Crypto Currency Mining a Giant Pyramid Scheme?

chrisski

Photon Sorcerer
I don’t get crypto currency mining. The more I look at it, the more it seems like a giant pyramid scheme.

I’ve fallen for a pyramid scheme before. This has all the signs of a pyramid scheme.

To me there’s all these people buying into different crypto’s by producing equipment, and they plug it into the wall and it gives them money. Doesn’t seem like many people are making a lot off this. There’s a few people that have a positive balance, but most do not spend it. Could be because they don’t want it taxed, maybe this is their nest egg, maybe its just too hard.

At some point I expect people to start cashing out, and when they do it will all fall down. Does anyone in the world buy groceries with this? Pay rent?

I don’t see what value these currencies add. I don’t see them being spent except in short term speculation. If I’m to believe news stories, the only ones spending this is to launder money. The one exception would be those dumping money into speculating that it will be worth much more hoping to cash out.
 

stienman

Solar Addict
Many cryptocurrencies are pyramids or scams of one form or another.

However, many have real value in a variety of ways.

It's no different than gold, or even paper money, in that regard. We only think gold is valuable because we think gold is valuable. It has a lot of uses, but it's just a metal, and unless a process or item requires it we only use it as a store of value now.

Likewise, if I started making my own paper money, it would be worthless except to those who chose to trade with it. If I get enough people to agree to use it, then it becomes useful. I could bootstrap that by "backing" my money with an accepted money, or other item of value. So I could start a currency where I indicate each of my bills are worth $10 US dollars, and I can put $1,000 away safely, create 100 of my bills, and distribute them. At any time someone could come to me and exchange them for US dollars.

If I don't bootstrap it, then it'll grow in recognition only slowly over time. Bitcoin was never backed, and for many years it was a novelty.

Bitcoin is not something you could reasonably use for every day transactions. However, it is a decentralized, cryptographically secure way of conducting trade. It doesn't require or involve banks or governments, and criminals have largely stopped using it because it's not anonymous - you can follow transactions from wallet to wallet without any significant effort, and most bitcoin passes through an exchange at one point or another, leaving behind details of the owner at that point in time.

It's about as valuable as gold in that regard - only a certain amount will ever exist, and you can't offer a gold bar at the grocery store to pay for your food just as you can't (easily and cheaply) offer bitcoin at the grocery store.

There are many other digital currencies which make small, frequent transactions cheaper and faster, though, and a lot is going into making all these coins more usable.

Most nations are now studying the feasibility of digital currency to supplement or replace their physical currency, and largely based on the concepts cryptocurrencies brought about.

A surprising number of well known companies are investing in cryptocurrencies, either to use them, or as a store of value.

As you indicate it could indeed collapse. Just like the Yen or US dollar.

But with so many people involved and using them I expect many of them will have long, productive lives.
 

chrisski

Photon Sorcerer
Can spend money on is different than a hard statement like received 10% of revenues from.

A few places “take it” but I’m not sure it’s actually used.
 

Mudd

Solar Enthusiast
I don't really have anything to add in regards to mining. I think a lot of people invest in crypto as a hedge. Kind of like buying gold to hedge against inflation and or the stock market. So many look at a stable coin like Bitcoin as a store of value just like gold. I think many investors look at krypto as a hedge against the US dollar. I doubt there's one American that thinks the path were on with our spending is sustainable. We haven't even been able to afford the minimum interest on our debt for over 10 years. So we're digging a hole that's getting bigger and bigger and quite frankly I don't think we'll be able to climb out of it. The Federal reserve has really no cap on how much money they're going to print. Versus crypto for example Bitcoin I think all the coins have been minted. Ethereum on the other hand is starting to burn coins with their latest upgrade. I remember when I first heard about Bitcoin back in 2010 and I thought this makes no sense why would anyone invest in something that's not back by anything. Nowadays I'm starting to kind of understand the technology and that's where the value is. I hear a lot about this web 3.0 one of these cryptocurrency may be technology needed to be safe once quantum computers become a thing.
 

