Crypto. Ponzi Scheme?

Dublinbay12

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The Crypto Market is not solely Bitcoin and the sole purpose of the market is not to produce investable assets or mimic traditional currencies.

In simple terms the purpose of each 'cryptocurrency' is not the same. Bitcoin use is as a currency / store of value. Is it successful? Debatable hence the hundreds of pages on this forum debating it.

Ethereum or Polkadot purpose is not to replace fiat currencies. the currencies are the native tokens for those platforms and it is these platforms that most of the other currencies are built on.

A lot of these projects that are built on Ethereum aim to implement some form of solution on the Blockchain, for example selling digital art or decentralised finance. The 'cryptocurrencoes' are in reality digital tokens and should be considered more like individual stocks than a currency. Its here that a lot of speculation happens.

The way I rationalise some of this is to the dot com boom of the late 90s. thousands of websites popped up with ideas only to go bust a few years later. Some of the crypto market is like that as in they are tryig to implement some product or solution and of it fails the company / project will end.

The way I look at Bitcoin is the evolution of the Car. The first ford was a great invention for the time but we don't still drive around in that same version today. In the same way Bitcoin will evolve and change, and maybe it evolves to the point it's no longer relevant.

The underlying crypto market is very exciting at the minute but it is definitely in its infancy.

I know it's easy to look at Bitcoin and see it was $100 6 years ago and hit $60k last year and start dreaming about riches. Unfortunately that boat has passed.
 

newirishman

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The Crypto Market is not solely Bitcoin and the sole purpose of the market is not to produce investable assets or mimic traditional currencies.

In simple terms the purpose of each 'cryptocurrency' is not the same. Bitcoin use is as a currency / store of value. Is it successful? Debatable hence the hundreds of pages on this forum debating it.

Ethereum or Polkadot purpose is not to replace fiat currencies. the currencies are the native tokens for those platforms and it is these platforms that most of the other currencies are built on.

A lot of these projects that are built on Ethereum aim to implement some form of solution on the Blockchain, for example selling digital art or decentralised finance. The 'cryptocurrencoes' are in reality digital tokens and should be considered more like individual stocks than a currency. Its here that a lot of speculation happens.

The way I rationalise some of this is to the dot com boom of the late 90s. thousands of websites popped up with ideas only to go bust a few years later. Some of the crypto market is like that as in they are tryig to implement some product or solution and of it fails the company / project will end.

The way I look at Bitcoin is the evolution of the Car. The first ford was a great invention for the time but we don't still drive around in that same version today. In the same way Bitcoin will evolve and change, and maybe it evolves to the point it's no longer relevant.

The underlying crypto market is very exciting at the minute but it is definitely in its infancy.

I know it's easy to look at Bitcoin and see it was $100 6 years ago and hit $60k last year and start dreaming about riches. Unfortunately that boat has passed.
So what then /is/ the purpose of cryptocurrencies?

I have a solid background in computer science and systems engineering, so I can see some useful applications for blockchains (usually in the general space of digital signature / digital trust).
But cryptocurrencies? Apart from the ponzi-scheme aspects? Can’t see the point beyond “get rich quick” schemes.
Store of value usage or usage as currency is from a practical perspective pointless given the volatility.
 

Dublinbay12

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So what then /is/ the purpose of cryptocurrencies?

I have a solid background in computer science and systems engineering, so I can see some useful applications for blockchains (usually in the general space of digital signature / digital trust).
But cryptocurrencies? Apart from the ponzi-scheme aspects? Can’t see the point beyond “get rich quick” schemes.
Store of value usage or usage as currency is from a practical perspective pointless given the volatility.

There are hundreds if not thousands of purposes of 'cryptocurrencies' but that doesn't translate to value. they all don't intend to be currencies, which is confusing given the name. Those can only be evaluated on a case by case basis hence my comparison to the dot com boom. For those types of 'tpkens' I view them more as stocks and you're buying an interest in the company succeeding. Whilst not exactly stocks I think they are fundamentally closer to stocks than currencies.

Bitcoin is the main crypto trying to be a currency and I agree with you, it's too volatile to be a currency and I very much doubt governments are going to give up their control of the economy to a decentralised currency.

So perhaps it becomes a store of value, perhaps it fails. Right now for the vast majority Bitcoin is held as an investment and not a currency.

