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Nassim Taleb: Bitcoin failed as a currency and became a speculative ponzi scheme (digesttime.com)
455 points by thefoodboylover 29 days ago | hide | past | favorite | 423 comments

The full tweet is actually easier to read:



1) Currency w/o a government

2) Stable/reliable for contracts

3) Inflation indexed store of value -- basket of items representative for me.

4) Rapid transactions

Can we do it?

#BTC failed to be currency, open-Ponzi speculative game. A currency must earn interest: currencies weren't born from govt design but from commercial credit. A deflationary currency blocks borrowing. #BTC is just an open Ponzi scheme: money made by someone is taken from someone else.

Stephen Diehl explains it better: Because on top of the zero-sum mechanics, if it siphons wealth off to insiders then the pool to pay out returns shrinks. What @nntaleb said is right, it's economically equivalent to an open Ponzi scheme.

Economically it's much more like gold than a ponzi scheme:

Gold: Asset that goes up and down in price according to demand. No central body controlling it. Some utility as jewelry though we could get by without that. Massive dollar and environmental cost from mining the stuff.

Ponzi scheme: Fraud where insiders take money from investors and use it to pay other investors. Collapses and the fraudsters run off or go to jail. No mining no utility.

Bitcoin: Asset that goes up and down in price according to demand. No central body controlling it. Some utility as a payments system though we could get by without that. Massive dollar and environmental cost from mining the stuff.

Gold has a certain permanence as the only element in the periodic table that has properties that has made it the #1 jewellery metal for the last few thousand years and probably the next few thousand though while Bitcoin was invented ten years ago and may well get outcompeted by a better invention/currency.

Gold is stable in isolation. If you bury gold in your backyard, and dig it up 20 years later, you will still have the exact same amount of gold. The exchange rate between gold and other things won't change that.

On the other hand, for btc to keep value, you need people to mine it from to the moment you buy it to the moment you sell it. This has a cost, which is currently paid by newcomers. But if btc becomes stable (i.e. there are no new entrants willing to pay a premium to get in), current holders have to accept depreciation to pay for mining costs. Since btc is not backed by any kind of real world asset, there is no other source of profit.

An investment that is only worthwile as long as it attracts newcomers is in essence a ponzi scheme.

Good point. The problem is that some people think it is a currency instead of an investment. Other people think it is an investment instead of a currency. It can't be both. Currencies have to be less valuable over time, otherwise no one would ever spend the currency. Investments have cost more overtime otherwise no would would invest. But both groups are buying and driving up the price.

Also, there is a 3rd group that thinks it is a hedge. With hedges you don't really care if the price is going up or down. You want it to give you options. For example, you may buy a stockpile of food or toilet paper, not because you are hoping to turn a profit, but to give you an option to avoid going to the grocery store during another panic buying situation.

> Currencies have to be less valuable over time, otherwise no one would ever spend the currency.

I don't have an opinion on BTC (or gold for that matter) but this widely-distributed meme is simply untrue.

1) If I have a bar of gold, and it will buy me 1% more bread loaves in a year's time, but I can invest it in something that will trade for 2% more bread loaves next year, then I will spend it because despite appreciation it is not my best source of appreciation.

2) I have living/operating expenses that I consider to supersede my need for financial return. If I don't pay for shelter and food, I won't be around in a year to enjoy the 1% more bread loaves I would get from appreciation.

3) Empirically/historically, over long time frames, gold appreciates in real terms (slowly). And yet people spent gold coins and gold-backed notes regularly.

Now, if a currency is appreciating much faster than anything else in the economy I agree you can have a deflationary spiral and a liquidity problem. But this is because the economy is collapsing — ordinary sources of growth have disappeared or reversed. This is a very special situation, and is not a general argument that currencies must depreciate.

Sure, people do have to buy food to live, but that isn't the point. Just replace "less valuable over time" with "not much more valuable over time" in my comment. The point isn't that gold went up or down by 1% between 1750-1850. The point is that people are buying bitcoin for opposite reasons. Is it a currency? If so like you said it shouldn't be going up quickly. Is it an investment? If so, where is the cashflow?

> Currencies have to be less valuable over time, otherwise no one would ever spend the currency

The purchasing power of a currency doesn't have to change, the government manipulators could target 0% inflations just as easily as they target 2-3%.

Most modern economies are driven by debt, thats what "creates" new wealth out of thin air. The main reason we target a low, steady level of inflation is to best incentivize lending and investing in debt. If currency value is allowed to swing wildly you can't put a predictable price on future money. If currency is allowed to lose value (deflation) you are incentivized to hold onto it rather than buy up debt. Noone buying debt means noone creating money out of nothing, meaning no GDP growth unless velocity increases.

> Currencies have to be less valuable over time, otherwise no one would ever spend the currency.

Ah, that would explain why we abandoned the gold standard. No one ever spent those gold coins, and no trade existed before 1933.

>Currencies have to be less valuable over time, otherwise no one would ever spend the currency.

Isn't this only true with the removal of the gold standard?

It's part of the reason the gold standard was removed. Currency deflation made loans expensive, for two reasons: the time value of money was higher in 1933 than it was any point since; and since loans are in nominal dollars, deflation causes loans to be more expensive in real dollars, even disregarding interest. 1932 had -10.3% inflation -- this added an additional 10% interest to every loan, on top of the 17% prime rate (because why lend money?). A 27% effective loan rate is ruinous for business, especially agriculture. The gold standard was removed in 1933, interest rates dropped to 12%, inflation increased wildly to 0.3%, and people could borrow money again.

> Currencies have to be less valuable over time, otherwise no one would ever spend the currency

I'm not deeply steeped in macro-economics. Is this a theory, or an historical observation? Where can I find more about this?

Historically, there have been a wide range of items used in barter and markets. https://en.wikipedia.org/wiki/Currency#Early_currency. Some of those like livestock depreciated in value very quickly since they literally had a lifespan. Others, like rare coins have gone up in value.

In the context of Bitcoin we are talking about the modern world. The major forces in the modern world are Globalization and Technology. Assuming you don't want China to take over the world you need growth. Growth happens when investment and debts are created. Ray Dalio explains it well. https://www.youtube.com/watch?v=PHe0bXAIuk0&ab_channel=Princ... This is why successful countries like the USA target 2-3% inflation. It is theoretically possible to create a country where inflation was -1%, but technological growth, which is very hard to stop would create a deflationary spiral that would bring the economy to a halt.

Bitcoin will stay forever as long as someone has a copy of the blockchain (around 300GB now). The cost of which is negligible today.

Mining is only necessary for making transactions, and it doesn't have to be expensive. It only is because of the competition. That expensive competition is important for stability but in theory, the entire system could run on a smartphone.

And it could run without newcomers. If everyone in the world had bitcoins, making it impossible to have newcomers, it would still have value, in fact a lot more than it has now.

Bitcoin may be a bubble, but it is not a Ponzi scheme.

Gold has some value as a technical material and because of its (subjective) beauty, so it will never crash down to zero, but it could lose a lot of its value if we decided that it is not worth hoarding.

That "someone with a copy of the blockchain" is not going to be credible enough to rehydrate Bitcoin. Mining is not just for transactions, but for maintaining the ongoing legitimacy of the blockchain, which is where the real value of Bitcoin lies.

> Bitcoin may be a bubble

Also, what is not a bubble nowadays. Just look at the gold price, the housing price, etc.


What about chain re-org attacks? Without miners the next blocks would be easy to attack and then you lose immutability along with creditability.

That's not really true. You could bury a bottle in the backyard with the address and private key written on paper and still have the bitcoins in 20 years. If no one is running the blockchain software you could get the most recent copy of the chain / software and start it up. With both gold or bitcoin if there are no buyers then you won't be able to sell it for much.

It might actually be entertaining to bury a bottle with $10 worth of bitcoin - it might be worth quite a lot when dug up like that guys hard drive in a refuse tip he wants to dig up. Or not of course.

("A man who says he threw away a hard drive loaded with 7,500 bitcoins in 2013 is offering his city $70 million to dig it up from the dump" https://www.businessinsider.com/man-offers-council-70-millio...)

Gold is a metal made in the burning core of dying stars. It doesn't really care about buyers and economy. We use gold for many purposes other than as a store of value, and that is exactly why it became a store of value. It is useful BESIDES being a store of value. Heck if you don't like gold, buy platinum or some other exotic material. Stores value just as well. Bitcoin is useless besides being a store of value. That makes it a bad store of value.

There have been buyers of gold for thousands of years though

I'm sympathetic to the argument that Ponzi schemes inherently have a small group propagating the fraud while presenting the illusion of a real business, so describing Bitcoin as a Ponzi scheme may be technically inaccurate.

If I understand the tweets correctly, Taleb, et al, are basically saying that the mining pool functions as the insiders in a Ponzi scheme, by outcome if not intent.

The argument is that a Ponzi scheme isn't just zero-sum speculation, with some people winning and some people losing: it is negative-sum, for the speculators, because the insiders were siphoning off money the entire time.

In this situation, the siphoning comes in the form -- among other things -- of the 6.25 BTC / 10 minute block rewards [$20B / year at present], which the miners sell to pay their costs [$10B / year of electricity at present?] and their own paydays. Because these "insiders" have been taking out money the entire time, when all of the investors go to get their money back, there won't be anywhere near as much money as they put in left to get out.

> I'm sympathetic to the argument that Ponzi schemes inherently have a small group propagating the fraud

The existence of a group of insiders runing the scheme is really a detail when it comes to understanding how the market works. If it works like a ponzi scheme, does it really make a difference for the victims whether or not some people get arrested?

There's at least three ways you could ask the question.

There's ontologically, in the manner of pedants, where you're really asking "in this defined ontology of financial phenomena, schemes and frauds, where does Bitcoin fit in?"

There's descriptively, where you are asking if it is useful to model or think of Bitcoin as a Ponzi scheme, regardless of whether it is a fully accurate categorization.

And there's rhetorically, where you are really just using "Ponzi scheme" as a concise way to tell people, "Don't invest in it, people are trying to take advantage of you."

> I'm sympathetic to the argument that Ponzi schemes inherently have a small group propagating the fraud while presenting the illusion of a real business, so describing Bitcoin as a Ponzi scheme may be technically inaccurate.

Have you heard about the miracle of decentralization? :)

How is BTC mining a Ponzi scheme in a way that gold mining isn't? Neither require any insider information and new entities can join in the mining. In fact BTC mining has lower barriers to entry because it doesn't require license, land rights, etc.

