation is there where you need data from someone, but so little trust exists you can't pay them before or after the data is sent?
To incentivize one or more peers to store encrypted data, with the expectation they would be paid for supplying it later. The peers would have no knowledge of the payload. A use-case could be that I have _very_ sensitive data, and I want to make sure it is available in the future, but do not trust anyone to store it in plaintext. I could encrypt the data, and ask peer(s) to store it for me. When I request the data back in the future, any peer that has a copy would be incentivized to under-bid other peers(if there are any) to set a price we agree upon to transmit the data back to me. The end result is my data is resilient, and the people storing it are doing it with some expectation of payment at a point in the future.
disclaimer: this is a contrived example....but do you remember the wikileaks "insurance file" in the past? If that insurance file was stored in the manner above, it would be even more likely to exist far in the future when the people storing it have the possibility of being paid for storing it. It also gives them plausible deniability of _what_ exactly they were storing if it is encrypted.
There is probably a more advanced version of ransomware they can enable. The other big use case envisioned when they were conceived was automated payouts on distributed assassination markets, where several news articles about an assassination could trigger a payout.
I’ve been on a deep dive into crypto and Ethereum in particular for a while now, and I’ve yet to find any actual utility for the technology other than currency. And even that one is as yet unproven.
The vast majority of smart contracts seem to rely on a trusted external source for their operation. Others seem not to benefit from the decentralized solution at all.
There is also a serious question of whether the excessive democratization will lead to tyranny of the majority. In the case of Ethereum, the majority has gone along with each of the hard forks proposed so far.
I find the technical aspects of crypto compelling, but I still remain highly skeptical of its applications.
Smart contracts don't have any utility beyond the utility already achieved by cryptocurrencies in general. The use cases are indeed "niche" and they will always remain that way due to the fundamental limitations of how a smart contract works.
I think the ETH network and the idea of smart contracts is extremely potent, but its primarily being utilized to furnish scams at the moment. The crypto bull market brings out all sorts of scam artists and actively stifles innovation.
Crypto would be a much healthier space if it wasn't tied so heavily to the Bitcoin halvening cycle. That causes asset prices to inflate every few years, and every big run up attracts awful people. Projects that come up in the bear market are always so much more interesting.
>“Maybe five years from now or 10 years from now or 20 years from now something useful will emerge from this, but so far, all that’s emerging is burning garbage,” Kashkari said.
I would love to hear Vitalik Buterins take on this. After listening to him for a while, I got very humble with respect to the ideas of crypto, the abstraction of value etc. - of course the world of crypto is dominated by pump and dumps at the moment, but I'm not convinced that that's all there is to see. I think that crypto will reshape the world of money, just not in the terms that money is being thought off right now. If that assumption holds, most people would be unable to see the forest for the trees.
> If that assumption holds, most people would be unable to see the forest for the trees, maybe even the president of the fed of minneapolis.
It reminds me of living through the early www.
We went from "who would ever buy books online?!", to DotCom euphoria, to market crash, to a long-term recovery, to a thriving internet economy. Some of the largest companies on the planet were created during the initial heyday period. Their trajectory was very non-linear, but they've had tremendous impact.
Time constants on innovation rarely translate across domains.
Look at adoption times for bank notes to central bank (i.e. federally-backed) fiat. Or adoption and discontinuation of the gold standard. TLDR: I would expect the time constant for money to be longer than the www.
The usefulness of the web was immediately apparent to a certain group of people, even if it was poo-pooed by the mainstream. The difference is that even crypto evangelists who are deeply immersed and invested in it will openly tell you that no, bitcoin is not a useful currency and we never expect it to be (and some will tell you it was never intended to be).
You're conflating bitcoin (specifically) with blockchain (generally). The general class of networked computers spawned a bunch of specific implementations: www, usenet, gopher, etc. Some survived, others didn't. The ones that survived are incredibly valuable.
One example: A ground-truth ledger with decentralized trust & transparency has a great many use cases. Each of these is a rabbit hole of antiquity... but a few good examples are digital voting (see recent US elections), realestate transactions (see land registry & title hell) and stock transactions (DTC is absurd; need only look to RegSHO).
This is just a bunch of bluster. The FED isn't the SEC. They don't have a law enforcement division or anything like that with guns and badges.
Some guy got in a car accident(Lewis v. United States)[1] with some Federal Reserve employee and tried to sue under the Federal Tort Claims Act, which allows the federal government to be sued for certain things, like car accidents, as they are normally subject to sovereign immunity. The judge said this didn't apply to the Federal Reserve because they aren't a federal agency. There is actually a long interesting argument in the case by the judge about why the Fed is not a federal agency. They can hire and fire employees at will, their workers are not in the civil service pension program, they get workers compensation, they receive no appropriated funds from congress, they can sue and be sued under their own name, etc.
