Why is it a pyramid scheme? I’ll give you my opinion.
I think bitcoin was a research project - it wasn’t designed to succeed as a real currency. Consider:
1) It has a fixed money supply. There will only ever be a fixed amount of bitcoin once it is all mined (or technically, the amount will grow more and more slowly forever— effectively, it’s a fixed amount). We’ve known for a long time what effect this has on a currency. A fixed supply will be deflationary, i.e. the value of 1 btc will only grow. To be stable, the total amount of currency in circulation must equal the economic value that it represents. This is why the Federal Reserve must continually expand the money supply - it’s because the US economy grows. (They actually expand it slightly faster than the economy grows, causing a small amount of inflation, on purpose. This is preferable to undershooting and creating a deflationary currency). Deflation makes for a terrible currency, because it inhibits spending. If you think your dollar will be worth more tomorrow, you’ll wait to spend it. That waiting cascades into the broader economy, causing a recession. Bitcoin can therefore never, ever be a true currency. Its deflationary design prevents it.
2) Transactions are public. Far from being a cash replacement, which is both anonymous and private, Bitcoin transactions are publicly recorded on the blockchain. There are elaborate work-arounds to improve privacy, but fundamentally the ledger is public. This is not a good feature for a cash replacement.
3) There is no one in charge. Would you trust the US dollar if a loose collection of volunteers struggled for control over key monetary decisions? Despite best efforts, governance of bitcoin is a disaster — because it wasn’t designed for governance.
4) It’s extremely expensive. Search recent news for the estimated electricity usage of bitcoin mining. It’s so large that a hedge fund recently restarted a decommissioned fossil fuel power plant just to mine bitcoin. Do you think this is a good design?
5) It’s inconvenient. Have you tried to make a bitcoin transaction? Were you surprised that you could pay extra in order for the transaction to settle faster? Did you think that was ridiculous? You’d be right!
I’m glad more people are speaking up about bitcoin. The emperor indeed has no clothes. Bitcoin is getting out of hand.
I think bitcoin was a research project - it wasn’t designed to succeed as a real currency. Consider:
1) It has a fixed money supply. There will only ever be a fixed amount of bitcoin once it is all mined (or technically, the amount will grow more and more slowly forever— effectively, it’s a fixed amount). We’ve known for a long time what effect this has on a currency. A fixed supply will be deflationary, i.e. the value of 1 btc will only grow. To be stable, the total amount of currency in circulation must equal the economic value that it represents. This is why the Federal Reserve must continually expand the money supply - it’s because the US economy grows. (They actually expand it slightly faster than the economy grows, causing a small amount of inflation, on purpose. This is preferable to undershooting and creating a deflationary currency). Deflation makes for a terrible currency, because it inhibits spending. If you think your dollar will be worth more tomorrow, you’ll wait to spend it. That waiting cascades into the broader economy, causing a recession. Bitcoin can therefore never, ever be a true currency. Its deflationary design prevents it.
2) Transactions are public. Far from being a cash replacement, which is both anonymous and private, Bitcoin transactions are publicly recorded on the blockchain. There are elaborate work-arounds to improve privacy, but fundamentally the ledger is public. This is not a good feature for a cash replacement.
3) There is no one in charge. Would you trust the US dollar if a loose collection of volunteers struggled for control over key monetary decisions? Despite best efforts, governance of bitcoin is a disaster — because it wasn’t designed for governance.
4) It’s extremely expensive. Search recent news for the estimated electricity usage of bitcoin mining. It’s so large that a hedge fund recently restarted a decommissioned fossil fuel power plant just to mine bitcoin. Do you think this is a good design?
5) It’s inconvenient. Have you tried to make a bitcoin transaction? Were you surprised that you could pay extra in order for the transaction to settle faster? Did you think that was ridiculous? You’d be right!
I’m glad more people are speaking up about bitcoin. The emperor indeed has no clothes. Bitcoin is getting out of hand.