Well for one, gold is a precious metal with great electro-conductivity properties, never rusts and can be worked at low (relatively speaking) temperatures. Kinda useful for all these chips we need and other electronics. Try to do that with Bitcoin.

That's not where its high value comes from though. And the vast majority of gold is not used in the industry.

That's right, but I think the OP was asking about differences in BTC from Gold as Ponzi schemes. I don't think it was "what makes Gold valuable"? I am just saying you can't use the BTC for anything but the scheme if it was a Ponzi scheme.

Just to put some additional data to this:

    Jewellery: 92,947 tonnes, 47.0%

    Private investment: 42,619 tonnes, 21.6%

    Official Holdings: 33,919 tonnes, 17.2%

    Other: 28,090 tonnes, 14.2%

    Below ground reserves: 54,000 tonnes
To answer that question, I would suggest that gold is valuable because it has uses. BTC as a payment instrument is useful, but how useful?

BTC also could be useful as a hedge against other assets, for example the stock market or the currency you save in. I view it as a possible hedge against the Euro. This is the currency I daily use, but I definitely keep the Greek Debt Crisis in mind.

The principle of hedging is that two assets hedge each other if their price demonstrably evolve in opposite directions. For instance, if a bank sells an equal amount of puts (the right to sell at a given time) and calls (the right to buy at a given time) on an action with the same strike price and the same maturity, it is hedged: both positions cancel each other.

Since BTC has no underlying asset, it's hard to demonstrate a correlation with anything. So if you buy btc as a hedge, you could pretend you're hedging against anything. In reality, the only significant factor is btc's popularity.

That means you could probably buy anything that isn't correlated with Euro and get the same result.

Correlation is a pretty fickle thing. Multiple hedges make for a nice diverse portfolio. So yeah, I consider gold a good component as well. Why add bitcoin as well? Because it makes for a nice bet.

We used to all rely on bonds and bills to stabilize our portfolios but central banks have killed that.

The fact that there's no way to fork gold.

Gold is a scheme (not quite a ponzi scheme) in which we've all agreed to maintain the delusion that it's a good marker for totting up wealth. It happens to have nice material properties for that, and it's nearly unique in those properties. The main one being that you can't print more of it.

BTC has a lot of those properties... as does Doge, as does Ethereum, as does Bitcoin Cash, and every other cryptocurrency. BTC has the name recognition -- which it shares with gold -- and in doing so may or may not become Gold 2.0.

But once we've realized that there can be Gold 2.0, why not Gold 3.0, 4.0, etc.? Only gold can ever be gold 1.0. Even adding silver and platinum and such doesn't really substantially diminish that uniqueness. Whereas there's no one crypto... which means that the "you can't print more of it" goes away. The Dogecoin guy did it. So do thousands of others, every day.

Maybe BTC will become the one and only Gold 2.0 and it'll stop there, and if so it'll have a value of some sort -- hard to say what, but eventually it'll reach some kind of equilibrium. Until it reaches that point, it has only its hope to be The crypto, and for the moment that relies on a continuous flow of new investors.

Addendum: the sense in which gold isn't quite a ponzi scheme is that the initial beneficiaries are long since dead. Everybody alive has roughly the same buy-in to it, so we can trade gold among each other on equal terms.

Some original guy got rich by convincing others to take his lump of metal in exchange for goods and services. The fact that it's nice to look at helped. That happened thousands of years ago, and so we're all just living with it as a collective agreement. We could break it if we wanted to, but there's not much motivation to.

TIL that the original "the other gold", silver, is only 9x more common than gold, in terms of "how much have we ever mined". Platinum, we've mined about 1/20th as much as gold.

So that part of the D&D economy actually works pretty well; copper, on the other hand, is something like 3600x more common than gold.

I'll give you that is has Ponzi scheme like aspects to it.


1) require an initial investment and promise above-average returns

2) money cannot be withdrawn for a certain period of time in exchange for higher returns.

High investment returns with little or no risk.? Overly consistent returns?

Your argument is that if I buy an ETF for gold and they charge 2% to keep the gold safe and manage it. This etf is a ponzi scheme as they need have holders to keep the thing going.

As the transaction fees go to miners you could then argue VISA and mastercard are ponzi schemes?

> On the other hand, for btc to keep value, you need people to mine it from to the moment you buy it to the moment you sell it.

That's not correct. Once you receive your transaction within a block, they are there forever assuming you keep a copy of that blockchain. If miners stop mining, you'll be able to mine yourself within 14 days with a regular computer.

The value of Bitcoin is not just the blockchain. It is the distributed consensus on it being the correct blockchain. So, Bitcoin relies on others believing that this version of the blockchain is authoritative.

Nothing like this in gold. It is an atom which does not require any extra belief from the society.

It's not enough to simply bury the gold. You have to guard its whereabouts and that cost something


Burying bitcoin in a garbage pit hasn't paid off yet but given time and patience. Who knows?

Do you have a sense of what that depreciation factor is?

If it’s nearly equivalent to overall population growth, it may not matter.

(For what it’s worth, I’m with you for the most part. Just curious. I’ve been short-term wrong on BTC since $102 and I’m trying to figure out if I’m long-term wrong as well.)

> For what it’s worth, I’m with you for the most part. Just curious. I’ve been short-term wrong on BTC since $102 and I’m trying to figure out if I’m long-term wrong as well.)

It has managed to outdistance both the dotcom bubble and the housing bubble at this point. Although the tulip bubble went from the 1590s to the 1630s, so there is some precedent for these boondoggles to run for a surprisingly long time before gravity catches up.

Someone else quoted $10B worth of electricity yearly, at current price. Given that number, and knowing that it evolves with market cap, that's about 1% depreciation/year.

The are trx fees for this exact reason. The network can continue to be profitable even without the mining of new bitcoins.

Gold has a lot more intrinsic value than bitcoin will ever have. It’s quite reasonable to explain a large part of gold’s price as speculation on continued demand for jewellery.

There’s a 5000 year history of gold. But only a few grams per person in this world; and a great number of people feel some sort of pressure to buy a few grams for their spouses.

Obviously what I’m saying is an oversimplification. But if we imagined a world where gold did not have its lustrous history, it might still be sold at the same price. In this world, gold would still cost around 800 dollars an ounce to mine; but the only difference would be the market cap for gold would be very small and would serve its niche applications (comparable to the market for terbium or platinum).

Gold might be overpriced a little bit. But the debate about bitcoin is if it’s worth anything at all.

Disclosure: I work for a bitcoin trading firm.

I’d contend that money(any fiat), like Bitcoin, like gold has no intrinsic value.

Historic precedence doesn’t exist... till it does.

No one wants to carry around chickens to trade.

The value of a monetary asset is in its interoperability, and backers of Bitcoin are working to enable that to a high degree.

I think you’ve misunderstood me.

Gold has its niche applications where you need a malleable and nonreactive metal (like dentistry). If this was the only use for gold, it would still be at least 800-900USD an ounce, because it that’s what it costs to extract.

The market cap for gold would be like 1 billion USD, rather than 11 trillion USD.

Ironically in a world where gold wasn’t ‘lusted’ after, it might even be more expensive because the market would be illiquid. And a small oligopoly of suppliers would be able to gouge buyers.

This is what happens in the rare earth metals market.

If you couldn’t exchange gold for fiat it would still have value. Bitcoin would plummet in value.

An investment asset must have a cash flow and/or intrinsic value. Otherwise you do not have a way to recuperate your money, so it is not an investment. They also provide basis for value of the asset. Bitcoin has neither. That is why Bitcoin is a Ponzi scheme regardless of all the rosy pictures the believers try to paint. This is very important: Bitcoin has neither cash flow nor intrinsic value. The only way to recuperate money from Bitcoin is for another person to pay for it - the very definition of a Ponzi scheme. Gold does not have a cash flow, but it has an intrinsic value.

How much does it cost to move 17 tons of gold? What is the risk involved in transfer?

I can answer that question for BTC. To transfer the USD value equivalent of 17 tons of gold, it's currently around $27.50[1]. This transaction can be made anywhere you can broadcast a hash string.

If you want to get fancy, you can trade wBTC on ethereum for, as of this moment, ~$8[2]. If even that is too high a fee for you, you could bridge over to xDAI and trade for orders of magnitude less than the value of a penny[3]. Again, you can do this anywhere you can broadcast a hash string.]

All of this is EXCHANGE, transaction, alone. Zero mention of the amazing utility of the financial instruments that are IMPOSSIBLE with legacy protocols. To go over which is not a comment or a blogpost but a detailed textbook or equivalent of a MOOC.

How's that for intrinsic value?




A pittance for the Gold transaction if your facilitor is feeling generous. Leave the Gold where it is, and issue a writ on the change of ownership. Rely on the Fiat system to ensure your value moves the way you need to.

Everyone who tries to make the argument that moving physical Gold is the same as a Bitcoin transaction is deluding themselves. They're conflating the logistics of commodity transfer with transfer of ownership. These are completely different things.

>How much does it cost to move 17 tons of gold? What is the risk involved in transfer?

How much does it cost to verify 17 tons of gold is not counterfeit? How long would that take?

You can comfortably bet your family's life that Bitcoin is not counterfeit about an hour after a transaction.

Intrinsic value has nothing to do with cost of transaction.

All value is tied to scarcity and gold is less scarce than bitcoin.

If we find a million tons of easily mineable gold tomorrow the price will dip below copper's. This can't happen to Bitcoin.

So VISA and MasterCard have zero intrinsic value as companies. Does not pass the sniff test.

It is incorrect to take the average transaction fee and use that number to say it would equal the transaction fee placed on a transaction placed at 1b+ of value. It's fine to be a vocal proponent of cryptocurrency, but there's no need to use disingenuous information to prove that point.

Sure we could "get by" without gold jewelry, but it is a _real_ tangible thing.

The problem with Bitcoin is that it is "international" in nature.

Yet, China holds the largest share of Bitcoins and thus ownership is unbalanced.



I think there is more value in Blockchain at the municipal or federal level of a country to improve transparency and such. Or somehow even the issuance of currency. Given geopolitical unrest and contention, or differing political views (USA vs. China), I can't see how this decentralized coin will continue over a 20 year period.

It’s a decentralized Ponzi scheme. It’s why Bitcoin owners are so aggressive in convincing others to buy Bitcoin.