The Fed absolutely has regulatory authority over a pretty big piece of the banking system much the same way the SEC has authority over the investment industry.[1] But more importantly, the Fed has leverage over most of the financial system: any institution that wants acccess to the discount window is going to have to do what the Fed says. And if they all have to comply, their clients will have to, too. OCC, FDIC, and the Fed also work closely with one another. Police force or not, if you want to be a bank you’re going to have to comply with their requirements.
I don't think Dogecoin is scared of losing access to the discount window!
They are more like a public utility that is private, but has some amount of government oversight. Controlling the ability to create money is pretty impressive and they can cut people off from that, so that is a lot of power. They can't arrest people or criminally charge people like the SEC can though.
No, but they’re scared of losing access to wire transfers. Or at least they should be. So if the Fed tells banks they can’t transact with or accept proceeds from the sale of Dogecoin they will cease transacting with and accepting proceeds that appear to be from the sale of Dogecoin. And then Doge will be well and truly fucked. You can’t get to the moon if you can’t get any money.
And for the record, the SEC can’t arrest or bring criminal charges, either. They’re civil enforcement only.
> They don't have a law enforcement division or anything like that with guns and badges.
What's interesting is that they're probably one of the only few federal entities without at least a small attached police force. Even NASA and the Department of Education have their own police.
Wow. I didn't know about that. Turns out they were not really a federal police force, and could only operate on Federal Reserve Property until September 11th, 2001.
Don't ponzi shemes need to pay out early investors (usually with the money from latter investors)? No-one is paying out Doge buyers, except those who choose to buy their coins from them.
Everything is a ponzi scheme, the only question is whether the speculative bubble is the majority of the value.
The "use value" of a house is living in it. The "market value" from the housing market speculation may be multiples of that.
There are two sectors in the economy... the productive one, which creates wealth for society (startups, new technology, reusing what works, cross pollination, economies of scale) and then there is the zero-sum one (exchanges, trading). Sure, it may enable more efficient capital allocation and help society somewhat, but over time, with financial derivatives, most of it is just a giant casino.
When you come into a casino, and walk away with more dollars than you came in with, someone necessarily walks away with less. The casino doesn't print dollars. Same here. The exchanges don't issue dollars (they aren't banks, after all ;-) ... so for someone to win X, someone has to lose X. Have fun losing to the institutions. The investing game is over in whatever assets already appreciated 50,000% .. move on to newer projects, and better yet, try to focus on that first sector of the economy, the one that actually helps society!
But in all seriousness, what are the odds that all the various pump-up schemes, from tesla to coins are another trick of the US to funnel the worlds money into their territory?
I guess we should stop calling them cryptocurrencies because they are not used as currencies as USD or Euro are. We should call them fungible tokens since we already have non fungible tokens thing. Fungible tokens such as Pokemon or Yu-Gi-Oh cards which we trade and exchange for fun and profit.
> The fact that none of the top 3 cryptocurrencies are inflationary tells you everything you need to know about the motivations of the early adopters.
The fact that they think their crypto is more important than democratic government sovereignty tells you the rest. It's the moral equivalent of "I got mine, screw you".
Why should the crypto whales be in charge? Who elected them? What good do they do for the rest of us?
Crypto doesn't pave the roads, feed the poor, or invest in university science R&D. Instead it wastes energy, causes GPU shortages, peddles away the brains of brilliant engineers on useless tech, and creates incentives for more ransomware.
These folks are hoarding digital Beanie Babies and touting it as the next coming Messiah. What they're really thinking is how rich they'll be if we all fall for the same trap.
Bitcoin sucks.
edit: to respond to a followup comment:
> The fact the parent post has already been modded down is what pisses me off about the crypto currency world
The thing that gets me is that two downvotes tripped HN's anti-flame/anti-spam filter, and now I can't comment anymore. Whatever. I'm not convincing anybody with strong convictions. My arguments are valid (and not unique to me), and I hope they spread to the broader public.
The fact the parent post has already been modded down is what pisses me off about the crypto currency world - people feel they are entitled to trash altcoins all they want, but say anything bad about bitcoin, and you'll meet the bitcoin bury brigade ("oh no, can't have anyone saying anything perceived as even remotely negative about bitcoin, no no no!") (Betcha if parent hadn't mentioned bitcoin the post wouldn't have been downvoted).
Frankly, the toxicity I've seen, especically from the bitcoin bros, would make the early days of the 'Mac vs. PC' blush (not to mention the WS movement going on now).
But the thing I especially hate is how modding has become weaponized to silence anyone seen as a foe/critic (aspiring authoritarian, much?):
> The thing that gets me is that two downvotes tripped HN's anti-flame/anti-spam filter, and now I can't comment anymore.