Short_Shot

Photon Sorcerer
Plenty of people make plenty of money with crypto. Much like the stock market, it doesn't just go belly up because as the price drops from people selling, others will buy.
 

Sanwizard

Photon Sorcerer
Many cryptocurrencies are pyramids or scams of one form or another.

However, many have real value in a variety of ways.

It's no different than gold, or even paper money, in that regard. We only think gold is valuable because we think gold is valuable. It has a lot of uses, but it's just a metal, and unless a process or item requires it we only use it as a store of value now.

Likewise, if I started making my own paper money, it would be worthless except to those who chose to trade with it. If I get enough people to agree to use it, then it becomes useful. I could bootstrap that by "backing" my money with an accepted money, or other item of value. So I could start a currency where I indicate each of my bills are worth $10 US dollars, and I can put $1,000 away safely, create 100 of my bills, and distribute them. At any time someone could come to me and exchange them for US dollars.

If I don't bootstrap it, then it'll grow in recognition only slowly over time. Bitcoin was never backed, and for many years it was a novelty.

Bitcoin is not something you could reasonably use for every day transactions. However, it is a decentralized, cryptographically secure way of conducting trade. It doesn't require or involve banks or governments, and criminals have largely stopped using it because it's not anonymous - you can follow transactions from wallet to wallet without any significant effort, and most bitcoin passes through an exchange at one point or another, leaving behind details of the owner at that point in time.

It's about as valuable as gold in that regard - only a certain amount will ever exist, and you can't offer a gold bar at the grocery store to pay for your food just as you can't (easily and cheaply) offer bitcoin at the grocery store.

There are many other digital currencies which make small, frequent transactions cheaper and faster, though, and a lot is going into making all these coins more usable.

Most nations are now studying the feasibility of digital currency to supplement or replace their physical currency, and largely based on the concepts cryptocurrencies brought about.

A surprising number of well known companies are investing in cryptocurrencies, either to use them, or as a store of value.

As you indicate it could indeed collapse. Just like the Yen or US dollar.

But with so many people involved and using them I expect many of them will have long, productive lives.
My son "lends" his crypto to "traders" who "borrow" the crypto at about 5%. You dont need to spend it. Thats how many HODL'rs make money. I recently cashed out a bit to buy a house. My son is able to pay his monthly mortgage on his "lending". He pays the IRS their share.
Once smart contracts start taking over much of normal complex transactions, like real estate, digital currency will become the norm. This current Admin is looking at killing the dollar, so they can switch to digital and know where every penny goes.
The world bank wants digital SDR's to replace the currency buckets. The world is changing fast. Your dollar is becoming worth LESS every day, slowly eaten by inflation caused by massive spending and huge debts by the government.
The wealthy are buying land and commodities. Those holding dollars when it collapses will be out of luck.
I am buying batteries as a commodity, and hedge against high energy costs. I also buy a little bitcoin every month, so I get the highs and the lows. (Bitcoin is up around $5000 today alone)
I bought a bit of Cardano yesterday, and made $300 today doing nothing. ( I was an idiot on Cardano, as I bought 30,000 at 2 cents, and sold at 4 cents, doubling my money. It's now over $2.00!).
I do not see the harm in having a little Bitcoin as a hedge. Many now accept it as payment. I bought my Alienware laptop for 2.5 bitcoins in 2016 when it was $600, as Dell accepted it as payment. Now its the most expensive laptop in the world.
 

Mudd

Solar Enthusiast
Yeah there's a lot left to be mined. Once those are mined that's it. The endless spending in America is bound to catch up to us. At least many believe that. What we're doing borrowing to no end is bound to catch up with us at some point. I remember when I was in my early twenties and I had great credit and lost my job. I was borrowing from this card to pay that card thinking it'll all get better soon. Eventually I ran out of credit. It seems the Federal reserve has endless pockets for us but there's no guarantee it's going to last.
 