What investment is not a Ponzi scheme? Real estate and stocks rely on a greater fool that was later to the party to come buy them at a later date. Stocks have appreciated in value so far past what they are worth for a dividend that we have had to give up that charade long ago.

From the wiki for Ponzi scheme-

> The scheme leads victims to believe that profits are coming from legitimate business activity (e.g. product sales and/or successful investments), and they remain unaware that other investors are the source of funds.

TSLA has a P/E of 1,181 right now. Peloton is 1,660. Amazon is even 80. How is it any different right now?

Stocks have dividends, loans have interest, land has either rents or utility from using it. It’s that income stream beyond the initial capital that turns something into an investment.

Bitcoin lacks that, it only has money from new investors and it loses money from mining. Which means without new investment it’s value must crash which creates incentives for people that own Bitcoin to convince others to buy Bitcoin.

The only way to argue Bitcoin has long term value is it must provide inherent utility like land. Increasing the number of transactions per second would be one way to demonstrate that value, but talking about future value doesn’t.

Something is valuable if you'd be more than happy to own it even if you, or your heirs, could never sell or exchange it.

Currencies aren't inherently valuable, but a measure of value and a medium of exchange. If you couldn't buy things, or settle your debts (taxes), with US dollars tomorrow they'd be worthless.

Something that is valuable, and is either subjectively or objectively going to become more valuable, is an investment.

You can make a case for almost anything being an investment, since value can be subjective and speculation is rife

Utility covers a lot of stuff, a painting you enjoy looking at or water that you drink etc. As you point out USD has built in utility and thus demand because the IRS doesn’t accept potatoes.

The issue is crypto currency is a digital asset so you need a buyer to do anything with it. That buyer could be a 3rd party uninvolved in the transaction, but someone needs to hold it after the sale even if it’s just to look for the next buyer.

>Stocks have dividends

when was the last time TSLA paid out a dividend?

Growth is optimizing for future dividends. If you know a stock will never issue a dividend, buyback, etc the it’s value is 0. That’s why people talk about future cash flows.

Not only that but companies keep buying back their own stock to make the price go higher. If this isn’t Ponzi I don’t know what is. The companies realized they don’t even have to wait for an investor to pump the price they can just do it themselves. Spend the money that should have been spent on keeping planes from falling out of the sky on the stock. Genius! Goodhardt’s Law in full effect.

>Boeing, which has been struggling for the past year with the safety of its 737 Max jet, has spent over $43 billion buying back stock over the past decade. The six airlines—Southwest Airlines, Alaska Air, Delta Airlines, United Airlines, American Airlines and JetBlue—have spent about $47 billion over the same period.


I think you’re misunderstanding what a buyback does, it returns value to shareholders.

If you own X% of a company and it buys back 20% of it’s shares, congratulations you now own 1.25X% of the company. If you don’t want 1.25% of the company sell 1/5th and it’s equivalent to a dividend. Alternatively, if it does this for long enough without you selling then you end up owning 100% of the company and the next buyback is again equivalent to a dividend.

Think about what you wrote more and then come back later.

Never rely on those stuck on the financial abstraction to dig themselves out. Economics has a way of rotting the connection between real life and price movement.

The point is that the company is pumping share price, not through actually creating value, but by tweaking but by engineering scarcity, and othogonal to the corporation's reason to exist. GP is conflating the end to which buybacks are a means with the actual goal of what Boeing was colloquially for; baking safe airplanes.

This more pervasive than anyone in the business world wishes to admit.

Buybacks may be more effective than dividends. If you consider your bought stocks as a source of income, then you get more control and better taxes with buy-back stocks.

With dividends you can't really rely on a future amount, i.e. you can receive more (or less) than you actually need. Also it can come at a different date that you want. Plus creates a tax event event when you maybe don't want to have it. And so on.

So it become more convinient to just have stock which you sell when you want and you sell exact amount as you need to. Also the tax rate on dividends is usually higher, especially if you hold the stock long enough.

You cite real estate and stocks:

You can buy real estate and generate returns by renting it out. A smart real estate investment can generate money for y you regardless if its market value.

Stocks are the same: they represent a real piece of a company. If the company doesn’t issue dividends, the value is retained in the price of the stock. Warren Buffet almost never sells stock, his whole strategy is to hold forever.

Stocks and real estate are zero sum in the short term. In the long term, they are not

>> A smart real estate investment can generate money for y you regardless if its market value.

Unless it loses 50%+ of value suddenly. Then it may take you 10+ years to return back to profit.

>> If the company doesn’t issue dividends, the value is retained in the price of the stock.

Unless your company go bankrupt. You may lose the whole investment.

>> Unless it loses 50%+ of value suddenly. Then it may take you 10+ years to return back to profit.

You didn't understand what I said. It doesn't matter about short term fluctuations of market value. If you are pulling in rent (or not paying rent because you are using the house) then it doesn't matter what the market price is right this minute. Flipping assets in a hot market is a zero sum game, and is more akin to gambling than capitalism. Traditionally capital generates profit by producing real value, in this case by providing shelter to you, or to someone paying you. Ownership of a company is the same thing (that's what a stock is). It produces value or provides a service.

This is a thread about bitcoin. Which is a virtual (read intangible), currency whose value is determined entirely by other people's belief that it is worth something. It can't be used for anything except as an incredibly unstable store of value. It can't provide shelter, people won't give you real value to temporarily hold it. Bitcoin as an algorithm is unkillable. As an investment it is, very, very fragile.

Yes, and it's not only stock market misvaluation. Perpetual growth economics itself functions like a Ponzi scheme insofar as it renders the planet more challenging for future humans to live on.

You can’t live inside a Bitcoin.

While you can be tempted to define Bitcoin in that way, the Ponzi scheme definition doesn't apply [1]. As the parent comment: in Bitcoin no investor has the precise information of when to exit to defraud others.

[1] https://www.investopedia.com/terms/p/ponzischeme.asp

I think the Tether people know quite well when to exit, because their implosion will bring Bitcoin down.

Why? There are other stablecoins, with better reputation. Could people just switch to them?

Tether mediates a lot of the BTC/USD-exchanges. At the same time there are rumours that tether has insufficient USD backing, so if there is ever a bank run, exchanges will be unable to pay. At that point it will be too late for a tether alternative. And after the "big tether crash", regulation will be a lot harsher on exchanges and possibly all crypto currencies, which will continue to depress courses. And I really don't know if the alternatives are any better.

Yeah, I totally get the concerns about Tether's solvency. I guess what I don't get is why Tether remains popular, as a product that isn't unique. Is it just that it's too dangerous for everyone to admit that the emperor has no clothes, because it would crash the whole system? Is it not a liquid market?

If I were sitting on a bunch of USDT, but I wanted to be holding USD stablecoins, just generally speaking, why not swap them into a different stablecoin?

Maybe another question I should be asking is what proportion of Tether is being used to collateralize leveraged long positions in other crypto assets? Maybe that's why this is a tinder box?

Sorry for all of the questions, but legitimately trying to understand what people are talking about.

Tether is also backed by other stable coins and crypto assets. And that is not even a rumor, it's a fact that they are not denying. I have a strong suspission that Tether is used to pump the price of crypto.

Your link never states that early investors have to know when to exit for the definition to apply.

No one has denied that Bitcoin is an innovator when it comes to new ways to scam and defraud people.

I honestly never experienced that. Its not like any crypto investor is running around converting others.

There are people promoting it on youtube - I was watching some last night (What Bitcoin Did https://youtu.be/Pw6tfNh8DAk) but most seem to be recommending it sincerely rather than trying to sucker some fools in so they can cash out.

It's an interesting time in the history of bitcoin as we are starting to see a move from small speculators (number go up) to institutions buying in (it's sensible to diversify 5% of your portfolio into crypoassets as they have historically high returns and low correlations).

Sure i do talk positive about crypto too. But i would never tell anyone where to put their money.

Its just wrong to think all people in crypto are evangelising others into their ponzi investments

How many crypto investors have you been around? I’ve had many, many coworkers trying to convince me to buy Bitcoin over the last decade. This is across different companies, teams etc. And I have definitely witnessed the same thing online.

I mean I wish I had listened because BTC was $50 a coin the first time someone tried to convince me to buy in.

It was $50 at the time precisely because people failed to convince others.

I see lots of people fall into the "If I only had done X back in year Y, then I would be rich." fallacy. No, you wouldn't be rich, because the information available at the time didn't justify such a decision. If that information were available, Bitcoin would have been worth $60k in 2009.

Right now nobody can tell you what will happen to Bitcoin, because all available information is already priced in. At this point it might go up but it might go down as well.

That wasn’t my argument but Ok.

Plenty. However maybe thats a cultural thing but i rarely have people insisting on any kind of investing advice. We might talk about stuff, but both sides know risks are involved. I never experienced evangelism IRL and i even spent some time in ctypto meetups

The entire crypto art movement is a marketing campaign designed to turn artists into crypto evangelists, i.e. convert others.

Source? Couldnt it be that some artists are just super happy they found a way to dsitribute their art lucratively?

I’m not saying that all artists are in on it (probably very few of them are). But the truth is that the artists who are getting paid are the ones pushing NFTs as “the future of art” and who have the influence to rope in newcomers. Collectors in the space refer to this as “engaging with the community”.

The crypto-famous NFT collector “Silver Surfer”, known for dropping hundreds of thousands of dollars on NFTs [1], tweets “celebrities that fail to get engaged with their communities will continue to have weak secondary [NFT] sales.” [2] That’s weird, I wonder why the money would stop flowing if the artist stopped tweeting about NFTs? Doesn’t their art still have value?

The truth is, if you spend enough time around the crypto art community, you realize that there aren’t any “real” art collectors in the space. There are crypto speculators, and there are artists who feel obliged to “engage with the community”. The lack of real money flowing into the space is what leads me to label this as a marketing campaign, as opposed to a completely organic movement. It’s a somewhat decentralized marketing campaign, but it’s a marketing campaign nonetheless.

[1] https://twitter.com/makersplaceco/status/1359654252944105473

[2] https://twitter.com/7Surfer7Silver7/status/13827818844433367...

Gold mining through the centuries has probably caused much more environmental pollution than bitcoin, and bitcoin ~~mining~~ minting is programmed to end.

Bitcoin can be transferred around the world easily, The way gold achieves permanence is partially by being extremely hard to move around and store.

Gold can be outcompeted too, aluminum used to be more expensive than gold.