The beauty of crypto is that you can elect which ecosystem you participate in. If you don't like bitcoin because it's dominated by whales, go to eth. If not eth, try doge or Monero. Or start your own. It's pretty easy to move money between cryptos, that you only hold Monero and your friends only holds doge does not stop the two of you from transacting
> The beauty of crypto is that you can elect which ecosystem you participate in.
The beauty of fiat is that the government can print more, if needed, and can tightly regulate monetary supply to increase the health of our economy and breadth of our trade.
The FBI and CIA can monitor who transacts and can shut down hackers and terrorists. I can also elect the people in charge of the system so that they can create more opportunity.
> If you don't like bitcoin because it's dominated by whales, go to eth. If not eth, try doge or Monero.
Bitcoin makes the Winklevosses richer. Ethereum makes Buterin richer. Everyone hawking this is getting richer, but nothing worthwhile is being done.
> Or start your own.
What the hell good does that do? I'd rather use my life to solve real problems. I want to make creators more money, increase the amount of art in the world, and eventually work on solving cancer and metabolic diseases.
I don't have time for this garbage, and neither does the rest of the world. It's wasted compute, both in terms of GPU and brain cycles.
> It's pretty easy to move money between cryptos, that you only hold Monero and your friends only holds doge does not stop the two of you from transacting
I can already move money. What problem is being solved?
Maybe this is great if I want to illicitly move money or dodge taxes. I don't see any other reason for it.
Here is the best, concise explanation that I have found for the nature of a ponzi scheme and the bigger fool theory.
Professional of Finance - John Zdanowicz
I feel like this will be the defining legacy for the current "age" of cryptocurrency. We didn't figure out how to actually distribute control and power, but heck if we didn't figure out how to distribute accountability!
I mean it's not a Ponzi scheme in that there isn't a 'borrow from peter to pay paul' kinda thing happening. It's actually just a kinda weird lottery with manipulable game theoretical rules.
I think of a Ponzi as a scheme where someone is managing the game and intentionally defrauding new investors to pay old ones demanding redemptions. In the case of Doge no one party is managing the game and it's not even clear that there's any coordination amongst the large players. Again, at best it's a kind of game of chance with ill-defined rules.
I still think it's worthy of condemnation as lotteries should have well-defined rules, IMHO, but that's an aesthetic issue. I'm only objecting to the specific use of the term Ponzi which I don't think applies here (and we should be specific with our language lest we lose our ability to define things sufficiently).
I think of a Ponzi as a scheme where someone is managing the game
I agree, but there's also not really a better word to describe something that is like a Ponzi scheme in every respect except the lack of central coordination.
Having a distributed hive mind of people all collectively trying to pump the value of a coin basically yields the same end result as a conventional Ponzi scheme, but makes it much harder to regulate or shut down.
Even worse is the fact that many of the people involved truly believe in their own evangelism, and don't realize that they're part of a negative-sum game. With the amount of value destroyed via mining, and the lack of any new value being created by the people investing in crypto, there will inevitably be more losers than winners in the long run, but that doesn't stop people from spouting HODL memes because they genuinely think that value is being created from nothing and that everyone is somehow going to get rich off of this stuff.
It didn't make the cut? It certainly should have. I vacillate between Doggy-coin, and using a long O, something like DOE-gee-coin (as in "Get along, little doggies", which is sometimes sung with a long O). The use of Doje-coin always seemed silly. The mascot is a friggin dog, not a doje or a dozh, whatever those nonsense words mean. Stick with Doggy-coin, it make the most sense.
Cryptocurrency technology has utility which has not been fully exploited yet. At present, the two variants with the most market cap, Bitcoin and Ethereum, do have reasons to exist. (Which, again, involves some present utility but more future utility.)
Bitcoin has earned a certain degree of trust that value moved into that form will continue to exist, just because there is so much distributed hardware behind it that it would be hard for a bad actor to compromise it. It's not impossible, but there is a certain amount of utility there.
Ethereum also has earned a certain amount of trust which, today, is based on hardware, but within the next year will be based on Proof of Stake, with many billions of dollars in stake. (The amount of trust it will receive will depend on how decentralized the stakers turn out to be.) But it also has "smart contract" capabilities. It has speed and expense limitations but those will be lessened over time with sharding, rollups, etc.
There are newer crypto technologies that may overtake those leaders in market cap, or may not.
In any case, there is utility to these technologies. Because of that utility, some portion of the world's currency supply should be in the form of cryptos in order for the world to get maximum benefit. Say that is X% for a particular cryptocurrency. (Remember, BTC and ETH have somewhat different roles and so may be able to coexist.)
