Hello readers; I’m @lemony-cricket and I was just waiting for everyone else to stop posting. I’m still here, and I will be until the witnesses turn out the lights; I promise.
Charles Ponzi, the original conman himself source. Public domain.
People really hate cryptocurrency.
Since the very early days of Bitcoin, there have been those who seek to destroy it or at least relish in its failure. There are a wide variety of reasons for this; some of them I can think of are:
- Envy. “I didn’t get rich off this, so why should these people?”
- Schadenfreude. “These guys are losing so much money it’s hilarious.”
- Ethics. “Crypto is making millionaires out of the worst people in the world.”
- Vindication. “I knew it was going to crash eventually. Was only a matter of time.”
- Speculation. “I have an open short position; I hope Bitcoin crashes to zero.”
- Environmentalism. “Bitcoin is a huge waste of natural resources.”
- Conflict of interest. “Cryptocurrency threatens my business or other interests.”
- Skepticism. “There is no value in Bitcoin. It is a ponzi scheme.”
I am mildly sympathetic to some of these, particularly the environmental, conflict of interest, and ethical concerns. I don’t mean to say that I hold these views myself; it’s just that I believe they are valid points and, to some degree, I believe they deserve more credit than they are given by the community.
There are many valid arguments against cryptocurrency, but the “ponzi” bogeyman is an absolutely invalid one that keeps coming back. I’m going to focus on that one today.
Semantics aside, it just doesn’t fit.
I could take the easy way out and cite the literal definition of a Ponzi scheme. As Wikipedia tells us:
A Ponzi scheme […] is a form of fraud in which a purported businessman lures investors and pays profits to earlier investors using funds obtained from newer investors.
Very few cryptocurrencies fit this definition. There are exceptions, most notably Bitconnect and certain Ethereum smart contracts, but these could hardly be called currencies in the first place; they are centrally-issued and “token” fits better (though the lines are very easily blurred between the two).
But what people really mean when they say that cryptocurrency is a Ponzi scheme is that it has no intrinsic value; that it serves as a wealth redistribution mechanism which favours those who bought in at lower prices… oh, and we usually have to assume that that last part is a bad thing for the sake of this argument.
Consensus is valuable.
I feel that anyone who denies this is either ignorant, closed-minded, or being dishonest on purpose; for sake of one of the motives listed above, perhaps, or some other ulterior motive I didn’t think to list. The reason I feel this way is simple: not valuable to you does not mean not valuable at all. Value is subjective… and there is a real value in consensus technology.
Regardless of whether Bitcoin rewards early adopters (it does), or whether this is justified (it is), the fact that all those miners are working to secure the network makes Bitcoin the most secure medium of consensus in history, and in exchange for this creation of value, the network pays the miners in newly minted coins. Even if the value of Bitcoin itself drops to zero, that innovation is not going away. Consensus technology has been let out of Pandora’s box, and it will always have a place in the world at any price or level of legitimacy.
To those who stick to their “Ponzi” guns for the greater good: I understand that the societal impacts of cryptocurrency may be unfavourable in some ways. There can be no avoiding these issues. The ecological impact is probably non-negligible (though I have yet to read any credible study on Bitcoin’s carbon footprint). There are a lot of people with questionable morals who are a lot richer now than perhaps they should be, and if Bitcoin continues to rise in value, they’ll get even richer.
The existence and use of cryptocurrency definitely threatens certain aspects of our way of life, but I don’t think that gives people licence to be dishonest. The fact is: you aren’t going to miraculously save humanity from crypto by lying to people. Instead, we should focus on how we can use consensus technology to better the world… because it’s not going away anytime soon. 🍋