Sanwizard

Photon Sorcerer
Yeah there's a lot left to be mined. Once those are mined that's it. The endless spending in America is bound to catch up to us. At least many believe that. What we're doing borrowing to no end is bound to catch up with us at some point. I remember when I was in my early twenties and I had great credit and lost my job. I was borrowing from this card to pay that card thinking it'll all get better soon. Eventually I ran out of credit. It seems the Federal reserve has endless pockets for us but there's no guarantee it's going to last.
It wont. Be prepared. Venezuela was the richest country in south America before socialism. It can go down REAL fast. The socialists in government will be fine. Its you who will be screwed.
 

NwCali

Solar Addict
I've long said the next crisis since WW2 will be the failure of the $ from what we've done to it. I see no difference in "crypto" based off nothing and the $ based off nothing.
 

Sanwizard

Photon Sorcerer
I've long said the next crisis since WW2 will be the failure of the $ from what we've done to it. I see no difference in "crypto" based off nothing and the $ based off nothing.
They can't print crypto. Its a rare commodity like digital gold, not a fiat currency. That being said, if the lights go out, there is no crypto! Better buy more batteries and solar to keep those miners going!
There are many cryptos though, and its the wild west still, and IS manipulated, just like silver and gold is. I stay with proven coins, and those that are used in transactions like Cardano and Ethereum, and the store of value which is Bitcoin itself.
If the dollar goes to zero, I can still buy Swiss Francs with Bitcoin, or use Bitcoin to buy gold.
 

Hedges

I See Electromagnetic Fields!
Apparently so


6 + 5 + 3 = 14 zeros in the bit bucket. 100,000,000,000,000 x or 100 Trillion x devaluation of the bolivar

If that number was U.S. dollars, it would be 4x the (acknowledge) U.S. federal debt. Add in unfunded pension liabilities and we come close.
Somebody offered a new calculator a few years back, with enough zeros for Congress to keep track.

 

robby

Solar Addict
Hard currency has a backer. If it's backed by a responsible country or not is another question.
No country backs Bitcoins although I think China use to. No country depends on Bitcoins to keep itself afloat.
If it nose dives it's only those owners spread across the globe that got stuck with it that will cry.
 

curiouscarbon

Science Penguin
when the US dollar stopped being directly tied to gold, a real life material with useful properties beyond conducting trade, it became a ponzi scheme by some definitions. gold is incredibly useful material that is resistant to oxidation, has high conductivity, is shiny(!!), and people consistently like these and other intrinsic properties. visors for space suits.. coating for electrical connectors.. the every day benefits list goes on and on.

one value of digital trust reconciliation systems is that people in areas of the world that are already experiencing hyperinflation have the option to use a global standard. purchasing us dollars at a high premium to buy bread is not tractable for every person.

one value of the level 1 blockchain is that it can function as a settling mechanism for level 2 networks. basically level 2 is like credit card company which reconciles all transactions of their users every X hours/days to level 1. level 1 would be bitcoin or ethereum. it’s expensive to settle a transaction on level 1 networks so it’s not necessarily something for daily small transactions.

one value is that if someone is escaping an unstable part of the world. and there are many people who are innocent and being forced to escape to new places in search of a more dignified life. carrying the life savings as a memorized phrase can make it more impervious to robbery.

i too think it’s very important to be wary of any scheme that purports to be valuable like a currency. because currencies themselves are already fraught with misdirection and coercion.

please nobody burn coal to mine crypto. use solar? ok whatever. some people heat their home with the latent heat of the machines. but the vast majority seem to just dump it outside.

one other thing is that power transmission has some tricky edge cases. computation can provide value. computation requires some energy input. when an off grid solar battery system is at full charge and the solar charge controllers have stopped pumping amps, there is real value being lost. some people set up dump loads like water heaters to capture this energy value reliably. that is great!!! doing computation for a global network with otherwise unused solar energy seems like one way it could bring value in a way that’s not clearly a scam. but not everyone will use it that way, etc.. etc.. i personally wish that there would be more reform but the lack of reform seems to apply a global pressure for these systems to exist

hope this helps with context in some form. i’m just an amateur. just hope people have fun with their computers and solar panels and stuff.
 
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