Then the value of a coin should be X * .01 * (the total value of the world economy) / (the number of coins). That's not a Ponzi scheme at all. What is happening is that the world is moving slowly, in fits and starts, toward the discovery of the numerical value X for each coin.
On the other hand, DOGE really does not provide utility that isn't being provided by more trustable cryptocurrencies, i.e. others are more likely to stick around for the long haul without crashes making the coin asymptotically approach zero in value. So, it really doesn't have the same kind of reason to exist. It's more like the Dutch tulip craze. It doesn't seem to fit the technical definition of "Ponzi scheme," but that label does capture the fact that its price is only what it is because of previous buyers.
[Update: edited to point out more explicitly that a lot of the utility is future utility. I say a little more about that in a thread below.]
If you actually want to know the answer to that question, you can easily discover it by means of google, and would have done so by now. If you don't, history tells me that nothing I can tell you in a reasonable amount of my time will make a difference. So I'll bow out now.
For anyone else who may be viewing this, I'll mention something I thought was obvious, but may not have been obvious enough: a lot of the utility is in the stage of being potential. For instance, while Ethereum has the potential to perform that same number of transactions per second as the Visa network, that is something that will be coming with the sharding and rollups I mentioned in my original post.
Is the attack on all non-state currency-like instruments is they "require" new "investors" to prop-up the value? Isn't it the case that many speculators are attempting to monetize while it is ultimately a meaningful, useful currency-like instrument created accidentally? Even if it was created as a joke, it's still useful if it can be transactionalized for commerce.
Crypto will never be competitive with official government currencies, it has almost no advantages except rare situations.
Official currencies are stable and extremely low-risk. This is only possible thanks to the monetary policies of central banks. Bitcoin can never have this level of stability or safety, because there's no central authority which manipulates the price.
They aren't Ponzi schemes either, nor are they a type of fraud. Their continued rise in value may rely on "Bigger Fool Theory", but that is true for many other investments that aren't Ponzi schemes either.
A Ponzi scheme doesn't require "bigger fools" or really any sort of fool. Many Ponzi schemes start out as honest investment offerings and only turn into fraud when the fund manager starts hiding their losses.
IDK, literal definition of Ponzi or pyramid says it does require "bigger fools" plain and simple.
You seem to be saying that the "too good to be true fund manager is hiding a Ponzi" doesn't require fools, because the Ponzi is well hidden. Hidden Ponzi is still a Ponzi, hiding it is a (another) financial crime; and "too good to be true" is still magnet to fools. The last customers will still eventually take the fall, that's the structure of a Ponzi whether they know it or not.
None of this is relevant; You're talking about how not all quadrupeds are horses, the issue is if all these horses are quadrupeds. These coins continued rise in value (without anything underlying) while relying on "Bigger Fool Theory" is an example of a Ponzi and a fraud.
What distinguishes a Ponzi scheme is that it promises returns that are paid out with money from new investors. What makes it a fraud is that the source of these returns is misrepresented. It is mathematically doomed to fail eventually.
A commodity like cryptocurrency (or precious metal) doesn't have returns. It may appreciate, depreciate or maintain its value. If the only argument for its appreciation is that "some bigger fool than me will find it to be more valuable", then that still does not make it a Ponzi scheme, nor does it make it a fraud.
So Bitcoins next and when Ethereum? I do not see any fundamental difference between them and Doge. Just because token was made as comment, should it be treated any different?
Doge reddit is full of the same memes every day encouraging people to keep HODLing, stop complaining, and "do you think Doge will hit $10?". Something does feel off about all this.
Ponzi's themselves are not illegal, but a descriptive term. I think what makes a ponzi scheme illegal is the existence of fraud, or lying about where the returns come from, not necessarily where the returns come from.
Where are the returns coming from? Is it a productive activity? Or are you making returns from others coming in and buying at a higher price? This can describe people pushing stocks not because the business is profitable, but because they say the price will go up. What makes this illegal? I think it comes down to lying or fraud, which is already illegal.
What makes crypto interesting is there isn't one person to point to, but everyone out there promoting it is like running their own ponzi because they only profit by convincing someone to buy in a higher price than them. Also in crypto, you can say bitcoin is going to 1 million and it is taken seriously so how do you this a lie? Also, it might get there in the future. It has to be about why the crypto is going up and that is tricky. Can you lie by omission, because in a ponzi if you don't say how the returns come, is that still a ponzi? If you just say, this is going to the moon, and people believe you, is that a ponzi?
Ultimately, all legitimate returns (investing) come from productive activity.
Gambling comes from ponzi like dynamics. Gambling that the stock goes higher, trading, etc. This is all about returns from other people, not from productive activity of the underlying. I think this ponzi is not illegal as long as there is no lying about where returns come from. Perhaps these activities shouldn't be allowed to use the word investment.
