
India Says Bitcoin as Risky as Ponzi Schemes - elkali
https://www.bloombergquint.com/markets/2017/12/29/india-says-bitcoin-as-risky-as-ponzi-schemes
======
blunte
Aside from the fact that there are a steady stream of actual ponzis centered
around bitcoin, many new coins and tokens are almost certainly hollow schemes
designed to transfer wealth from the naive to the ICO creators.

Then you have the "mining" companies selling shares of mining power, but those
sometimes turn out to be pure frauds - no mining nor equipment. Those behave
just like ponzis.

It is probably in the average person's best interest to avoid it all.

~~~
chroem-
It's been amusing to watch HN's overwhelmingly negative reaction to
cryptocurrencies. Yes, there are absolutely some shady things going on with
cryptocoins, but the response to them here seems pretty overblown. What I
suspect is that many startup types have sour grapes over how they could have
made nearly as much money speculating on digital tokens as they did building
their web or app business. It's too bad, since there actually are some
interesting technologies beginning to come out of the cryptocurrency sphere.
These opportunities will get overlooked by everyone in SV apparently, though.

~~~
jacksproit
It’s also amusing to see this straw man argument and rebuttal get posted in
almost every single discussion about cryptocurrencies.

~~~
chroem-
For what it's worth, this is the first time I've seen it. Not sure it's fair
to call it a strawman though.

~~~
thisisit
The "sour grapes" and "jealously" has been the go-to explanation, if it can
even be call that on each of the cryptocurrency thread.

~~~
verylittlemeat
Bitcoin is just like any other investment I don't see how people can have
"sour grapes" about it. So you knew about bitcoin or even had bitcoins when
they were fractions of a cent? So what...most people would have sold when they
reached $5 or $10 or $50 thinking they were at the peak.

------
noncoml
At the moment 50% of all Bitcoins are controlled by less than 2,000
people(assuming 1 wallet per person).

It is becoming exponentially more difficult to mine them, and there is only a
finite number of bitcoins in that can be mined.

Buying bitcoins is making these 2000 people richer.

I really don't understand people who put money into Bitcoin. Actually I don't
understand anyone that puts money in a cryptocurrency that is supposed to have
"intrinsic value".

~~~
trophycase
It isn't making them richer unless they sell, at which point the wealth is
further distributed. Also exchanges and custodial wallets skew the
distribution numbers.

~~~
noncoml
> It isn't making them richer unless they sell,

Jeff Bezos is not the richest person in earth unless he sells.

> at which point the wealth is further distributed.

They basically exchange Monopoly money for real money. If that’s what you mean
by wealth being distributed, then you are right.

------
waytogo
How often was Bitcoin called a Ponzi scheme? When it was at 50, at 100 or at
1,000? Always.

If I look at my stock portfolio there are so many strange stocks and funds I
once invested in. They feel much more like Ponzi schemes or pump and dump,
especially the riskier funds.

If I look at my angel tickets into early stage ventures (done with FIAT) even
worse.

And if I look at the countless ICOs based on Ethereum, this is the real pump
and dump Ponzi Disney Land.

But Bitcoin? Seriously? I highly doubt that Bitcoin's founder or its early
adopters intended Bitcoin as a Ponzi scheme.

~~~
lawn
To be fair the developers of Bitcoin seem to have abandoned the original
vision of Bitcoin, peer-to-peer digital cash, and has moved towards being
purely a store of value.

As transaction costs increase and Bitcoin's usefulness diminish it is becoming
more and more like a ponzi scheme, a pyramid scheme or a game of greater
fools.

