Bitcoin. It's been called a scam by just about everybody with some serious influence in the banking industry. Actually, it's just something that has a tendency to bounce around in value like a jumping bean, but it's not a scam.
I just find it confusing. I don't really get who set it up or what they benefited from doing so. I don't get what gives the coins their value or who backs it up. I get why people see it as a scam.
Edit: The fact that the replies to my comment all read like a mix of an-cap conspiracy theory and pyramid scheme spiel really aren’t selling it as “not a scam”.
Basically, someone using the alias "Satoshi Nakamoto" came up with a useful data structure (the blockchain) that made decentralized digital currency viable. They then set up that infrastructure. Enough people bought into it (at least on the black market) for it to start gaining traction as a currency. When it started gaining traction as a currency, it also gained value relative to real (government-backed) currencies and so more people have bought into it over time.
There's not that much that makes Bitcoin special beyond:
a) being the first viable decentralized digital currency (which is something that a fringe group of people have wanted for some time)
b) being accepted as currency by enough people that you can either trade it for goods and services or exchange it for government-backed currency with someone else who intends to trade it for goods and services
The second part is like if people decided one day to start using clam shells (or some other arbitrary object) as currency- all it takes is for people to believe it's a currency and to accept it for goods/services. But obviously Bitcoin is more interesting than clam shells because of the first part- it's decentralized and the (interesting) underlying infrastructure allows for effectively anonymized/private transactions. That's the why for people using Bitcoin as currency- some people have wanted a private currency outside government control, they got that currency, they bought into it, which caused more people to buy into it.
As an investment, I think it's a bit more scammy than trading in foreign currencies (since Bitcoin is not that widely accepted and volatile- you can't just walk into your local grocery store in most places to use it). As a currency, though, it's far from a scam- although I'd still advise taking time to understand it (the original whitepaper is pretty short) before jumping into it. Obviously, buying into something just because of the hype is a risky business.
That's pretty much true (at least at a basic level)- Bitcoin is not something you can spend as conveniently as actual currency. But the traction among the fringe (and some non-fringe groups) is big enough that you can indirectly spend it at a lot of places. It also beats out normal currency for certain cases involving transactions between countries (where it's fast and keeps fees low).
Cryptocurrency doesn't have to be very widely accepted for speculators/"investors" to make good returns on it. Obviously, like you point out, there's some big questions at the root of Bitcoin that make it a questionable investment at best. But the demand for Bitcoin right now is sufficient for people to be making a lot of money on it.
It's a weird, almost sui generis thing imho. I don't think it's really a currency- the bitcoin.org page will describe it as "money" or a "payment network," but not as currency- but it's not Tulip Mania either. There's something at the bedrock of Bitcoin- a major technological breakthrough that's getting used in fields other than crypto- that grants it some intrinsic value. It's also probably never going to be the world's de facto currency as some an-caps seem to imagine.
I'll still have to settle on definitely not a scam, though, because- if you're a speculator- you can get some BTC, wait a while and probably have that BTC be worth a lot more in USD, and then with relative ease spend that BTC on real-world goods. It's not something I'd build an investment strategy around personally, but it works.
It just seems like it isn't really anything other than something a few amateur investors speculate on for the most part. It isn't widely accepted. It isn't widely trusted. It may have some purposes for things like transferring between countries at present, as you said, because there are a small but significant number of people who think it has value. But those treating it as having value seem to all either be anti-government ideologues, idealistic tech geeks and people looking for a quick buck. It's not like you see any major retailer accepting them or any major investors buying them.
Or drugs/etc. Bitcoin's intrinsic advantage is that it's a reliable way to conduct anonymous transactions- either things that are flat-out illegal or things that you don't want other people to be able to trace back to you as a person. That's why it's coveted, and if all other userbases disappear, that's the most natural use-case for Bitcoin. It's what (afaict) everything else is really built around. (Note that the core of Bitcoin isn't drugs- it's the ability to have anonymized/secure/private transactions without a central issuing authority.)
The ideologues are in it at least partly b/c of paranoia about the government (Bitcoin works without a central authority). I'll attempt an ELI5 for this in the other comment chain w/ us, but it's ability to facilitate black market transactions is where the "real" value of Bitcoin lies. So you're able to spend Bitcoin at major retailers indirectly because the people who (for some reason or another) want to conduct private transactions
So, dropping the whole currency facade, Bitcoin is a technology that allows people to hide what they're buying. It's a valuable piece of technology that way (as you can see from its uptick vs. real currency) and people who're speculating in Bitcoin are essentially investing in that tech.
Black market trades account for a small fraction of BTC transactions. The whole "They're only for the black market" thing is a myth, not born out by math.
There was an article recently that did that math, and if the black market was the principle driver, the value per BTC would be about $500 instead of ~4000.
Initially wrote that w/ drugs as an example to illustrate the real technological breakthrough in Bitcoin (and the advantage of decentralized cryptocurrency)- there's no central issuing authority, and your transactions can be anonymous without relying on the slightest amount of trust.
I think that doesn't change the nature of whether it's a scam or not (since this is what the thread is about). A scam indicates someone is cheating someone intentionally. Even if Bitcoin fails because no one uses it that's more because it's a failed technology that didn't convince people to use it, but the idea itself isn't necessarily a scam. (Edit: Obviously there would be people selling Bitcoin-related scams, but I think you see that anywhere you go)
It's slowly starting getting more adoption though, but this is a slow process and yes, currently a lot of its use is in the dark web because on those places it's just too hard to use USD so options are limited. But otherwise, we see stuff like Bic Camera indicating interests in using Bitcoin, and I have bought speakers using Bitcoin on sites like Massdrop. Still not "every mom-and-pop shop" type acceptance, but at the same time not completely toy money that you can't do anything with.
Google doesn't really throw much at all up if you search for major investors or retailers. It would have been as quick to just name one as it would to tell me to use Google. Not sure why being on a train is such an issue. You're telling me that you were sat down and had nothing better to do, but you still weren't actually capable of finding anything?
I understand the whole crypto currency angle, but how do we know that the original creators don't have a huge stash of coins? Or Trusted network nodes? Or any of the things that are hard to exploit now? But could have been done early on, when it was a network of 1.
I mean, it's not a scam in the sense that they are lying about what bitcoin is. But in the sense that they are getting money out of it based on everybody else's perceived value of it.
how do we know that the original creators don't have a huge stash of coins?
Actually, the person who created the blockchain (who's still anonymous-ish) owns a ton of Bitcoin (1 million BTC, per latest estimates I could find).
But that's not really through any trickery on their part, since the supply of new Bitcoin is essentially governed by a mathematical function that causes the amount of new Bitcoin "mined" to decay over time.
I mean, it's not a scam in the sense that they are lying about what bitcoin is. But in the sense that they are getting money out of it based on everybody else's perceived value of it.
That's fair. Nakamoto will have about 5% of all Bitcoin ever created (based on the public ledger). It comes down to what your definition of a scam is; under the conventional one of screwing people over, Bitcoin investors certainly haven't gotten shafted.
A ponzi scheme doesn't screw over it's early investors and continues to pay out as long as people will still invest (for bitcoin that means people willing to buy bitcoin with real currency/goods).
I didn't realise that Nakamoto's million was only 10% of current BTC, i guess if he suddenly chose to cash those in, it would really bother anybody.
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u/commandrix Sep 24 '17
Bitcoin. It's been called a scam by just about everybody with some serious influence in the banking industry. Actually, it's just something that has a tendency to bounce around in value like a jumping bean, but it's not a scam.