Because it is so hard to think about, I don't think it makes since to call them a ponzi. I think it makes since to explain to people you are gambling, not investing, and it will eventually not be sustainable, but crash back to fair value, which most of crypto's case is slightly above zero. I think with crypto there is a lot of misdirection, fraud, lying, but it is very difficult to prove. The SEC can't even figure out what a security is....
Because crypto has no intrinsic value, predicting crazy prices are ridiculous. It is all based on speculation. Most people know there isn't a company behind it making profits and they know that some people got lucky and bought in way lower than them. This is known. What may not be known is basic financial literacy and people who know better that do not tell the truth because they can make more money confusing and pumping crypto to the moon. Most people who know it has ponzi dynamics do not care, most people like ponzis, know the risks, and still want to play. Crypto makes ponzi games more fair.
And crypto keeps falling . Given the poor performance and bariers of entry to ownership such as kyc, a diversified large cap tech portfolio is way better. There is no advantage to owning bitcoin over index funds unless you want to stash away money from law enforcement
Down voters: Please make sure you truly understand the concept and history of money, currency, fiat currency, gold and how the Federal Reserve actually works and is structured.
FOMC board members are not elected by the people, yet they control interest rates and the money supply. They are not the federal government and they maintain their own balance sheet of debt. They do have a little oversight from Congress but well Congress likes low interest rates. When low rates become a problem, they will more than likely be out of the office. They also allow America to finance our endless wars with low interest rates.
Digital currency are the product of governments debt load and overspending.
"The reason that the dollar has value is because the US government has a legal monopoly on producing the dollar."
That's a completely ridiculous statement, coming from none other than Neel Kashkari. These are the people in charge of your currency, desperately trying to convince you that the money they created out of thin air is more sound than a joke currency created after an image of a dog.
> He said the dollar has value, not that it is sound.
He gave a completely ridiculous reason why the dollar has value. It's along the lines of "Bitcoin has value because it is scarce and hard to create". It's a non-sequitur. It's also ignoring that 90% of the money supply is not created by the government.
Perhaps he wanted to sanitize the following argument: Each year, there's a lot of people that owe a certain amount of dollars to the US government. If they don't find those dollars, they could end up in jail. This is a valid reason why the US dollar has natural demand and thus is valuable.
> If you think you understand better than a leading professional in the field, you might be the mistaken one.
That's not what I am saying. I'm pretty sure he knows better, but he is lying to you with a straight face. That's part of his job.
> If you think you understand better than a leading professional in the field, you might be the mistaken one.
I don't understand professional baseball, but if the owner of a team says "my pitchers are the BEST" - I can call "bullshit" on them without actually knowing if his pitchers are the best. It's in his best interest to say his pitchers are the best, even if they are not. He owns the team, and his livelihood is linked to the efficacy of his pitchers. This MN reserve employee has the same link between his livelihood and perceived value in the US dollar.
tldr; the "professional" making the statement is heavily biased.
The creator of doge cashed out of it years ago to buy a Honda Civic. So clearly it is not a Ponzi scheme.
Having long term capital gains is not a Ponzi scheme in itself.
Are there other issues like pump and dumps? there might. But that is different to a Ponzi scheme.
A general piece of advice.... Just ignore everyone trying to get you to "yolo" or "hodl". If you buy or hold and someone else sells, they win at your expense.
>> Literally, people have been fleeced for tens of billions of dollars
Fiat money printing has been fleecing me for over a decade. I've had to endure my salary being held down while rent prices kept going up and I was forced to change companies many times in desperate attempts to get a raise. I even had to change countries, leave most of my family behind to just to try to keep up with inflation so that maybe one day I will be able to buy a simple house and not be enslaved to a landlord.
I agree that most cryptos currently are garbage but it's not fair to call out crypto for fleecing people out of their hard earn money when global reserve banks are doing the same on a much larger scale.
Please consider how hopeless many millennials feel right now being stuck having to choose between different pyramid schemes. As non-meritocratic as crypto space might seem, so far it's the only place where I was able to achieve any sort of success as a software developer. The fiat corporate ponzi is the least meritocratic ponzi of all.
your comment makes absolutely no sense. rent prices going up has nothing to do (directly) with fiat. your lack of wage increases also is not a problem inherent to the use of fiat.
I believe his position is that irresponsible money printing is causing rampant inflation, which gets reflected into rent. Honestly, its not the worst logic in the world...
The fear of inflation motivated me to purchase a property this year. My mortgage payment will stay the same for the life of the loan regardless of the value of USD.
Hypothetically, wages should also raise with inflation but I suppose OP is saying that hasn't been his experience.
The only way to get a raise is to change companies. Pretty much everyone in the software industry will agree on this.