The platform I have been following lately is Polkadot which is trying to create a Web3, some kind of decentralised web and has then applications (finance, messaging, data etc) being built on top of it. It is an interesting concept and I am following it from the product perspective rather than because it has a token which might be worth X.

So in summary I'd split crypto in two buckets

1. Currencies - speculative investment e.g. Bitcoin
2. Tokens - specific applications or platforms and you are investing in the idea/product and receiving a token which may appreciate or depreciate.

Obviously that's a simplified view, and not doesn't answer the question of what the underlying value is.
 

newirishman

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2. Tokens - specific applications or platforms and you are investing in the idea/product and receiving a token which may appreciate or depreciate
Congratulations, you have invented shares and the stock market!

Of course, a tongue-in-cheek comment. But you are only solidifying my point: cryptocurrencies are a solution for a problem that HAS been solved already at least adequately well.

(edit: has - Not hasn’t)
 
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Dublinbay12

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Congratulations, you have invented shares and the stock market!

Of course, a tongue-in-cheek comment. But you are only solidifying my point: cryptocurrencies are a solution for a problem that hasn’t been solved already at least adequately well.

Only it's better than the stock market because it's a Blockchain solution! (Very much a tongue in cheek comment.) In all seriousness that's why the SEC views many cryptos as "investment securities" and not currencies. So it's a fairly sensible but simple comparison to the shares

I 100% agree that many are offering solutions for which perfectly adequate solutions already exist.

It is a bit of a minefield and very susceptible to scams, just Google onecoin.

However, and this has nothing to do with the value there are some very interesting projects out there (web3, decentralised finance etc). There is rapid development and release to public of products we'd traditionally have to go through intermediary such as banks for. Again nothing to do with the value or purpose, but it is interesting.
 

Duke of Marmalade

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So in summary I'd split crypto in two buckets

1. Currencies - speculative investment e.g. Bitcoin
2. Tokens - specific applications or platforms and you are investing in the idea/product and receiving a token which may appreciate or depreciate.
Trying to get my head around this.
As per Professor Roubini, crypto currencies have no assets, have no revenue, produce no goods or services.
Are you telling us that tokens, like shares, have assets, do supply some service and do have revenue, or at least potentially so? If so then this is something of a red herring as I presume OP is referring to the former obscenities.
 

Dublinbay12

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Trying to get my head around this.
As per Professor Roubini, crypto currencies have no assets, have no revenue, produce no goods or services.
Are you telling us that tokens, like shares, have assets, do supply some service and do have revenue, or at least potentially so? If so then this is something of a red herring as I presume OP is referring to the former obscenities.

If your use of cryptocurrencies is referring to the entire market then you are wrong on a few points. Bitcoin, yes I agree with you but not for what I've bucketed as tokens. This is why the SEC can view them as securities and they become applicable to securities laws. I said it was a very simple comparison.

But many of these cryptocurrencies do offer a service and a product.

You can still be a company with a share price without physical assets.

My simple point here is that Bitcoin is intended to be a currency, many of the other 'cryptocurrencies' are not and probably should have the currency name removed. Its an important distinction.
 

Duke of Marmalade

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If your use of cryptocurrencies is referring to the entire market then you are wrong on a few points. Bitcoin, yes I agree with you but not for what I've bucketed as tokens. This is why the SEC can view them as securities and they become applicable to securities laws. I said it was a very simple comparison.

But many of these cryptocurrencies do offer a service and a product.

You can still be a company with a share price without physical assets.

My simple point here is that Bitcoin is intended to be a currency, many of the other 'cryptocurrencies' are not and probably should have the currency name removed. Its an important distinction.
Sorry but trust me that I am not being my usual cantankerous duke here, just trying to understand these tokens. Are they like shares in that they are shares in some genuine economic activity providing a service for revenues and profit? I accept that there need not necessarily be assets as for say an actuary whose assets would amount to little more than a laptop but would be selling professional services for fees.

Put more simply will the activity these tokens give ownership of be charging customers fees for some service? Clearly that would distinguish them from bitcoin and are not I suspect the subject of OP.
 

Dublinbay12

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Sorry but trust me that I am not being my usual cantankerous duke here, just trying to understand these tokens. Are they like shares in that they are shares in some genuine economic activity providing a service for revenues and profit? I accept that there need not necessarily be assets as for say an actuary whose assets would amount to little more than a laptop but would be selling professional services for fees.