Bitcoin mining is not programmed to end. It has two functions: issuing of new coins and safeguarding transactions. From these two only mining of new coins will eventually end but it still is likely to stay profitable for many decades. Safeguarding transactions, with reward from transaction fees, is programmed to go on indefinitely.

I second this comment. Glad to see someone knows the actual protocol rather than speculating.

> A currency must earn interest

Taleb at it again. He's decided on his definition of a currency and, lo and behold, Bitcoin doesn't make the cut, much to the chagrin of the coin bros who will flock to its defense.

Normal currency is zero-sum from certain contexts. If I have a dollar and I give it to you then you won and I lost. The only reason that fiat currency earns interest is that the promise of payment tomorrow is almost as easily tradeable as the product itself which, given BC's volatility, is difficult.

Bitcoin is a currency in that it is a medium of transaction, no matter what Nicholas Taleb has to say about it. It is not failed at being a currency but it has failed at being a stable currency so far.

points 1 & 2 are contradictory. 3 is easily gamed. 4 can be worked on.

The idea of a permanently-inflationary cryptocurrency with a stable inflation rate doesn't sound bad

However, bitcoin as digital gold will still survive.

I 'm pretty sure what he describes it the current banking system as well: banks loan the plebs who pay back interest, who then the capitalists convert to gold,art,real estate, permanently enriching themselves. Even the data from piketty etc shows it's true. Bitcoin ecosystem is just the digital version of this.

No, we cannot 'do it'.

1) a) There can only be 1 currency for an economic area - this is because we need price stability. The 'second currency' with the promise of 'less dilution' wouldn't be useful for transactions - people are not going to accept it widely, therefore it becomes more of a potential 'store of value' (but most cryptos are not good at that either).

b) A currency or any store of value is as good as the entity backing it. There is no avoiding that. You cannot have magic numbers represent value. Currency is a contract between you, and the people that use that currency.

2) Stable/Reliable for contracts. Contracts are agreements that are only valid in a legal regime. They are completely pointless without a legal framework to judge them in - and where there is enforcement. They always require interpretation. An 'independent document' doe nothing to help.

3) 'Storage' - you can't 'store' value in a bunch of numbers. You can buy land, commodities, stocks, bonds, commodities with some underlying value. We could feasibly use Gold as a kind of 'historical agreement' about what we value and do not (which has incumbency) - but the volatility of crypto makes it poor for 'store of value'.

4) Rapid transactions. We already have those.

Finally - we lose monetary policy and hand it over to an algorithm. No thanks.

The crypto world fail to understand what currency is, why it is used, and why we do the things we do but most fundamentally that money is a contract ultimately.

When China stores $1T in USD as excess reserves, surely, it would like to not have to depend on the US Government but there is no other way.

A USD is a contractual IOU from the economy of America - there is no way around that, no way to just magically extract the value of those trade surpluses into something that has intrinsic value.

A kind of Crypto that is backed by real assets, to replace VISA - merely to make transactions easier, might work. But any crypto backed by assets has centralized trust (fine for most people) and it would be hard to promote because it would need price stability and with price stability means you don't have millions of GenZ on their iPhone buying in.

Crypto might have a legit future but nothing on the horizon seems to fit just yet.

It is the idea that money is credit / debt.


As for Bitcoin. Who cares if it is a bubble or a ponzi? People make money and gambling is a part of human nature.

People are stuck at home and cannot go to the cinema. Investing in Bitcoin and watching Elon's twitter is an ok replacement for now.

OK I will bite.

> As for Bitcoin. Who cares if it is a bubble or a ponzi? People make money and gambling is a part of human nature.

People who want to use it as a currency and people preferring to avoid losing their investment in a dumb bubbles.

(it is more OK if it is a dumb gambling with what someone is considering as entertainment funds, but nearly noone is doing that)

There are a number of Bitcoin variations out there (Bitcoin Cash and BSV) which are tuned in manner that gives faster and cheaper transactions. None of them seem to have caught the eye of investors. My interpretation is that investors like their ponzi and don't really care about whether the technology is useful. I could try and scold them but I don't think it works, therefore I choose just to accept them as they are and see their beauty in their own right.

In the money as credit model, the money supply expands and subtracts with economic activity. And the best suited money have price stability so the market of credit can focus "pricing" risk correctly.

This model of money could be supported by some kind of cryptocurrency, however right now the investors don't seem to have an appetite for sponsoring that sort of thing.

You are describing speculation, not investment, and yes there is a difference, though people often lose sight of that during bubbles when the price is all that matters.

Speculator, investor ... I don't want to pass judgement. I listen what ARK Invest says, I think they are smart people, but I also think they overshoot.

Speculator, investor ... I don't want to pass judgement


In this sense bitcoin is just like any other currency: it works because we all believe it works. The second people stop believing in a currency is when it will implode, there are plenty of historical examples of this.

Bitcoin's value in terms of pizzas you can buy with one has balooned ever since it was created, with massive fluctuations. It's awful as a currency because of that - why would I buy a pizza today when tomorrow I could buy two?

Because you are hungry today.

If you're going to let the future determine your transaction patterns too much you will quite literally starve in the present. So even in that scenario there will be transactions and people will be happy to take your coin because they too hope that its value will go up. Obviously once a large fraction of world trade would be in a currency like that the currency itself would start to exhibit the same traits as the global economy and this effect would mostly cancel out any inherent properties.

Effectively: bitcoin was underpriced at the beginning to the point that it could only go up, the question is how far it will do that before it will have expanded to fill the niches where it fits. As soon as that has happened it will cease to increase.

> None of them seem to have caught the eye of investors.

That's the problem with this doublespeak, where people intentionally fool themselves into cognitive dissonance.

The whole point of currency is not investment. It's the exact opposite of investment. Currency is intended to have stable value over time, because it's whole point is to serve as a unit of account, store value, and serve as a medium to exchange value in an economy.

By it's very definition "investing" implies the expectation of profit. Think about it for a second: how can something intended to have a stable value be considered apt for speculation?

Not to go into too much detail. But in a debt based system you have bonds and currency. A bond has the risk of not being repaid, speculators speculate in the likelihood of that and their individual decisions give a market price for that bond. Likewise bond may have repayment price-indexed and speculators then speculate indirectly in the currency's price stability.

Point is that even with stable prices, there is plenty of room for speculators.

Bonds are not currency. That comparison is even invalid as a strawman. I don't understand why I need to point this out.

Even if you feel the need to equate crypto-things to bonds, first you need to argue why buying, say, bitcoins can be argued as lending money to someone, which makes no sense whatsoever.

Cryptos are nothing more than speculation vehicle, and it's pretty obvious that they are massively used as a pump-and-dump scheme. The only point in time where cryptos played a relevant role as a currency was way back in the silk road times where cryptos were used with the expectation of laundring transactions. That usecases quickly went out the door ages ago.

But Bitcoin specifically excludes credit. I put $100 in the bank. The bank lends $50 to an entrepreneur. Now there is $150. That’s the magic of credit. And it’s impossible with Bitcoin.

Why is it impossible with Bitcoin? This is already taking place. How do you think the interest bearing crypto accounts work? Rehypothecation, lending the same coin possibly multiple times.


I’m not sure I get it. Only one person can own a Bitcoin at a time.

So some people of reinvented fractional reserve banking. But now with the problem that it’s unregulated, unbackstopped by a lender of last resort and ultimately through rehypothecation you’ve virtually eliminated any advantage gained by using blockchain technology.

> And it’s impossible with Bitcoin.

I'm sure bitcoin purist will hate it, but afaik there's a lot of btc being held at exchanges (e.g. coinbase).

Technically instead of holding BTC there, you could be holding cBTC (value in a coinbase btc deposit account) and coinbase could issue cBTC loans similar to banks.

(The issue is that there's no backstop like in the real world, where central bank can step in as lender of last resort to avoid bank runs)

So cBTC simply isn’t Bitcoin. It a double spend by design. So the whole fixed supply goes out the window when depositories start extending credit.

I often hear: investment is good, gambling is dumb, speculation is risky.

In my opinion, in most people's dictionary, these things describe the same things and when we use these words, there is no good, measurable way to classify them, we just act on our instincts, yet when we use words like investment, we feel safe and clever.

Good point about the currency part, I don't think BTC is going to be a good currency, it's expensive, slow, traceable, public.

Honest, successor crypto-currencies, who work for their money will have to fight the fallout once the scheme collapses and people who lost everything demand government to regulate "rogue" currencies? Distrust will also prevent a whole generation of investors to invest again?

> Distrust will also prevent a whole generation of investors to invest again

My parents lost a lot in the 2000 crash, so were spared from the 2008 crash. Between those two I decided buying shares was a mugs game

(Nasdaq was 4000-5000 before crashing to 1300 back in 2000. It recovered to 2500 by 2008 before crashing back to 1500.

It's now 14,000 - massive gains in the last 10 years I've missed out on because of not trusting.

If you'd have bought $1k of Nasdaq and 1k of Bitcoin 5 years ago, you'd have $3k from nasdaq - an amazing return.

I can sort of see why the nasdaq is so high though. Crypto though?

That same $1k would mean you'd have $137k from bitcoin. If that's sustainable I don't know what unsustainable is.

DOGE? You'd be a millionaire.

But the political decisions of the economy seem to be built around driving these things up. It makes the UK house price boom of the 90s and 00s look tame - 500% in 25 years? A measly 6% roi?

25% per year gains on stocks, 170% per year on bitcoin? 300% per year on DOGE?

In 2018 people were saying about tulipmania with bitcoin and how the price would collapse. It did. $1k invested at the height of the bubble in 2017/18 when it reached $20k - 20 times what it was earlier in the year, was soon worth just $150.

It would now be worth $3k, 45% per year roi from investing at the worst possible time

Putting a measly $10 a month into bitcoin every month for the last 5 years would have cost $600 and left you with $14,620 today.

The market can remain retarded longer than I can remain solvent. The only thing I've learnt waiting for things to crash is that I'm an idiot, and people who fall for hype are rich.

Could you point me to an alternative investment that can not lose its value, please?

There is not such thing.

Every single thing can lose its value. In addition:

Real estate can be bombed in a war or confiscated[0] and is not mobile for obvious reasons[1].

Gold can be stolen, confiscated - and it happened already more than once.

Companies can go bankrupt.

Items - either productive like machinery or various stores of value like art are not immune.

Cash/bank accounts - well, money printing will get you here.

Cryptocurrency - ridiculously volatile, many exciting dangers, can be stolen remotely with no recourse.

You are looking for an unicorn.