Also, the way employees are hired and the way salaries are negotiated is totally unfair. There is often no logic behind it other than pedigree/family connections.
> The only way to get a raise is to change companies. Pretty much everyone in the software industry will agree on this.
I can certainly agree with you here. The only times I've received significant raises are when I leave, or threaten to leave. I'm getting pretty sick of hopping around every year or two...but hopping is the only time where I have any leverage.
His comment makes perfect sense to me, you could summarize his comment as a real-life example of inflation. His dollars ability to be exchanged for goods/services is diminishing.
As reserve banks print more money, the money supply expands, this means more fiat chasing fewer goods. This is what makes house prices go up, which leads to increasing rent prices (real estate investors need the rental income to cover their mortgage repayments).
Salaries, on the other hand, are negotiated up front and sometimes not re-negotiated for years... In the meantime, the currency is inflating (losing value, prices of everything going up). So by the end of the year, your salary buys you less than what you had negotiated at the start of the year. Some companies offer 2% salary increase per year; this is not enough to cover real inflation. By many accounts, the real inflation is much higher than that; the basket of goods to measure inflation has been manipulated over the years to make inflation seem smaller than it actually is. So even in those cases, employees are losing buying power over time.
Besides, inflation is not a single number. Different items inflate at different rates. Money printing is creating wealth inequality which means that goods which appeal to wealthier individuals (such as real estate and other assets which provide financial independence) inflate faster than goods which appeal to the average person (which merely have survival utility).
This is BS. Money printing and 'trickle down' distribution of the newly created money is subsidizing incumbents and making it impossible for competitors to compete with them. Anyone who has worked for a big corporations knows how ridiculously inefficient they are and seen that this has 0 effect on the bottom line.
Imagine you open a coffee shop and then some billionaire opens a coffee shop next to yours. Imagine his coffee shop receives a $10 million government contract to provide coffee to the nearby FBI bureau for 1 year... On the other hand, you get no government contracts or subsidies of any kind... You cannot compete! Impossible! He can afford to sell his coffee at a loss to regular customers. On the other hand, you cannot! You cannot compete on price, so you go out of business.
The same dynamics permeate pretty much every part of the economy. A similar story can be told without government contracts (which is entirely funded by newly printed money BTW). Big capital holders have access to cheaper credit and lower tax rates than everyone else; they have an unbeatable competitive edge. It's not merely hard to compete; it's impossible! They can make so much money from big institutions that they can operate their front businesses at a loss! That's why they get all the customers! Because they're subsidized by the money printers.
Big corporations can setup shell companies to take out huge loans at 0% interest and then give each other huge phony contracts to get that freshly printed currency circulating between themselves. This creates huge revenue numbers on each other's balance sheets. If the shell companies go bankrupt, no big deal, just make new ones and repeat! That's what limited liability is for. Always use 'intangible assets' as collateral that way you always have the upper hand over the banks when repo time arrives and they collect your worthless intangibles... Just like the Fed did buying all these intangible toxic assets. All the companies and all the banks behind them are offloading their toxic intangibles onto the central banks which are paying for them by diluting the salaries of average workers through money printing.
The worst part of this is that even if you manage to negotiate up your salary over the years, you will get pushed up into a higher tax bracket. This effect was described by Milton Friedman several decades ago. The system eviscerates workers in countless different ways. It's a kind of slavery which keeps getting worse over time.
I don't see how the "The government-subsidized billionaire out-competes the small player" scenario differs from "Imagine satoshi decides the billionaire's coffee shop is great and gifts them 5,000 BTC from his stash of 1 million."
Even if we assume fiat currency is a mechanism to disadvantage individuals through inflation and unfair fiat distribution, I think it's not proven that cryptocurrencies solve those problems. Cryptocurrencies don't change the fact that in a system where wealth is unevenly distributed, the wealthy can wield outsized power. They merely change who's wielding the power.
And new BTC is continuously being printed; miners generate new coins with every solved block. That process continues through the year 2140.
But unlike fiat inflation which compounds, this inflation is fixed so each year it represents a smaller percentage of the total in circulation. The inflation percentage goes down each year and as it approaches 0% by 2140.
The hard cap of 21 million BTC helps as well.
The point is that with crypto, those who have power lose it as they spend their crypto (since the 'money printing' cannot keep up with their spending; they can't afford to waste money). In fiat, because the value of assets keeps compounding ad-infinitum (propped up by constant money printing) the elite can keep spending more and more (wasting quite a lot of money) and they will never lose any power or wealth because their wealth is constantly compounding.
satoshi has a million BTC. He can spend it in 500 BTC increments once a day for half a decade (about 14 million-dollar outlay per day at the current exchange rate). It's true that that BTC won't automatically refresh... Unless, of course, he's spending it on mining equipment and is dominating generation. If he owned enough computing power to generate about half the hashes, then at the current generation rate he would almost be replacing his 500 BTC a day. Later, his ability to generate new currency dies out in the mid-2100s, but of course, if he's controlling the majority of the infrastructure he can just change the rules at that point.