For what is the use of Bitcoin when other cryptocurrencies can be a store of
value _and_ peer-to-peer digital cash? I see none thus I see no value with
Bitcoin.

~~~
waytogo
> Bitcoin's usefulness diminish

No, you mentioned it yourself: Bitcoin is a store of value. Moreover, it's one
with a high liquidity, strong brand, limited supply, available in 180
countries, without banks involved and super reliable (gold doesn't have that
features and please show me any other asset that has these features). So, it
has a use and value.

That it has evolved to this is no one's fault and btw this might change (the
cash part) with the lightning network again.

> more like a Ponzi scheme

That would mean that all operators of Bitcoin, so everybody who is just
investing or running local wallets with full nodes deliberately intend Bitcoin
as a Ponzi scheme?? This is utter nonsense. If I launch an ICO tomorrow. Just
a landing page and a BS white paper, you could allege that I deliberately plan
my ICO/coin/token to be a Ponzi scheme. But you can't allege millions of BTC
investors that they intend a Ponzi scheme eight years after this things
started. Maybe you should check the definition of a Ponzi scheme again.

However, do you own or did you ever own any BTC?

~~~
thevardanian
> No, you mentioned it yourself: Bitcoin is a store of value. Moreover, it's
> one with a high liquidity, strong brand, limited supply, available in 180
> countries, without banks involved and super reliable (gold doesn't have that
> features and please show me any other asset that has these features). So, it
> has a use and value.

As I've said before Bitcoin is absolutely a garbage "store of value". It's not
going to exist for decades, let alone for centuries, because of the nature of
technology. As you yourself have pointed out there's nothing inherent about
Bitcoin other than a network effect that's made it a brand. It isn't backed
and guaranteed by a government, there are no organization that are demanding
to be paid only in Bitcoin as America demands to be paid only in dollars.

Furthermore There will be better technologies that will emerge and supplant
Bitcoin. Land, Dollar, precious metals all far exceed as stronger "stores of
value", both because of their historicity, and also because of their
technology, that is a technology that is stable.

Not to mention the complete and utter lack of privacy of Bitcoin because of
it's public ledger. Everyone knows everyone else's entire transaction history,
and any large enough actor can find that out. Traditional stores of value
don't have that problem, or rather not nearly as publicly visible.

Cryptocurrencies, and digital currencies do have place, but I don't think
we've come to any sort of equilibrium as to what its role will be in society,
which is why I don't think Bitcoin will succeed as "store of value", or
currency.

~~~
waytogo
> It's not going to exist for decades, let alone for centuries, because of the
> nature of technology

How do you know, did you found a time machine??

> It isn't backed and guaranteed by a government

Even better. So many countries (basically 70% of all countries) have
governments I wouldn't trust a single cent.

> there are no organization that are demanding to be paid only in Bitcoin as
> America demands to be paid only in dollars.

Exchanges?

> precious metals all far exceed as stronger "stores of value"

Go and try to buy some gold, it's not that easy and also, oh which surprise,
also volatile.

> Everyone knows everyone else's entire transaction history,

Pipe it through exchanges and it get anonymous again. Not that I like this
feature but if you need it...

You didn't really convinced me.

~~~
thevardanian
I don't care if I can convince you or not. That doesn't matter. Realistically
only time will tell which one of us is right, and give either one of us the
satisfaction of saying "told you so".

With that said are you saying that there will be no other competitors, or
technological advancements that will improve on Cryptocurrency technologies,
and supplant Bitcoin? If so, I think that's a more irrational position.

If Bitcoin gets large enough you'll just have cryptocurrency legislation that
will regulate it to oblivion, and make what are relatively private
transactions today into Big Brother is watching. Perhaps that's the goal
anyways.

Physical cash is still king in terms of privacy, but a poor long term store of
value if that cash isn't invested.

Metal is difficult to buy, and it is tracked, but that information isn't
public. The value of a precious metal isn't in its liquidity, but rather its
theoretical long term value so volatility isn't necessarily a factor. Land is
better because it actually has uses, but similarly it too is volatile, and as
such viewing it as a long-term 20+ year investment is better. Again the
current value of it doesn't matter so much.

I'm not saying Cryptocurrencies have 0 value, just that we haven't reached a
consensus of what exactly the value of a cryptocurrency is, or its role in
society, let alone having achieved a technological stasis to make a
cryptocurrency a long term store of value. There are in reality no true long-
term store of value, just that some are better in way than others.

In general though, I think, the problem is what we as humans consider "value".
So far I think the only real value of anything is what a State actor demands,
and enforces as valuable. Not land, not precious metals, not cryptocurrencies,
or dollars, but whatever a government deems officially as valuable becomes
magically valuable.

