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Business/Finance
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Title: Bitcoin is a ‘pyramid scheme,’ says an economist
Source: [The Block]
URL Source: https://finance.yahoo.com/news/bitc ... -says-economist-070015526.html
Published: Jan 2, 2020
Author: Yogita Khatri
Post Date: 2020-01-02 11:38:36 by Ada
Keywords: None
Views: 2371
Comments: 22

Bitcoin is a ‘pyramid scheme,’ says an economist

Tendayi Kapfidze, chief economist at Nasdaq-listed online lending marketplace Lending Tree, has said that bitcoin is a “pyramid scheme.”

“You only make money based on people who enter after you,” Kapfidze told Yahoo Finance in an interview published Thursday. He added that bitcoin has “no real utility.”

“They’ve been trying to create a utility for it for ten years now. It’s a solution in search of a problem and it still hasn’t found a problem to solve,” said Kapfidze.

Bitcoin has earned many monikers in its 11 years of existence - a "scam" (by Bill Harris, founding CEO of PayPal); "rat poison" (by Berkshire Hathaway vice chairman Charlie Munger) and "rat poison squared" (by billionaire investor Warren Buffett), among others.

Yet, a recent report from Bank of America names bitcoin the single best investment of the last decade. The report said if you invested $1 in bitcoin at the start of 2010, it would now be worth more than $90,000. Last year alone, the value of one bitcoin rose more than 85%, making it one of the top-performing financial assets in the world.

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Begin Trace Mode for Comment # 5.

#1. To: Ada (#0)

It's funny because the only finance experts news media can find to comment on bitcoin are those "deep state" people who've established their success in the world of fiat currency. They can't interview a 25 year vet from any crypto firm's board of directors because crypto was only created some 10 years ago and any businesses based on crypto are only 2-3 years old at most. So there are no pro-cypto voices in the media world to counter biased opinions like these.

To say it's a pyramid scheme is laughable, as the qualification of that:

“You only make money based on people who enter after you,” Kapfidze told Yahoo Finance in an interview published Thursday. ”

That's true of gold too, and pretty much any commodity. Stocks at least pay dividends which doesn't rely on downline buyers but with the P/E ratios these days, that doesn't count for much.

He added that bitcoin has “no real utility.

Yes it does. It facilitates transactions worldwide with no intermediaries, is oblivious to sanctions, and at a fraction of cost. It's also a method of storing wealth that is very difficult for governments to seize.

>“They’ve been trying to create a utility for it for ten years now. It’s a solution in search of a problem and it still hasn’t found a problem to solve,” said Kapfidze.

That's hogwash. Bitcoin was devised in response to the 2008 financial crisis, which was a problem just short of being the "Mother of all Problems", that problem being fiscal irresponsibility and theft by Congress.

Now Bitcoin does have its problems. Namely, transaction speeds, while far faster than bank wires, is woefully inadequate for retail, point of sale use. Transactions can take 30 mins to an hour which is far too long for paying for groceries at the checkout counter. There's also the number of transactions per second. Visa/mastercard services, being centralized, can handle 10's of thousands per second while bitcoin is maybe less than a dozen. For crypto to truly compete with CC's and cash, it needs to bridge those gaps. But it should, with time. How long, I don't know, but tech is always getting better.

Pinguinite  posted on  2020-01-02   13:55:14 ET  Reply   Untrace   Trace   Private Reply  

How are bitcoins mined?

Ada  posted on  2020-01-02   14:31:10 ET  Reply   Untrace   Trace   Private Reply  

How are bitcoins mined?

Bitcoin, and all free market crypto, is mined by solving puzzles. It's a race. You might picture a warehouse full of unsolved Rubik's cubes. They are available for anyone to solve, in sequence. So it's a race to solve each one. Everyone competes to solve it and whomever solves it first is, generally, winner of the 6.25 bitcoins that come with it, after which the next puzzle becomes available to solve. Lather, rinse repeat.

I say "generally" because 2 parties could solve it at about the exact same time, which occasionally happens. In that case, the tie-breaking race is to essentially spread the news to other nodes on the blockchain/internet, and the one who spreads the news fastest wins.

Each time a puzzle is solved, a new link in the blockchain is created and in that link, pending bitcoin transactions are permanently recorded for all time. So mining is directly tied to the ability to transact bitcoin. Puzzles are solved about every 15-30 minutes, on average.

So "mining" bitcoin means having a computer competing to solve the bitcoin puzzles. An independent homeowner system could try this, but the competition is so big it could mean working this for a few years with nothing to show for it except for higher electricity bills. 6.25 bitcoin is about $45,000 at current market prices, but even so, some people give up as for some, it may be like trying to win the lottery.

Pinguinite  posted on  2020-01-02   15:33:50 ET  Reply   Untrace   Trace   Private Reply  

Bitcoin, and all free market crypto, is mined by solving puzzles.

So anybody can mine bitcoins, but to mine dollars you have to be in the club?

StraitGate  posted on  2020-01-02   17:16:12 ET  Reply   Untrace   Trace   Private Reply  

#6. To: StraitGate (#5) (Edited)

So anybody can mine bitcoins,

Yes.

but to mine dollars you have to be in the club?

No, there's no club to join. If you want to you can put your computer to work mining bitcoin, or go on ebay and find specialized equipment to do it much faster. It's free market. Decentralized. Anyone can do it.

Edit: I note after responding you said mining "dollars" requires club membership. Yes, of course, the Fed can print dollars at will, and only releases those dollars to the fed gov. It is quite centralized, and with no mining required.

It's the digital equivalent of mining gold. If you go into the wilderness, you can look for it like anyone else.

There are (still?) a few android apps that you can run where you essentially rent out your device to the app maker to help mine. They'll pay you a tiny amount of bitcoin as rent. You pay the electricity used by your device, of course, but in that case, you should be guaranteed to make bitcoin, and you don't have to worry about actual mining success.

Pinguinite  posted on  2020-01-02 17:44:54 ET  Reply   Untrace   Trace   Private Reply  

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