BTC as currently constructed doesn't have theoretically infinite coins, but in practice, the only functional difference between it and fiat currency is the power rests in the hands of a digital oligarchy instead of a government monopoly. The fundamental principle that money is power applies to both scenarios.
If Satoshi spent it on mining equipment, they would have to pay for electricity. And the profits of mining are never again going to be above 6.25 Bitcoins every 10 minutes (and that's assuming ownership of 100% of all ASIC miners in existence); it wouldn't make any financial sense for Satoshi to spend all their Bitcoins on ASIC miners because they'd end up increasing the mining difficulty and drive up their own operational costs. Controlling more than 50% of miners doesn't make any financial sense.
And no, it's not possible to change the rules at any point because there is a large network of exchanges and hundreds of thousands of machines running software which are integrated with and depend on Bitcoin's code not changing. If a small group tried to change Bitcoin's code on their nodes without more than 50% community consensus (and giving them time to update all the hundreds of thousands of machines running the old software), they would fork from the main network and their tokens on that fork would be worthless.
... but if, say, someone with a million BTC spent it on mining rigs and gathered enough power to control 50% of the network, they could institute changes overnight and their rigs' interpretation of the rules would dominate the network. There's nothing in the design of BTC to stop that scenario other than "It costs a lot of resources to pull off," but that means control of the currency is by a de facto oligarchy (of enough rig-owning power to call the shots technologically).
“The reason that the dollar has value is because the US government has a legal monopoly on producing the dollar.”
Does he not see the audacity of the hubris and irony in his statement?
“Like my Ponzi but not their Ponzi” is what it reads like to me.
Is Doge good money? No, because it has uncapped supply. But real crypto like Bitcoin, despite all its flaws will never have more than 21 million of them created out of thin air by some necktie, and I find that very comforting.
It's important to note that a nation's official currency has intrinsic value simply because the nation's economic output is, by law, required to be expressed in terms of it, and each and every transaction involving the state, whether it's paying for goods and services or paying salaries owed to state employees, are expressed in terms of the official currency.
So, it's hard to hand-waive around the fact that an official currency, unlike a so-called cryptocurrency, does have intrinsic value because by definition certain units of account do buy you certain goods and even the work of full-time employees.
> But a purpose as desired by one entity is not necessarily a good purpose for another.
Inflation is a very basic and proved tool to not only stabilize the value of a currency (you know, what a currency is supposed to be) but also to provide incentives to avoid stockpiling production potential and lower unemployment rates.
Crypto speculators might desire to exploit their first-mover advantage to speculate their way into riches without creating anything of value to a society, but that does not mean that the interests of these speculators are aligned with society's best interests.
> without creating anything of value to a society,
Can be true, but is not necessarily always true:
They might already have created value for society by working, and now want to save their thereby hard-earned money without getting the fruit of their work stolen by inflation.
What's bad about not wanting to be deprived of your retirement savings?
Governments have a long track record of providing poor pensions, of course people want to protect themselves against that.
> They might also want to save their hard-earned money without getting the fruit of their work stolen by inflation.
"stolen by inflation" is a ridiculous take. Society benefits greatly from inflation as it's an incentive to not stockpile production/consumption potential in a way that it artificially stifles the economy in general and everyday people's lives in particular, because there is a very clear and obvious way to avoid inflation: apply the money in productive investments.
Whether the money is lent or made available to someone else in exchange of a small payment (i.e., interest rates), those with money can already easily beat inflation just by investing conservatively.
ON the other hand, dumping cash on a ponzi scheme hoping that the next guy in line is left holding the bag, is not a good justification for this sort of scheme. It's extremely damaging to society and ultimately dangerous to society.
But it encourages investing in assets like real estate, equities, and (ironically) Bitcoin instead of holding cash. Suppose USD appreciated over time and often "beat the market". Why would anyone invest in startups or existing companies instead?
The purposes of startups and existing companies who want to find investors are not necessarily the same purposes as of those who just want to put money aside for saving.
They surely may benefit from cheap inflated dollars.
But that does not mean savers benefit.
Like with software, one person's feature is another person's bug. Bitcoin users consider inflation as a bug, so that's why they use it.
Yeah, what the chairman said about monopolyis indeed not quite it.
A monopoly in creating something isn't even enough to guarantee (or even make it more likely) something will have enduring value. bitcoins indeed have capped production, which kind of serves like a monopoly on producing it (or perhaps even better, it's supply is completely predictable). But as long as the only reason it's trading so high is because everyone is hoping to sell it to someone who will buy it even higher -- that's not why people acquire dollars, and I can see the ponzi scheme analogy.