[0] For "real estate will never go down in value" fans: https://en.wikipedia.org/wiki/File:Destroyed_Warsaw,_capital... https://en.wikipedia.org/wiki/File:German_Brennkommando-firi...

[1] Fun fact: Polish words for real estate is "nieruchomości", "nonmovables"

Fun fact: Polish words for real estate is "nieruchomości", "nonmovables"

Same in NL, "onroerend goed" translates (literally) as "non-roaming goods".

> [0] For "real estate will never go down in value" fans:

You realise that these properties in the picture (Plac Defilad right in the centre of Warsaw) are worth a lot nowadays. And descendants of the original owners get compensated (the land had been confiscated after WW2 by communist government). So I would rather say that real estate could be illiquid with temporarily depressed prices occasionally.


> the land

What about people who owned a flat? Have they got compensations restoring entire value? AFAIK no in general.

Or even a noticeable part of original value?

One of my friends recently got compensation (after 60 years old legal battle initiated by person who died before it completed). But that was for property that survived WWII and got confiscated after it.

> And descendants of the original owners get compensated

In other words value of original property went down (especially given opportunity cost).

And they were quite lucky, in similar cases many lost without recourse.

But overall I agree with the main point: real estate is one of best stores of value, some of it can survive even that.

But describing it as never, ever loosing value is not true - in many cases it lost part or all value, permanently, without compensation.

I agree with your arguments.

But there is another asset class beside real estate - arable land. People see gold as store of value which is false to some degree - gold was historically more of mean of exchange (of landed wealth) while the universal asset class paying regular dividends since Roman Empire until Industrial Revolution was arable land. And to a degree still is but since Industrial Revolution there are many alternative assets available that provide better/competitive returns (like government bonds)

Of course land could also be taken away but that happens very rarely (Communist revolutions in Russia, China, Central Europe). Historically land-owning class is stable. For example in largest wealth grabs in European history (Burgundians in France, Vandals in North Africa and best of all Norman conquest of Britain) there was generally sharing and mixing between old and new land-owners.

Yes, that should be less fragile than flats/buildings and even more resistant.

As a city dweller posting on internet I somehow missed arable land in a comment about good stores of capital. Go me!

Despite that my cousin owns large farm. Staying for so long in my family that it was located in 5 countries since my family moved into that specific location.

But still, it is not a magic pixie dust: your land can be confiscated, or taken by sea/river or polluted by industry/salt.

Or it may be turned into wetland/desert by some other external changes beyond your control.

> descendants of the original owners

Indeed. I believe that succinctly sums up the outcome of the investment for the actual person who did the investing.

For most people, the word temporary is not a good description for situations that persist until after you’re dead.

"In the long run we are all dead" -Keynes

> can be stolen remotely with no recourse.

By bruteforcing into the wild? What are ypu referring to?

Malware scanning for wallets is not unusual.

In some cases password (private key) as sole and sufficient method to have full control over asset, executable by anyone is a problem not a benefit.

Malware stealing bank accounts, credit cards & paypal is just as popular. All of which you have no real influence about the actual account security.

Banks have more security measures in particular.

You can't just login to paypal from another IP. You can't just login into most emails these days ( 2FA)

Crypto wallets have none of those protections.

Other than that:

EOS (dPoS) reversed transactions multiple times while being top 10 at the time: https://cointelegraph.com/news/eos-reverses-previously-confi...

Ethereum Classic was attacked multiple times with chain reversing double spends due to not enough energy being committed to immutability: https://www.coindesk.com/ethereum-classic-attacker-successfu...

Ethereum reversed the "DAO hack" with a hard fork.

> Crypto wallets have none of those protections.

Which is simply not true, there at least 100 Wallets just in the Android Store. You think none of them has some kind of additional protection?

I thought as much. I suppose some things are riskier than others, but at the moment I really don't know which ones.

risk always changes. you should be constantly reviewing and updating your exposure according to your risk assessments. (for some, this is daily; for others, once a year may be enough.) if you don't want to do the work - understandable, since it's an impossible amount - you might want to start from looking at the bond market. this is what they get paid for. (not saying that you should be buying bonds - but look at relative price of bonds)

Gold maybe.

But gold is not a currency either, so hmmm.

In all earnest, I wonder when the mainstream will realize that in a digital world the store of value and a currency can be different because they are easily interchangeable.

Just like bonds or gold for long term investment (store of value) and dollar (currency).

Good luck transporting and securing larger quantities of gold and also exchanging it for money. One basically has to declare any quantity in excess of six ounces / 170 grams of gold because it exceeds 10k US dollars / euros.

what's wrong with declaring? It's not like it'd be taken from you...unless you illegitimately obtained it.

It can via tax...

If there is a wealth tax, as is being discussed in many places, it could be taken from you.

If you carry your bitcoin wallet with you do you need to declare that?

paper gold trades like a currency, bitcoin trades like a commodity.

gold - the real thing - i guess you should have some, but this is more like insurance than asset, don't ever sell unless the world is ending stuff.


I had a friend who was a lawyer in South Africa before their political upheaval. Once his career of choice ceased to exist, he ended up becoming a software tester, then an IT guy at a bank.

What's more concerning to me is the cryptocurrency market as a whole. Perhaps there is an argument to Bitcoin being a kind of "digital gold" even if it is all but useless as a currency. But events like Dogecoin hitting a $50B market cap are very unsettling to me.

I used to take part in "Dogecoin Socks for the Homeless" events. It was wonderful, everyone was trying to make something good out of what we all knew to be a meme. I am shocked now to look back on those wallet addresses which once held ~$1,500 and see they'd be worth $285,000 (had I held). Of course, it might be that I'm just angry I wasn't the one to become rich, but the mania right now is really, seriously, insane.

Many people who are FOMO-ing in thinking this will make them millions with a few hundred dollars invested will be hurt when the "number go up, number go down" cycle turns to "number go down."

> Perhaps there is an argument to Bitcoin being a kind of "digital gold" even if it is all but useless as a currency.

Gold is less useful than most people think:

> In a 2012 paper entitled "The Golden Dilemma",[1] Claude Erb and Campbell Harvey examined some common assumptions about gold. First they looked at gold as an inflation hedge, analyzing gold returns from 1975 (the year the U.S. came off of the gold standard), through March 2012. They found that, due to its real-price volatility, gold had not been a good inflation hedge over the short- or long-term.

* https://www.pwlcapital.com/will-gold-save-the-day/

It's only of note because of historical accident and it's use in certain cultures (along with silver as well). The Incas had piles of gold, but only used it for jewelry and such, and not as a currency.

* https://www.tourinperu.com/blog/inca-gold-culture-invasion-r...

If we didn't have the culture references of the Gold Standard, I don't think most people would accept a shiny rock as anything special. Or at least gold (Au) specifically, and not any other Period 6 element:

* https://en.wikipedia.org/wiki/Period_6_element

Is there perhaps something special about Group 11 element (Cu, Ag, Au) that they should be treated as "currency"?

* https://en.wikipedia.org/wiki/Group_11_element

They are certainly useful from a tooling perspective in some ways, but beyond that?

> I don't think most people would accept a shiny rock as anything special.

Gold isn't being treated all that differently to the other period 6 or 11 elements. Although it does sometimes get randomly good tax treatment due to its history which keeps it entrenched as the first choice for a monetary metal. But fundamentally it is being sold at cost to mine + a margin, same as everything else. My memory is anything with similar properties to gold has a similar price. The bulk of its value comes from nobody being able to produce the stuff for much less than $50k/kg US.

If history was erased, the price of gold would go down a bit because demand drops, but it would still be somewhere similar to $50k/kg US - to a first approximation people can't produce gold more cheaply than that. The price might even go up if the cheap producers are big bulk-mining operations.

Alternative is that the price would drop far below $50k, mines would shut down and people would just trade gold that is already available on the market.

Just because something is expensive to produce doesn’t mean that it’s worth that much.

> Just because something is expensive to produce doesn’t mean that it’s worth that much.

Well ... it kinda does? If a commodity cannot be produced for less than $X, then the price of that commodity is not going to be that far below $X. The price can vary away to anywhere you like to signal for producers to open and close in the short term, but the equilibrium price point is ~= cost of production and the market will trend in that direction.

I'm going off one article [0] but there is enough gold to make a 28m x 28m x 28m cube. That isn't a lot of gold when compared to the 8 billion humans in the world and the amount of metal we go through (of iron, aluminium, copper, etc). Unless something really novel happens in the mining space, the price is never going to be low enough that an ordinary person can have a big block of gold. It will stabilise on the cost to mine pretty quickly.

There are other metals that are just as good as gold (like platinum) that get less press but are similarly priced.

[0] https://www.usgs.gov/faqs/how-much-gold-has-been-found-world

> mines would shut down

This sparks an interesting thought (for me) - gold mining (and really, any mining) is intertwined in modern times; copper mining produces gold as a by-product for example. We derive palladium and platinum from refining for other metals, we get sand for concrete from gold mining, etc. Point being, the mining industry is interwoven as to what is extracted for refinement, the by-products of that refinement (and the environmental destruction :() which of course is all economically intertwined. A mine probably won't shut down, it would probably shift to another focus?

But Bitcoin is mined for one thing (itself) and produces environmental waste (heat, etc.) with no by-products (another coin?) and no other mining (Monero?) produces Bitcoin as a by-product. So it makes me think that while it sounds good on paper to compare Bitcoin to Gold, it really doesn't work like that in real life.

Fun fact: all the gold ever mined on earth could be contained in about three Olympic-sized swimming pools (https://www.forbes.com/sites/afontevecchia/2010/11/19/how-ma...)

> But fundamentally it is being sold at cost to mine + a margin, same as everything else.

I don't think this says anything about why the gold price is what it is. If gold suddenly gained lots of value then it would still be cost + margin, because new mines would open up in places where gold mining had previously been unprofitable.

> But fundamentally it is being sold at cost to mine + a margin, same as everything else.

This price chart, especially since early 2019, seems to suggest otherwise:

* https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM


> These metals, especially silver, have unusual properties that make them essential for industrial applications outside of their monetary or decorative value.

Sounds special to me. There are lots of things we would make out of gold and silver if they were more common. Gold has quite a bit of inherent value independent of cultural accidents regarding beauty.

Silver is quite useful as wire. It's a better conductor than copper, but because of cost is only used rarely. It was used in WW2 for making magnets for uranium processing.

It is really an amazing story!

