Crypto is a planet-destroying ponzi-scheme, but in a collapsed economy like Russia, I wonder if everyone can just have virtual wallets where you can buy goods by sending the seller some "coins". Which is basically the WeChat payment system, or how the Brazilian Real got established: https://www.npr.org/sections/money/2010/10/04/130329523/how-...
We already just exchange "coins" electronically, but with the Visa or MasterCard network getting involved...
The phrase "ponzi scheme" has been thrown around liberally in regards to cryptocurrency, especially on this forum, but I've never heard a convincing argument that it actually fits the definition.
It's weird because it seems like you can point to various aspects of crypto and maybe identify them as being a pyramid scheme, but I don't feel like that definition holds up as it gets sufficiently large and self sustaining. Otherwise you could point to a number of other very large money machines like the stock market or even money itself and say it is also a pyramid scheme. Maybe it is though. Perhaps the entire economy is a pyramid scheme that is dependent on an infinitely growing population.
As soon as we hit a population limit on the planet there will be no bigger fool to sell to in the future and the economy becomes stagnant.
As for the literal definition of ponzi scheme I don't think it holds up because everyone is fully aware, or should be of what it is they are buying and where the money is coming from if they want to sell.
The same can be said of any startups. They are pyramid schemes until they finally offer utility to customers.
What is sometimes up for debate is whether something is serious utility, such as “owning” a picture anyone can look at, or a digital experience in the metaverse with artificial scarcity.
But then again, under the capitalist system, we need to introduce scarcity even where it’s not easy to do so, in order to recoup initial venture capital. So for example, I remember stories about SWAT teams raising grandmas for downloading movies illegally, or about manufacturing companies all forced to cripple their software with DRM, or the blowup at the W3C, or crackz of popular software that kiddies handed out until all these companies like Adobe went full SAAS. It’s an antipattern that is the direct result of any capitalist system.
By contrast, open source, creative commons etc. doesn’t have that issue.
"Bitcoin doesn’t really meet this broader definition of a Ponzi scheme any more than the gold market, the global fiat banking system, or less liquid markets like fine art, fine wine, collectable cars, or beachfront property. In other words, if your definition of something is so broad that it includes every non-cashflow store of value, you need a better definition."
You know they'd have a point if they were talking about Bitcoin and gold, but they're not - because if you don't get understand what underpins the value of fiat, or pretend it's the same - then you have an agenda to push.
Fiat has value because it's legally recognized by governments that issue it: it extinguishes tax and debt obligations in those jurisdictions. This makes it markedly different to any other of the commodity items listed: my government will only ever tax me fiat currency, which is sufficient to extinguish those taxes and fulfill debts. I can't be ordered to pay them in gold, or bitcoin.
Imagine if every merchant came up with their own currency and forced you to pay them in it only. Wouldn't a global currency be a lot more efficient & frictionless?
As soon as I hear something like “planet destroying” within the crypto context, I stop reading because that tells me the person knows nothing about the current state of crypto.
I'm curious about this, I try to stay up on what's going on in the crypto world and it's my understanding that the vast majority of crypto blockchains are still using proof-of-work, which is what I imagine "planet destroying" is in reference to.
The biggest proof-of-stake blockchains by market capitalization in 2021 were Cardano, Avalanche, Polkadot and Solana. Other prominent PoS platforms include Tron, EOS, Algorand, and Tezos.
There have been repeated proposals for Ethereum to switch from a PoW to PoS mechanism. In April 2021, the Ethereum Foundation announced that it planned to switch to a PoS system by the end of 2021. This has since been pushed back to the second quarter of 2022.
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So if most of crypto transactions are conducted on proof-of-work chains, which do require burning large amounts of electricity, why would this make you think someone doesn't know about the current state of crypto. What exactly about the current state of crypto is incompatible with this critique?
>>What exactly about the current state of crypto is incompatible with this critique?
Ethereum is by far the most widely used cryptocurrency network, and while it consumes a lot of energy relative to the number of transactions in processes, and a lot of energy in absolute terms, it consumes on the order of a thousandths (0.1%) of the world's energy output.
It will have switched to Proof of Stake long before it grows large enough for it to account for a materially significant portion of global energy consumption. So the rhetoric used above, which makes the generalization that "Crypto is a planet-destroying ponzi-scheme", is entirely hyperbolic with respect to the environmental criticism (and a blatant mischaracterization with respect to the ponzi-scheme allegation).
Ethereum is now estimated to consume energy equivalent to or greater than mid-sized countries like Greece[1]. You can paint it as tiny, but 0.1% of world energy output is still enormous, for providing what is for the most part a highly speculative set of financial instruments to a limited audience.
It's been "about to go PoS" for several years now. The fact is it hasn't. When it does, you can tell people their concerns are out of date. About Ethereum. Bitcoin isn't even going there and its consumption is as bad or worse.