If tomorrow congress makes Bitcoin the official currency of the USA, and buys
up all the Bitcoins then Bitcoin will become infinitely valuable in comparison
today. On the other if it's made illegal to make Bitcoin transaction it won't
be worth a penny.

------
thisisit
Well this was a long time coming. It is not reflection on bitcoin per se
rather the use of the coin.

Let me try and explain why this is happening. In India, people don't warm up
to "internet" only companies easily. What this meant is while bitcoin and
cryptocurrency FOMO has caught on, people don't go and buy coins online. There
are exchanges but none of them are household name like Coinbase.

So, a new industry has mushroomed - people offering "investment" opportunity
in bitcoin "funds". These guys are not authorized investment professionals.
They collect any where between 25-50k and _promise a fixed return_.

No investment opportunity can claim fixed returns unless it is a Ponzi scheme.
Hence, this announcement.

My personal take on these opportunities is that, if these "funds" are in
trouble - prices increase or decrease lot \- they can simply claim that they
have hacked. So, it is not even a ponzi scheme rather outright fraud.

Even though I have tried convincing otherwise couple of colleagues have
invested in such opportunities. They find the whole bitcoin process - wallets,
keys, pass phrases etc very cumbersome but can't miss out on the supposed
gains. And these guys are software engineers.

Lastly, if a person with above average technology experience finds it
difficult to use bitcoin, I think it shows how true cryptocurrency's dream of
banking the underbanked in 3rd world country is going to be.

~~~
runeks
> So, a new industry has mushroomed - people offering "investment" opportunity
> in bitcoin "funds". These guys are not authorized investment professionals.
> They collect any where between 25-50k and promise a fixed return.

So scammers are using the Bitcoin brand to attract customers?

Sounds exactly like what ICOs are doing here in the West. Except they use the
word “blockchain” instead.

------
hendzen
It's not a Ponzi scheme - it's worse. At this point it only makes sense to
call it a Nakamoto Scheme.

[https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/](https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/)

~~~
trophycase
Ridiculous. Pyramid and Ponzi schemes do absolutely nothing other than
redistribute wealth. Bitcoin obviously has some value and if you can't see
that you're willfully ignorant. The article suggests that Bitcoin "promises
insane returns" but Bitcoin doesn't do that at all. Speculators want you to
buy so the price goes up, just like a stock.

~~~
hendzen
Do you honestly believe that most people buying bitcoin are buying it for any
reason other than the hope that the price will increase?

~~~
trophycase
How does that make Bitcoin a Ponzi scheme? A ponzi scheme is an organizational
structure, not the people that exist in that organization. Bitcoin is a piece
of software, and some people using that software are trying to profit. There
is nothing inherent in the structure of Bitcoin that makes it a Ponzi

~~~
hendzen
This comment makes me think you didn't read the article in my parent comment.
Bitcoin is not a Ponzi scheme, it is a Nakamoto scheme.

------
jstanley
At least your Bitcoin isn't going to be yanked out from underneath you
overnight by the government:

For example, [https://www.theguardian.com/world/2016/nov/08/india-
withdraw...](https://www.theguardian.com/world/2016/nov/08/india-
withdraws-500-1000-rupee-notes-fight-corruption)

