digicidal
Major Contributor
What do you see as the fundamental difference between a stock certificate for a company like Facebook or Twitter and a cryptocurrency like Bitcoin? How about a painting? Collectable cards?Thought Experiment:
Think about famous, traditional ponzi schemes and also pyramid membership/sales enterprises. Why do they fail? And very predictably too? Because they are, intrinsically and by definition, doomed by rather simple constraints. As they become successful the need for more contributors accelerates exactly as the availability rapidly diminishes. It's comical as well as tragic. But they always have appeal. And the instigators and early players do indeed get rich. But the instigators and promoters also risk serious criminal liability, imprisonment & loss of all assets. The big problem: when you need exponential growth you run out of people very fast, or too soon anyway. Most people have a clue & might spot one of these schemes and avoid it.
Here is the true genius of crypto currency: It extends the tail almost indefinitely. As it requires more contributors the algorithms exponentially ratchet down the ability to contribute, while making the possibility of gain seem more and more attractive and lucrative and while making the end point ever more difficult to predict, so continually postponing the day of reckoning. It's a cosmic joke. Maybe the best yet, after Eve & the Serpent. If Bernie Madoff knew how to code and considered the possibility of being able to exponentially postpone doomsday he never would have been caught.
Sure you can argue for some level of intrinsic value... but in the case of the last two it's such a minimal amount in comparison to the "demand premium" as to effectively be zero. Now how about credit default swaps? Or even better, what about uncovered "naked" calls? While the underlying instrument might have some value - the contract itself is literally just a bet with no actual collateral other than a promise.
While you can argue fiscal policy and macroeconomic theory to justify almost anything these days... I think it would be hard (if not impossible) to divorce the ~$15T in consumer debt and ~$22T in federal debt held by the public by various means from our "dominance" and "security". I would argue that our entire economy is a literal ponzi scheme... i.e. that if we don't expand our population and/or number and value of financial instruments at nearly an exponential rate.... then there is nothing but IOU's for the bagholders at the end (which is to say almost all of us).