I don't disagree with most of your comment, but I do want to point out that the code to power Ethereum's switch to PoS is actually built out now and is in its final stages of testing. The latest Kiln test network is effectively a release candidate. At no point in the past several years has that been true, so it's comparing apples to oranges to say it's been "about to go" for that long.
I will welcome it when it does, don't get me wrong. That honestly removes a major issue I have with cryptocurrency (at least with Ether, anyway). There are a host of more theoretical reasons I'm not buying into the ecosystem, but remove that negative externality and hey - you do you, not my bag but you aren't hurting others.
I'm sure it is closer than ever, if it wasn't then there's something wrong with the development process! I sincerely wish the various people involved good luck in this venture and a speedy success in moving it to production. In the mean time I'm still going to get pissed off at people saying that energy concerns are outdated, especially when they're referring to the whole cryptocurrency ecosystem.
Don't forget that traditional banks consume lots of energy as well. Their armies of employees and tellers are required to drive an hour or so every day, they maintain tons of physical buildings, truck around piles of physical currency etc. Traditional fiat is given legitimacy based on government's monopoly on violence inside their borders which often result in wars. Nothing is free and I'm fairly certain that crypto will end in less energy consumption, not more.
Exactly. Proof of work is costly in energy and affordable in labor. The energy consumption of labor-intensive industries obfuscates the real energy requirements of those industries, by effectively outsourcing the energy consumption to the workers.
I still prefer Ethereum's variation of Proof of Stake over Proof of Work, but it's by no means clear to me that Proof of Work based blockchains are less resource-efficient than traditional financial systems, and I would wager a comprehensive analysis would show in fact that they have the potential to be vastly more efficient, if they're allowed to scale up their transaction throughput to amortize their energy consumption across
more numerous transactions.
Proof of work does not replace labour though. There is not really an equivalent outlay in tradtional banking. And blockchains don't provide the services that the labor provides in the banking sector.
Proof of work completely replaces the bureaucracy that maintains trust in traditional ledgers..
A bunch of automated nodes, strewn across the globe, and connected via the internet, maintain the network, with the network being able to seamlessly/autonomously manage nodes joining/leaving.
There are no legal contracts that need to be drawn up, filled out and signed for someone to start submitting PoW, or validating and propagating transactions, to the network. There is no HR department. No payroll. Just machines, and a deterministic compensation mechanism, managed by a fault tolerant network of machines.
No offence, but for you to see zero parallels between the contract enforcement that decentralized blockchain-based networks conduct, and the function of traditional legal systems, suggests to me you would benefit from taking your own advice.
0.1% is huge, but in no reasonable terms can it be called "planet destroying", when it's slated to be mostly eliminated within 6 months with the transition to Proof of Stake. The characterization is hyperbole.
As for the transition to PoS, the first phase of the transition was implemented on December 1st, 2020, with the launch of the Proof of Stake Beacon Chain. The Beacon Chain has been running without problems for over a year now.
The testnet for the second phase of ETH2 - which is when the execution chain is merged into the Beacon Chain so that Ethereum can fully switch from PoW to PoS and reduce its energy consumption by 99.95% - was launched on December 20th, 2021:
The difference between now and then is that now Ethereum has had the Proof of Stake Beacon in operation for over a year, and the next phase, which merges the execution chain into the PoS chain already, has a running testnet.
The projections on the completion date of the switch to PoS is now far less speculative / more reliable.
Emissions on a par with Greece. And just for one coin. Ethereum is still going to PoS any day now, totally, just a few months off. Like it has been for several years.
So what is it about "the current state of crypto" that you think you know better than these?
The ETH PoS chain is already in beta with the expectation of transition (the merge) later this year.
BTC mining is creating new business models for renewable energy [0][1], BTC uses less energy than many other activities that don't get the same flack- AC usage, Data Centers, etc [1]
> Finally, if energy is one of your biggest expenses, you're economically incentivized to reduce those costs as much as possible.
Unfortunately, with Bitcoin (and other Proof-of-Work blockchains), the economic incentive is the opposite: to use as much energy as possible, until the return from the block rewards and transaction fees is smaller than the price you pay for that energy. Reducing the energy costs only allows you to use even more energy before reaching that limit, increasing the total costs again.
Pointing desperately at other things doesn't change the argument at all.
> Finally, if energy is one of your biggest expenses, you're economically incentivized to reduce those costs as much as possible.
So? This doesn't make bitcoin clean?
There is already huge demand for clean power in this world, adding to it with PoW systems doesn't actually help, and as we can see by the power plant and by the article linked above about a fall in renewable use in BTC, we're not in the "Bitcoin has incentivised green energy and helped the world get cleaner" stage, we're in the "Bitcoin is adding pressure to an already over-pressurised system and is making the problem worse at a critical time" phase.
Even your own linked article is sub-headed "Cryptocurrency mining has the potential to address the obstacles to more widely adopting renewable energy" - not that it has or is, but that it could.
These pseudo-intellectual economic arguments about "helping the world move to renewables" are tripe.