> But copper—used in shell casings—was a high-priority commodity during the war. So Marshall and Nichols struck on the idea of using silver as a substitute. Congress had authorized the use of up to 86,000 tons of Treasury Department silver for defense purposes.


> Nichols met with Undersecretary of the Treasury Daniel Bell on August 3, 1942, to inquire about borrowing 6,000 tons of silver from Treasury vaults. In his memoirs, Nichols relates that Bell indignantly informed him that the Treasury’s unit of measure was the troy ounce—though not all present at that meeting recall any unpleasantness.


> Scrap recovery and cleanup operations were so successful that over the course of processing, more than 1.5 million pounds of silver were collected and returned to Treasury, much of it likely originating from earlier and unrelated silver processing. That more than offset a much smaller amount—11,000 pounds—of borrowed Treasury silver that was unaccounted for.


> The busbars were massive conductors about a foot square that carried current to the magnet coils. During their manufacture, armed guards again stood by, this time with pieces of paper positioned to catch drill dust as workmen bored holes in pieces of silver in preparation for fastening them together.


> But events like Dogecoin hitting a $50B market cap are very unsettling to me.

It's the sign of the peak of the bull market. There is going to be hangover.

It's the sign that no crypto has really found the right value-add yet.

They are all struggling with poor transaction throughput/high fees, huge bandwidth for nodes, deflationary money supply, etc...

I only had Doge because I could use it for cheap exchanges between hard to find currency pairs when I was mining. Those pennies of left over coin became thousands of dollars worth and I sold at $.04 when the Diamond Hands on WSB pumped it during the start of the GME squeeze. It all makes no sense and yet I participate.

'Investing' at an all time high, is going to upset lots of late comers.

Signalling a great big crash, waiting to happen.

This isn't even close to what will be the all time high. I know HN has a significant aversion to cryptocurrency (which absolutely befuddles me for the foundational societal concepts it modernizes) but love it or hate it if you think this is close to the peak you've been in a cave the last decade.

*Edit: speaking about crypto as a whole not specifically doge coin. BTC and ETH first to market with digital solutions to antiquated economic problems. But I'm not joking when I say the cut of Musk's jib puts a significant non-zero chance that he announces Doge will be the official martian currency. PT Barnum or not, I wouldn't completely discard the idea.

> This isn't even close to what will be the all time high.

The problem is nobody can tell where the top is, and there IS a top, these things don't grow forever (you can't have infinite growth and it becoming infinitely valuable).

Now there are multiple things that might happen when growth stops:

* 1) The price stabilises and bitcoin/crypto becomes a major standard currency, which people want to use and spend. This certainly isn't going to happen for btc due to transfer fees, but could feasibly happen to a different coin. I think this is unlikely because there are several factors that actually stop crypto being an ideal currency (e.g. non-reversibility in case of fraud or dispute resolution).

* 2) The price stabilises and everybody keeps their money in crypto because it is a store of value. Personally I find this unlikely as I think most bitcoin 'investors' actually want to see their money increase in value rather than the value stay static.

* 3) The price stabilises and crypto doesn’t manage to become a standard currency which is easy to use everywhere - and although initially people hold their money in bitcoin to see if there is another rise, when it doesn't come people start to withdraw funds to realise their gains (if bitcoin isn't growing what's the point holding it?). As people sell bitcoin the value drops and never goes back to it's high. As more people exit the bubble is burst.

I personally think number 3 is by far the most likely outcome, however it's impossible to tell where the top is. I think the most sensible approach is to acknowledge it’s likely a bubble, and if you invest funds to acknowledge you are effectively making a gamble that the bubble won’t pop yet (and you are confident that you will realise when to sell before the rest of the market does and not hodl all the way down like we saw with gme).

I don't know if we're there yet or not, but I remember last peak I started to here about crypto in my non crypto media feeds, aka comedy podcasts. I just saw my disc golf feeds talk about crypto. I think that's a strong signal.

Last peak was pretty much 100% retail investors like your disc golf gang.

The amount of institutional investment this round offer legitimacy and absolute scale of potential that can't be overlooked by anyone that's been paying attention.

Honestly, for the amount of forward thinking technologists that call this nook of the internet home, there is a ridiculous blind spot for cryptocurrency. It's actually ridiculous to me that such forward thinkers could be such luddites.

Will it take another decade before you realize we're there - or if not yet, where this is going?

I have been around in the crypto space for a significant amount of time (think $700 BTC) and have started two startups which use blockchain tech to a significant degree.

But I am very disappointed in BTC and ETH. BTC did not become “A Peer-to-Peer Electronic Cash System,” and we haven’t seen the explosion of uses-cases I hoped to see from ETH (like tokenization and trading of real-world assets). There’s a ton of froth and solutionism in this space, which is OK, but it also understandably puts off a lot of people who see it as a scam-ridden wasteland.

That’s to say nothing of the Tether black swan to come.

>BTC did not become “A Peer-to-Peer Electronic Cash System,”

I understand that people are disappointed by this thus seeing the idea of BTC as a whole as a "failure", but given the fundamental properties of the system (finite supply, distributed network) it was never possible for BTC to become a currency used widely in everyday high volume transactions. Impossible.

Hal Finney even recognized this in early discussions predicting BTC wouldn't be used in high volume but more likely as a reserve asset, which BTC can absolutely be. Functioning as a digital gold, despite people's aversion or annoyance at this concept. Acting in concert w/ other payment methods or fiat currencies used for payments, taxes, commerce, transactions. A store of value to complement inevitable debasement or dilution of uncapped supplied fiat.

Sure but Hal probably didn’t realize layer 2 solutions such as Lightning Network were possible, with low fees and fast transaction times using bitcoin.


I see that as third party rent seeking behavior and a bit of a co-opting.

And that's fine, because the beauty of satoshi releasing it as open source spawned an entire ecosystem of ideas and implementations, so while his 'baby' may not be what he envisioned the basic idea and problems solved live on through evolution.

I've been around since I read about it on slashdot in 2009. Was one of the first online retailers accepting bitcoin for purchases (late 2010). And I completely agree.

Monero is the 'ideological' best cryptocurrency in my opinion, and I've hedged my bets across a handful of coins that I think at least offer something valuable to the future space.

Bitcoin has the first mover advantage and although bastardized into a 'gold like store of value' completely detached from its original use case I'd still want to own a decent amount because why fight momentum.

I agree with everything you say (wild west token scams, tether backing and sketchy accounting) but I think there is too much benefit at the core for one to disregard the entire space. The cream will rise to the top.

BTC did not become “A Peer-to-Peer Electronic Cash System”…

It certainly has when you consider that by cash Satoshi meant cash as a bearer instrument.

Unlike a federal reserve note—a piece of paper—that represented the thing that’s valuable—gold, bitcoin itself is the thing of value.

> I hoped to see from ETH (like tokenization and trading of real-world assets)

For ETH to trade real-world assets it needs everything else that the real world already provides: laws, courts, verification systems. Hell, it actually needs that even for digital systems.

Correct. Blockchain is only able to extend its guarantees to concepts wholly encapsulated by the blockchain. That's the reason only "currencies" have been successful thus far. The boundary between the blockchain and the real world is not a surmountable one - not with the guarantees of the blockchain anyways. And once you get rid of the guarantees it's just a slow, inefficient database.

This is why, try as people might (in over a decade) they have yet to achieve literally anything that isn't a currency with it.

I think this is not quite true. You can represent real world events and data with oracles. This is being now through Chainlink for things like security price data. Of course, it's probably not so simple to keep oracles in sync with increasingly niche real world data.

> You can represent real world events and data with oracles.

You can represent them, but that's about it.

For Ethereum contracts to be enforceable in the real world (and even in the digital world) you need significantly more than just representation.

> That’s to say nothing of the Tether black swan to come.

Black swan refer to unexpected events, right?

By black swan I mean that I'm convinced something bad will happen with Tether, but I don't know what. It's like Rumsfelds' "known unknowns" [0].

[0]: https://en.wikipedia.org/wiki/There_are_known_knowns

That's a white swan. Unknown unknowns are black swans.

It will be interesting to see what happens when those who exit at the top move into USDTether and try to cash out.

What makes you think a forward thinking person should be supporting bitcoin? The ideology behind bitcoin is anything but forward thinking.

Crypto is a grift that grew into a scam economy. That's why it's unpopular on this site.

Either you are wrong, or lots of people here are wrong. Which do you think it is?

If I've been wrong since 2010 then I don't care and don't want to be 'right'

> which absolutely befuddles me for the foundational societal concepts it modernizes

There are literally no fundamental societal aspects that cryptocurrencies modernize. Unless you call speculation "not modern".

I disagree with you. Some coins like tezos and cardano or a similar coin will be a creative destructive force for many institutions. They allow for truly decentralized authority. Think passports without an issuing country. Think money without a central bank. They are building the systems to be all the things that Taleb laments in Bitcoin.

> Some coins like tezos and cardano or a similar coin will be a creative destructive force for many institutions. They allow for truly decentralized authority. Think passports without an issuing country. Think money without a central bank.

These are all just words that amount to nothing but marketing. To be all that these coins need to painstakingly re-create all the institutions that make passports, money etc. possible: laws, courts, trust systems, enforcement etc.

There's literally nothing in the "fundamental societal concepts" that they modernise.

I remember thinking thoroughly about stuff like this in 2009 as I was very interested in political and economical philosophy back then - and back then the core idea of Bitcoin - a token that can be sent to anyone, semi-anonymously, completely out of governmental control - would be laughed out of the room, a silly theory pondered by Austrian school economists. That is a fundamental societal concept it introduced and tested at large, and fundamental development of the society.

> a token that can be sent to anyone, semi-anonymously, completely out of governmental control - would be laughed out of the room, a silly theory

You realize that this a) doesn't constitute a fundamental societal concept and that b) sending secrets outside of government control isn't even a novel idea?

> and fundamental development of the society.

There's still nothing new or fundamental introduced by cryptocurrencies, and they rely on existing concepts old as time to even function outside their bubble.

Why does every feature implementation feel like the Manhattan Project for the crypto guys? So many of these stories were told in 2017, and in 2021 we're still talking about future updates and 'will be', rather than working products.

Eth 2.0 for example was talked about for years, I'm still here getting wrecked on fees.

Lightning network for reducing BTC fees is another beauty we hear less about now days.

> Think money without a central bank.

Wondering what's the chance of it becoming the speculative anything-goes plaything of the entire big biz financial world without a central bank to keep them (at least marginally) in check.. and with lotsa money of the 'small people' on the line?