Put more simply will the activity these tokens give ownership of be charging customers fees for some service? Clearly that would distinguish them from bitcoin and are not I suspect the subject of OP.

Yes I don't think it's the subject for the OP. However, as they said they any cryptocurrency has value I was highlighting that they aren't all currencies.

My comparison to the stock market is that each company on the stock market at some point sold shares via an IPO to raise capital to fund their business strategy and provide services. Each company offers a different service e.g Facebook, AIB, BP etc. The shares are regulated strictly such that the owner of each share has certain rights. by holding a share in that company you own a bit of the company but you don't necessarily have to be a user of its products/services.

Now for some of these cryptocurrencies that issued ICOs the first principle was the same as the stock market in that they raised capital by issuing tokens to fund their business strategy / plan. Next, so each token is against a certain business idea rather than just another Bitcoin. Yes a high % of ICOs failed or where scams (think I read 70% in a research paper)

That's where it starts to differ from the stock market as there are different types of tokens offering different utilities. For example Polkadot (web3 platform) as a token holder you have voting rights in any proposed changes.

So in essence you are getting ownership of the platform and this where it gets tricky on what service they are offering. In the example of Polkadot, it's building WEB3 and so is a platform for apps and DOT it's token purpose is as below. In this case the way I look at it is the amount of DOT I have rather than the dollar value. 1 DOT is 1 DOT on the platform and the dollar value is irrelevant. The dollar value is really just speculative trading.

DOT is the native token of the Polkadot Network. DOT can be used for transaction fees, staking, governance, acquisition of a parachain slot and for enabling several key functionalities on Polkadot.

Most of the top 10 cryptocurrency with the excoption of Bitcoin are platforms that want people to build scalable apps and solutions on that platform. The tokens are to be used in those platforms and are never intended to be used down the shop.

Within these platforms there are apps providing services e.g financial (defi) etc.

I guess it's a further derivation of why do companies like Facebook make so much money and have value or Airbnb, Uber etc. They are all platform companies.

I've not answered why they have a dollar value, probably mostly down to speculation, but they do have a utility (in its infancy)
 

Duke of Marmalade

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I guess it's a further derivation of why do companies like Facebook make so much money and have value or Airbnb, Uber etc. They are all platform companies.

I've not answered why they have a dollar value, probably mostly down to speculation, but they do have a utility (in its infancy)
Hmm! I don't particularly understand why Facebook is worth so much. But I do see they have something to sell e.g. advertising fodder.
As McAuley observes, the only value that can ever accrue to a bitcoin holder is that some other person wants to be a bitcoin holder - like Ponzi, there is no actual economic service being supplied for revenues. I am not sure that many of these tokens do not fall into the same category.
Admittedly many/most people hold shares on the prospect of selling them on to other folk. But fundamentally the stockmarket is underpinned by the fact that even if trading was banned in the morning in theory the value would still be delivered over time from their economic activity.
 

CuriousGeorge11

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So what then /is/ the purpose of cryptocurrencies?

I have a solid background in computer science and systems engineering, so I can see some useful applications for blockchains (usually in the general space of digital signature / digital trust).
But cryptocurrencies? Apart from the ponzi-scheme aspects? Can’t see the point beyond “get rich quick” schemes.
Store of value usage or usage as currency is from a practical perspective pointless given the volatility.
 
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Cavanbhoy

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I am not sure of the longterm prospects of Crypto but there is definitely a lot more to it than bitcoin. The value of the token Cro that I hold is it enables me to get a 14% apr on dollar and sterling stablecoins. Plus getting 5% cashback on credit card purhases.
It has worked out ok for me sofar but who knows what the future holds.
 

CuriousGeorge11

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Disney is launching their own meta verse and minting NFTs, Facebook rebranded as Meta

Smart contracts are quite possibly the future of business transactions but people still call crypto a pyramid scheme.

I find it amusing and never attempt to change anyone's mind. Let people to their own opinions and if your on to a good thing then dont chart watch, collect your staking interest daily and dont forget to take your initial deposits out
 

RetirementPlan

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Disney is launching their own meta verse and minting NFTs, Facebook rebranded as Meta

Smart contracts are quite possibly the future of business transactions but people still call crypto a pyramid scheme.

I find it amusing and never attempt to change anyone's mind. Let people to their own opinions and if your on to a good thing then dont chart watch, collect your staking interest daily and dont forget to take your initial deposits out
Does this reflect the process of selling NFTs for artworks accurately?


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