Ultimately, I'd say the reason the dollar has value is because the US Government charges taxes denominated in dollars, and accepts only dollars in payment of them.
Dogecoin adds a fixed number of coins per year. At this point that fixed number is less inflationary than the USD by a large margin. That said, I'm more of a Monero and BTC guy myself.
> For example, there are now 128 billion Dogecoins in circulation. The rate of increase in the number of Dogecoins, once mined, is no more than 5 billion per year.
> Dogecoin adds a fixed number of coins per year. At this point that fixed number is less inflationary than the USD by a large margin.
That, alone, renders dogecoin unsuited as money. Money is, by definition, expected to be stable, not only to serve its purpose as a store of value but also as a standard of deferred payment.
With the fed itself acknowledging it's losing the battle to inflation--4.2% over the last year--then I'd say by your definition, that, alone, renders _dollars_ unsuited as money.
> With the fed itself acknowledging it's losing the battle to inflation--4.2% over the last year--then I'd say by your definition, that, alone, renders _dollars_ unsuited as money.
It makes absolutely no sense to claim that a historical high inflation rate of 4.2% renders the dollar unsuited as money, when your everyday cryptocurrency, the so-called magic alternative to all money problems, sees far higher fluctations on a daily basis.
Take dogecoin for example. Today alone dogecoin's price tanked 23%. That's a drop in a 24h period.
This is the sort of argument that eats away the credibility of any argument made regarding cryptocurrencies as an alternative to money. It's pretty clear that we have a small army of early joiners eagerly awaiting to cash out and to ensure they keep the pumping part of the pump-and-dump scheme they make this sort of absurd claims that doesn't pass the faintest of scrutinies.
No new currency enjoys a stable value against the dollar unless it's in some way pegged to it.
Just because a currency is not stable in value at first doesn't mean it won't stabilize.
Further, we seem to be talking past each other. I'm thinking more along the lines of the amount in circulation and how if a currency like BTC was in use, we wouldn't have inflation and likely much more stable pricing.
I know the Keynesian arguments for inflation about people never spending their store of value if it's not inflationary, but you have to realize we also live under a Keynesian government, are educated by Keynesian economists in schools subsidized by the Keynesian government.
There are plenty of good arguments for hard money, but they aren't backed by the current monopoly of force as it doesn't provide them with a source of extra dollars.
That's like saying I can crank out as many of my own alt coins as I want. So what? They're not "genuine" in the same way that my blockchain is not Bitcoin.
> US government does not actually have the monopoly. The Federal Reserve does
The Treasury operates the U.S. Mint [1]. That said, most dollars are created privately by banks when they create deposits through their lending. The Fed oversees all of this while also creating dollars through similar mechanisms (albeit higher-powered ones).
> Federal Reserve is not Federal - it is a private bank that mints the dollar
The Federal Reserve was created by an act of Congress. Its leadership is appointed by the President. Its profits remit to the U.S. Treasury. It's a creature of the government in everything but name.
As David Graeber wrote in “Debt,” “Nixon floated the dollar in order to pay for the cost of a war in which he ordered more than four million tons of explosives and incendiaries dropped on cities and villages across Indochina… the debt crisis was a direct result of the need to pay for the bombs, or, to be more precise, the vast military infrastructure needed to deliver them. This was what was causing such an enormous strain on U.S. gold reserves.”
For the first time in history, the world was in a pure fiat standard. The dollars held by central banks across the globe lost their backing, and there was a geopolitical moment where U.S. dominance was called into question and where a multipolar financial world was a distinct possibility. Adding even more pressure, in 1973 the Arab petroleum exporters of OPEC decided to quadruple the price of world oil and embargo the U.S. in response to its support for Israel during the Yom Kippur War. In just a few years, a barrel of oil rose from less than $2 to nearly $12. Faced with double-digit inflation and declining global faith in the dollar, Nixon and his Secretary of State and National Security Advisor Henry Kissinger came up with an idea that would allow them to keep “guns and butter” going in the post-gold standard era and alter the fate of the world.
In 1974, they sent new Treasury Secretary William Simon to Saudi Arabia “to find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth.” Simply put, a petrodollar is a U.S. dollar paid to a petroleum exporter in exchange for oil. As a Bloomberg report says, the basic framework was “strikingly simple.” The U.S. would “buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America’s spending.” This was the moment that the U.S. dollar was officially married to oil.
But I guess Ponzi has been officially redefined to "speculative asset that is in a bubble" at this point if that's what the regulators are going with.
Except what do you call the thing Bernie Madoff did now? Because that had nothing to do with "speculative asset in a bubble".