"I know HN has a significant aversion to cryptocurrency (which absolutely befuddles me for the foundational societal concepts it modernizes)"

I can't for the life of me figure out why HN keeps hating on bitcoin for the past 10 years since ive been following this site has but has been pretty much spot on about every other tech related subject. It initially discouraged me back in the early days but once you GET it, you realize its one of the biggest technological breakthroughs in the history of mankind.

I think with bitcoin you simply can't read about it but actually get your hands dirty and fully use it to really understand the potential it is going to have.

Does Musk have authority over a whole planet or is this just more mindless celebrity worship?

> Does Musk have authority over a whole planet

Of course not. Anyone is free to make a settlement on Mars and choose their own currency.

I've been saying that for years

I hope you didn't buy BTC @ >$60K then.

This is more a mania with dogecoin. Of course set off by robinhood traders and elon musk tweets.

blame musk all you want, he knows doge is a joke and treated it as such. same for doge creator. there's simply so much money looking to be put to work that people throw it around to see what sticks.

i don't believe that anyone trading doge isn't aware this is a ponzi. the only question may be if it's by design or by accident.

or maybe memes have value after all...

Memes are influencing presidential elections.

Also a Conagra Foods Slim Jim cross promotion announcement.

Money only works because we all agree to believe in it.

The book Money by Jacob Goldstein is the best thing I have read on this. It covers the useful fiction that is money and how it has has shaped societies.

From the inception of coins in ancient Greece, the first stock market to current day cryptocurrencies. When people first came up with coins and paper money, don't you think people questioned their value?

"At the heart of the story are the fringe thinkers and world leaders who reimagined money. Kublai Khan, the Mongol emperor, created paper money backed by nothing, centuries before it appeared in the west. John Law, a professional gambler and convicted murderer, brought modern money to France (and destroyed the country's economy). The cypherpunks, a group of radical libertarian computer programmers, paved the way for bitcoin.

One thing they all realized: what counts as money (and what doesn't) is the result of choices we make, and those choices have a profound effect on who gets more stuff and who gets less, who gets to take risks when times are good, and who gets screwed when things go bad."

For the record I am in on crypto including Dogecoin, just as I am in on FAANG, just as I am in on index funds, just as I am in on property. I honestly people not diversifying would be hubris.

> Money only works because we all agree to believe in it.

The major popular currencies are very sticky and very difficult to stop believing in them.

Whatever you might think about the US declining compared to China and other issues, there's still a $21T economy with the economic activity of 330M people behind it.

And if you're doing business in this country the US government will demand that you pay your taxes in USD. There's a lot more inertia in the USD than people into crypto give it credit for. Everyone in the country could, in theory, wake up tomorrow and all decide to use something different, but in reality that won't happen.

Crypto can (and most likely will) crash hard and while its getting big enough now that the damage will likely ripple through the economy a bit, but the US economy will go on.

And I'd strongly recommend Galbraith:

https://www.amazon.com/Money-Whence-Came-Where-Went/dp/06911... https://www.amazon.com/History-Financial-Euphoria-Penguin-Bu... https://www.amazon.com/Great-Crash-1929-Kenneth-Galbraith/dp...

No. Fiat money works because the government makes it legal tender for debts. It would be more accurate to say that state institutions only work because we believe in them. Fiat money gets its utility from the government which exercises force.

> For the record I am in on crypto including Dogecoin, just as I am in on FAANG, just as I am in on index funds, just as I am in on property.

All but one of those is positive sum. One of them is negative sum.

> I honestly people not diversifying would be hubris.

There's an infinite set of things you can diversify into. Speculative mania does't have to make the list. It can, but it certainly doesn't have to.

I personally believe everyone should allocate 5% of their portfolio to GameStop. There's only 69 million shares outstanding, that's not enough for all the world's millionaires to own just two! I'm as in on GameStop as I am index funds, and real estate, and various tech picks.

positive sum land ownership?

Well, you need a place to live right? So that's rent you would otherwise have been paying to someone else. If it's a secondary property and you rent it out, it's a positive sum because someone is paying you rent.

Money works because if you don’t deliver a denomination to the tax office then they take all your stuff off you and throw you in jail.

Therefore you will get the denomination requested whether you believe it or not.

And since that rule applies everywhere in the world now there is nowhere to hide.

> The book Money by Jacob Goldstein is the best thing I have read on this. It covers the useful fiction that is money and how it has has shaped societies.

Thank you! This is the book I've been looking for. I've recently read about adjacent subjects like value and finance, but this is the thing that links those things together that I've wanted to read.

It goes straight to the top of my reading queue.

No disagreement.

Here’s my beef, though: Dogecoin, BTC, etc. have failed to replace cash money or be used for any sort of significant, regular, money-like use-case.

Monero is maybe the most legitimate cryptocurrency at the moment, as it allows for (and is really used for) darknet purchases. That’s a real use-case.

This is the point Taleb is making too.

I've happily paid for legal things in BTC in the past. Actually the biggest thing that blocks me from doing so now is the fear that the tax man might come to haunt me later for some bogus reason. So it's mostly about its legal status of "something that's not legal tender" that makes it unusable.

And also that established payment services have kept improving their services enough that BTC's superior agility isn't that pronounced anymore.

>"Money only works because we all agree to believe in it."

Not only that, but it's a derivative (or perceived derivative!) of an underlying value, which in turn can be another derivative!

A long time ago, that was Gold, which in turn is a derivative of food and everything else that can be purchased by Gold.

Early U.S. pennies, for example, had pictures of wheat stalks on them, the idea "you can use this coin to buy wheat (food)" (storage of value of food) is present in that picture...

If you really want to go back in time, when you have food that doesn't rot and doesn't decay over long periods (for example, dry noodles), then we can see the noodles themselves as "storage" for the "value" of the underlying wheat (which decays much faster when not in noodle form).

In fact, you might argue that nature's nuts (walnuts, hazelnuts, peanuts, etc., etc.) -- because they were food that could be stored for a long periods of time without rotting -- were the first historical "storage of value", and thus the first currency...

Perhaps that's why everyone is so "nutty" -- about money! <g>

Also, in any system where object A (stock certificate, money, IOU, metal, physical object, digital identifier, etc.) -- is a storage of value for some underlying value, or something which is value derived from somewhere else, or a chain of derivatives -- you have the potential (in those systems) for

a) Ponzi Schemes (correctly or incorrectly called this)


b) Hyperinflation


c) Hyperdeflation


d) The possibility of eventual worthlessness from either extrema...

Fun Fact: Ancient Rome, near its end of life, resembled a giant Ponzi Scheme... <g>

(Bernie Madoff, in the scope of his crimes, was "small potatoes" -- compared to the last days of Ancient Rome! <g>)

Then, on a related note (same principle, in effect), there's the following "Rick And Morty" clip:

"Changing 1 to 0"


+1 for Money by Jacob Goldstein. An easy read and no degree in economics needed to understand.

Re bitcoin, he makes the argument that all currencies face a moment of crisis and only survive when Govt's do 'whatever it takes' to save them.

Who's going to come to the rescue of Bitcoin when that day comes, he doesn't say since the answer is rather obvious.

Worth mentioning is the fact that currencies often fail because of increasing money supply and in effect loss of value. In the case of bitcoin the monetary policy doesn't allow for reckless printing.

The quantity theory of money you are referring to is not universally accepted. The competing theory is that monies die because of decreased demand, not increased supply.

Example 1: reduced faith in a government to repay its debt decreases the demands for its fiat bills, which decreases their relative value, which prompts them to print more to repay its debt, and so on.

Example 2: Cowrie shell money stopped being accepted by colonial power to settle debts with it, it's value decreased, requiring private companies to import more of it to pay for what they want.

With those feedback loops it's hard to know what came first, but it's not obvious that excess supply prompted reduced demand -- it might as well be the other way around.

There is the fallacy that "real" markets are somehow super-efficient in moving peoples money exactly where they need to go to achieve tangible effect. This is just a myth, however in the crypto ecosystem it becomes entirely transparent. There's probably a lot more than $1T worth of money which is allocated randomly in regulated markets (i.e. gambling money). Part of this is moving to crypto because it's easier to handle.

One way to look at crypto is that each coin is a digital version of a casino chip and you need these chips to gamble in the casino.

At the end of the day it’s just another phenomenon. Cryptocurrencies are many things to many people. You may lament for the person that looses a few hundred dollars but what about all the people who spent money on Pokémon Go just because they wanted to get involved in an activity with their friends.

There’s nothing wrong with getting hurt if you chose to ignore the risks and risked more than you were willing to lose.

That "article" doesn't add anything beyond the fact that "this guy wrote a tweet and here's what it said".

Why is such low quality filler getting traction on HN? Is it because anti-crypto posts push people's buttons? Every day there is something like this posted, and like clockwork the comments are full of the same arguments both on the pro and anti crypto sides.

Am I an idiot for expecting better from HN?

there is a wonderful irony to Taleb saying this because his ideas, especially the concept of having 'skin in the game,' have been extremely popular among the most ideologically orthodox of the Bitcoin crowd.

This remark smarts only slightly less than if someone like Satoshi or Nick Szabo came out and called Bitcoin a failure, or at least admitted it was fated to become a naturally occurring Ponzi all along.

unfortunately I suspect that Taleb is merely setting up a pivot into some other crypto ponzi wherein he is better positioned to realize gains (and the guru praise he craves) from diverting his followers away from Bitcoin. I wouldn't be surprised if that "not Bitcoin" turns out to be Ethereum.

Btw, what happened to Nick Szabo? He was very active on Twitter (mostly posting weird stuff) but suddenly stopped About a month ago.

Or he needs the price of Bitcoin to dip a bit so he can invest more.

I’m sold on Bitcoin as “digital gold”, but for highly-visible entities it’s way too easy to game without repercussions. E.g. Musk likely has a bunch of patsies ready to buy and sell before or after one of his outbursts. You do that with actual commodities or companies, you go to jail; you do it with bitcoin, and people just shrug, “oh well, anyone in that market knows it’s wild”.

Taleb is in the business of selling books. He does really well in this sector.

I think he prepares his readers for a future book "Why Bitcoin failed", written as soon as the price tanks. Well, it might already be in the process of writing.

HN got very popular in the last few years, so I guess it became much harder to moderate.

I wish the rules got stricter over time (stay strictly within the hacker/startup/tech mindset), but also as software is now a multi-trillion dollar market, politics has to be involved.