~~~
cynicaldevil
You're really twisting what happened here. It wasn't so much "yanked" as it
was "replaced". I was initially against the idea, but soon got around to it.
It was a very risky and daring move by the government, but it was a good one.

~~~
shbm
How do you even measure it. What's the metric. How do you classify it as good
or bad. It was clearly short-sighted and the government even failed to account
the size of the new currency notes and the inconvenience caused by it. All
that was achieved was dip in the GDP and the loss of lives.

Contrary to the popular belief that BTC purports money laundering, it can
actually mitigate the problem of black money and money laundering. The
governments all around the world should try to keep up and they should
themselves establish a separate think tank/research arm/department for
blockchain and cryptocurrency space.

------
wslh
Ponzi or not, there is a new phenomenon where the ecosystem has created more
individual millionaires than the ones created by startups in the last few
years. Many people are reinvesting their funds in new ventures, spending more
money than angels or VCs in the typical startup world. It is obvious that this
is connected to the high exchange rate of cryptoassets but it can have good
historical consequences: there are good projects that the general community is
not hearing about because they don't follow the typical ICO marketing route.

------
qwerty456127
IMHO the one and only thing a government is to do to protect the people from
Ponzi and other schemes is to make sure everybody leaves school with conscious
knowledge of the following:

1\. Every investment is a risk, you may win or you may loose. 2\. The chance
of loss is usually proportional to the potential profitability estimated. 3\.
Never invest what you can't afford to loose easily. 4\. Don't be mad on the
friend who has introduced you to the business if he didn't explicitly
guarantee you will win - that was your choice. 5\. Whoever says there is no
risk and the success is guaranteed - lies, don't believe them and don't rely
on them.

Actually, if a person doesn't know this by the time they finish the school the
time they've spent there has probably been wasted. As for me I've learnt about
Ponzi scheme from a Khan Academy lecture (and yes, my time at school was a
waste mostly, that's a pity there was no Khan Academy back in those years).

------
qwerty456127
What I can't understand is why do people demonize Ponzi Schemes so much while
lotteries and bookies of all kinds are legally available on every corner. I
know quite a number of people who have consciously taken the risk of investing
in an open (so I can't logically agree it being scam/fraud/etc although legal
authorities can insist it is) Ponzi Scheme and have quit it with rather
serious profit some time later. And I don't know anybody who has ever won more
than a couple of bucks in a lottery. In my opinion a Ponzi Scheme (unless the
potential investors are actually told a false claim that it is not a Ponzi
Scheme but a low-risk high-profit enterprise) is not a scam but a game,
similar to fishing, and even much more nice to people than classic chance
games played in casinos. Why not just teach people basics of risk management,
warn them 3 times and let them play if they want to?

~~~
scribu
One difference between ponzi schemes and games of chance has to do with
impartiality. Even if casino games are tweaked to give better odds to the
house, once you roll the dice, neither you nor the dealer can influence the
outcome in any way.

Another difference is that there’s no requirement to bring more and more
people into the game, so there’s no risk of widespread adverse effects.

------
anonymous5133
Not surprising they say that since many Indians are taking interest in
cryptocurrencies due to the Indian central bank being unable to control
inflation. It was at 10% just a few years ago! Also it isn't like something
that has the potential of ever going up by any significant amount. Every year
it drops 3-10%. Who wants to hold on to that to save their money? No wonder
the Indians have so much interest in crypto. I don't blame them. Their
government has failed them. At least with crypto it has the potential to go
up.

~~~
wmf
Cool story. Have Indians heard of investments?

------
crypticlizard
Well is this Orwellian double talk? To some extent, I think that's wildly
accurate. Buy stocks that are sort of a scam, but don't buy into a new
technology like BTC which has imo by now proven itself to be powerful and
legit, unlike the next crappy IPO. Honestly it's hard to take articles like
this seriously when what's going on is a lot of misdirection. Just my 2c.

------
Theodores
The two motivators in this story: fear and greed.

The people have the motivation of greed, the government has the motivation of
fear. Fear that the greed will lead to fear of losses and everyone exiting at
the same time. It is a bit sad really as the governments should just let the
people wanting to get burned in this harmless bubble lose all of their money.

~~~
harigov
Yeah, when the population is educated and has general awareness of technology,
betting on ponzi schemes is up to them. When you have large, uneducated and
poor population, letting people know of the risks is a decent thing to expect
from a government.

------
superasn
On the other hand you have Estonia preparing to launch its own crypto
currency[1] called estcoin.

[1] [https://www.cnbc.com/2017/08/23/estonia-cryptocurrency-
calle...](https://www.cnbc.com/2017/08/23/estonia-cryptocurrency-called-
estcoin.html)

------
acd
The government want to be able to control the currency minting new money in
cooperation with private banks. With bitcoin governments does not have that
control. What says government central banks with zero interest rate creating
new credit money out of thin air is not also a Ponzi scheme?