>I wish the rules got stricter over time (stay strictly within the hacker/startup/tech mindset)

That was never a rule to begin with.

There's a rule about not making jokes, which already distinguishes HN from almost all other forums in the world.

Also there are some topic based bans, which is really hard to do well, as there are new things happening in Bitcoin (i.e. a new soft fork, or ETF being approved or not approved) that should be able to go through the filter.

>There's a rule about not making jokes, which already distinguishes HN from almost all other forums in the world.

There isn't actually a rule against making jokes, humor tends to get downvoted because few people are as funny as they think they are, and HN has a thin skin.

And as far as other forums go, you can find plenty of niche subreddits which moderate humor and off-topic conversation far more strictly than HN does, such as /r/askhistorians.

HN is very anti crypto, they love the echo chamber of FUD that will be disproven

There's a difference between being anti crypto and being a crypto skeptic. It would make sense for technologists to be skeptical about a technological service during its massive ramp-up among laypeople, because the acceleration in demand isn't driven by fact-based reasoning. I see a lot of herd mentality, coupled with easy money and no real returns elsewhere.

More anti-shill than anti-crypto. I'm sure everyone here prefers ssh to telnet.

I think for a lot of these articles it is the idea of the article that gets traction rather than the content itself.

Bitcoin has spectacularly succeeded as a reliable litmus test to identify people and companies who are actually charlatans and get-rich-quick scammers with nothing better to offer than self-serving shilling and crypto-woo-woo, who contribute nothing to the world but hot air, burning coal, and global warming.

Bitcoin doesn't run on coal.

It does too. Bitcoin is China's way of exporting coal through the atmosphere.

Bitcoin shills also produce huge quantities of hot air and CO2 by endlessly repeating false claims like "Bitcoin doesn't run on coal".


>How Accidents in Chinese Coal Mines Are Affecting Bitcoin Mining

>The explosions took nearly a quarter of Bitcoin's hashrate offline, but the network is operating normally and these miners could be back online in as soon as a week.

>Disruptions in coal plants in Xinjiang and other parts of China have knocked out bitcoin miners in the region, clipping as much as 35 exahashes from the Bitcoin system’s global hashrate, CoinDesk has learned.

>Figures shared with CoinDesk show F2Pool, Antpool, BTC.com and Poolin, the four largest pools in the world, have collectively lost 86% of their share of Bitcoin’s global hashrate over the last 24 hours. Primitive Ventures partner Dovey Wan, who operates mining equipment in one of the regions, told CoinDesk the coal-fired plants are down after “a massive explosion under the plants.”

>The coal plant shutdowns follow coal mine accidents in Shanxi, Xinjiang and Guizhou provinces, which collectively have left nearly a dozen dead and, in the case of the mine in Xinjian, 21 people trapped. Coal-abundant Xinjiang and Inner Mongolia are popular spots for Chinese bitcoin miners in the autumn and winter, when the rains that usually supply cheap hydro energy in regions like Sichuan are low.



>China’s vast bitcoin mining empire risks derailing its climate targets, says study

>China powers nearly 80% of the global cryptocurrencies trade, but the energy required could jeopardise its pledge to peak carbon emissions by 2030

>Bitcoin miner Huang inspects a malfunctioning mining machine during his night shift at the Bitcoin mine in Sichuan Province, China. China’s bitcoin mines will generate 130.5m metric tons of carbon emissions by 2024, the Nature study found.

>China’s electricity-hungry bitcoin mines that power nearly 80% of the global trade in cryptocurrencies risk undercutting the country’s climate goals, a study in the journal Nature has said.

>Bitcoin and other cryptocurrencies rely on “blockchain” technology, which is a shared database of transactions, with entries that must be confirmed and encrypted. The network is secured by individuals called “miners” who use high-powered computers to verify transactions, with bitcoins offered as a reward. Those computers consume enormous amounts of electricity.

>About 40% of China’s bitcoin mines are powered with coal, while the rest use renewables, the study said. However, the coal plants are so large they could end up undermining Beijing’s pledge to peak carbon emissions before 2030 and become carbon neutral by 2060, it warned.

As I said, it's a reliable litmus test for detecting shills! They'll always crawl out of the woodwork to defend it with lies.


>Bitcoin's damage to the planet - the coal-powered Chinese phenomenon that uses more electricity than the whole of Argentina

>There's good reason for environmental campaigners and academics to worry about the effects of Bitcoin, cryptocurrencies, and Blockchain on the planet, not to mention on geopolitics and the distribution of wealth.

>However, while China is the world’s leading investor in clean energy, it remains highly reliant on fossil fuels. Indeed, between 1990 and 2019 China's coal consumption nearly quadrupled, according to US think tank the Center for Strategic and International Studies (CSIS). So the environmental impact of its electricity habit is massive.

>The CSIS estimates that coal still powers almost 58% of all Chinese electricity usage. Roughly 21% of the world’s carbon emissions came from China between 1990 and 2019, and the CSIS estimates that nearly 80% of those emissions were from coal.

>So the subtext ought to be clear: despite its promise of digital newness and disruption, Bitcoin is largely a coal-fired technology whose energy usage is soaring and its carbon footprint growing. That should be something for mega-fan Elon Musk to ponder while the world’s richest man develops his electric vehicles and plays 'billionaire bottle-toss' with space rockets.

> Nassim Taleb called him an “imbecile”.

This is why I disgust this Taleb guy: he usually has good insights but defends them with the worst arguments. Or no arguments at all.

I felt his "Black Swan" book is a very good idea stretched into hundreds of pages of arrogance and condescendence.

100% agree on Black Swan. Taleb sure loves Taleb.

“To figure out if someone is an idiot, call him an idiot and check if he gets upset.”

It’s intentional: https://mobile.twitter.com/nntaleb/status/129716309534169907...

I don't recall Taleb calling others idiots much in his book.

I do recall Taleb admiring himself, though. A lot.

He’s just a pathological narcissist that functionally aliterate traders think is a philosopher.

His books are mostly unoriginal fluff that could be expressed in a few pages.

This seems transparently ridiculous coming from someone as famously thin-skinned and pugnacious as Taleb.

I wonder if there is maybe some other, easier, way of checking if someone's an idiot.

His reply to his own tweet is hilarious. He's playing chess whilst we're all playing checkers

I know it's a losing battle, but I can't help but tilt at this particular pedantic windmill.

Not all financial scams are Ponzi schemes. Most are not. Ponzi schemes involve shady bookkeeping by the operator that conceals the source of fake profits.

If Bitcoin were an actual scam (and I don't think it is) it would be a pump-and-dump. Most ICOs were clearly pump-and-dumps.

There is a huge variety of financial scams, and it would be a fiscally safer world if more people knew about them.

Shiller may have coined the phrase "Naturally occurring Ponzi" but I believe the World Bank was the first to describe Bitcoin as one:


The key characteristic of Ponzi schemes, I think, is that there is no real value and returns are paid based solely on new cash coming in. There’s shady bookkeeping only as an artifact to hide the cash-in/cash-out structure.

I think this applies to Bitcoin because it’s payouts are solely based on speculation and new cash coming in.

Bitcoin has two well understood and valuable use cases:

1) Bitcoin can do trustable and reliable transactions with unlimited amounts of assets across the world in 10 minutes. What else can do that? It's the perfect settlement layer for large actors.

2) It doesn't inflate, which makes it a perfect store of value. Even gold inflates.

> It doesn't inflate

It does currently inflate (currently 900 coins per day), the distinction is that the inflation will decrease over time to zero.

One reason this is an important distinction is that the network which secures Bitcoin is currently ~85% subsidized by that inflation. A big unknown is whether transaction fees will go up enough to support the current level of security in the network in its non-inflationary state.

The amount of total Bitcoin is known and capped.

Yes, because the amount of inflation goes to zero over time. That doesn't mean that there's no inflation now (i.e. that new Bitcoin aren't created every day until that time).

(I guess you could argue semantically that mining doesn't “create” Bitcoin but “unlocks” it or something, but it doesn't affect the dynamics I mentioned where the cost of running the network is currently subsidized by the newly unlocked Bitcoin and that subsidy will disappear over time.)

The total Bitcoin supply doesn't inflate. And so your assets won't be inflated away.

Again, it’s a semantic distinction. I think it’s more accurate to say it inflates at a known rate than “doesn’t inflate”, but I’m not going to argue semantics.

It doesn’t address the problem of the network being subsidized by the diminishing pool of remaining unmined bitcoin, and what happens when that pool is exhausted.

Maybe I'm being pedantic but it seems to me that inflation properties are separate from (though related to) total supply/printing. If prices denominated in bitcoin go up (e.g. because bitcoin crashes), isn't that still inflation?

I always have some difficulties with the "printing is limited so it's a store of value" argument: it's only a store of value if people keep assigning it value. That property doesn't purely come from supply but also from demand.

That's correct but there is still a huge issue for me with Bitcoin, which is that the vast majority of BTC is owned by literally a handful of people. It should be well distributed if it's gonna succeed as a currency and it never will be.

No one can gatekeep anyone from buying and owning Bitcoin. It is infinitely divisible, so anyone can partake at any level. Anyone can put their savings in Bitcoin.

In contrast to today's financial markets where size gives you huge leverage and access that you don't get otherwise. This is why the rich are getting richer currently.

But the future of financial markets and wealth will be as distributed as the crypto assets and protocols will be.

"It's the perfect settlement layer for large actors."

Wow, all the 'large actors' seemed to have not figured that out?

If it's the 'perfect settlement' process, then why are literally zero large actors using it for settlement?

Nobody uses it as a currency.

> I think this applies to Bitcoin because it’s payouts are solely based on speculation and new cash coming in.

Bitcoin does not pay out anything. There is no cash flow. You can only sell it.

It's true that price increases depend on later investors, but that is true of all investable assets; art, gold, comic books, etc.

Bitcoin is likely a bubble. It may be a pump-and dump, but it is not a Ponzi scheme.

Personally I think it makes sense to distinguish between deliberate Ponzi schemes and speculative bubbles but, at the end of the day, both depend on new money coming in to inflate value. One difference is that Ponzi schemes are pretty much guaranteed to collapse at some point and someone knows with certainty that it is in fact a Ponzi scheme. Whereas whether something is a bubble can only be definitively determined after it pops.

> both depend on new money coming in to inflate value

This is true of all investable assets that don't produce cash flow. It's true for art, gold, comic books, baseball cards, wine, classic cars, everything.

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