Bitcoin is a ‘Ponzi’ With Infinite Supply – Skeptics Chime In


Bitcoin (BTC) is rallying, but that doesn’t stop its critics from, well, criticizing it. It’s perhaps even provoking them to increase their attacks on the world’s number one crypto: calling bitcoiners ‘irrational’, questioning the coin’s scarcity, calling it a fraud, and questioning if it’s money or what. Some accidentally make a case for it though.

How to feed the world with a pizza

Much of the criticism on BTC’s scarcity seem to come from people who either don’t know that bitcoin is capped at 21m, or do not understand the concept, or have unknown intentions. Either way, this time around a debate started following a series of tweets on bitcoin by longtime BTC skeptic, financial commentator Frances Coppola, in which, among other things, she claimed that “subdivision eliminates scarcity.”

Per Coppola, bitcoiners “aren’t rational,” suggesting this to be their default characteristic, as they believe in the hard cap that “won’t come into existence until long after all of them are dead.” As it is known, the last BTC should be mined sometime after 2100, depending on the mining power of the network. Bitcoiners “believe Bitcoin is “the scarcest asset in the whole world”, even though its supply is constantly increasing and it can be subdivided so much that there is in practice no scarcity at all,” Coppola wrote. Truth to be told, while miners generate around 900 new BTC every day, the supply is set to decrease by half every four years, as we saw this year during the third Bitcoin halving.

Meanwhile, on the question about how subdividing bitcoin into satoshis, smallest units of BTC, means lower scarcity, as the percentage of the network remains unchanged, Coppola didn’t reply but said she’d write a piece on why subdivision eliminates scarcity. There are 100 million satoshis in one bitcoin and around 7.8bn people on this planet, meaning that, in theory, each individual could get around 269,000 satoshis. However, it is also possible that new decimals can be introduced, but again, it would divide the same BTC.

Seriously, how can these people think subdivision increases the overall quantity of something? It’s on the level of ignorance of flat earth theory and i’m convinced they’re trolling.

— ExtraNonce (@428a2f98) December 29, 2020

Many have tweeted counter-arguments to Coppola’s argument, given that no matter in how many pieces somebody cuts a bitcoin, the value of that bitcoin remains the same. It’s not to say that everybody in the world couldn’t possibly own a tiny piece of that pie – or pizza if you will – but would it be worth it? “If we cut this pizza into 8 billion slices we can feed the world,” wrote Swan Bitcoin‘s Brandon Quittem.

Or as Cake DeFi‘s CEO Julian Hosp explained it:

Ponzi! Ponzi, Ponzi!

And of course, where would we be without the words ‘fraud’ and ‘Ponzi’ thrown into the mix. “Just in case people forgot: Bitcoin is *literally* a ponzi scheme,” wrote Jorge Stolfi, a professor at the University of Campinas. Per him, all invested money “just disappears,” “USD 25m” in mining rewards and fees a day goes to the miners, and “not a penny gets “stored” anywhere.” At the very least, he said, when one buys gold they get “a chip of a nice shiny yellow metal” which can be sold.

On the other hand, Stephen D. Palley, a partner at Anderson Kill, tweeted that “there’s substantial evidence” that a small number of actors used bitcoin fraudulently and that it was “manipulated by large purchases with questionable assets, wash trading, spoofing, etc., adding “So have Onions. It doesn’t make ’em a Ponzi scheme.” He continues to say that ‘Ponzi scheme’ is a legal term that refers to a type of investment fraud, and “when people use the term to describe Bitcoin they are using it incorrectly.”

My bros @stephendpalley and @propelforward are right. Bitcoin is *not* a Ponzi scheme.

There are echoes of Ponzi in how speculators interact with it. But it’s not a Ponzi. It’s a “Nakamoto Scheme.”

— Preston Byrne (@prestonjbyrne) December 28, 2020

Money, not money, money, not money…

As is the eternal case, the existential debate over whether bitcoin is money – if so how, if not what is it? Arguments are given that bitcoin is a store value, which many disagree with. Another argument is that it is sound money, which again, many disagree with. “Bitcoiners know that -contrary to its original purpose- it will never serve the unbanked. What is worse, bitcoiners see it as a store of value. Now they stack sats, they do not use it as payment,” claimed commenter Eduardo Cobián Roig. However, data shows that BTC is actually being used for payments.

Some say, however, that bitcoin “wins the sound money race” due to its reliability, predictability, and immutability, not better technology. But others wondered if its financial asset then, instead of currency. Nonetheless, another longtime skeptic, author David Gerard tweeted that this race can be won only if the definition of sound money is made to fit bitcoin.

Your understanding of money is flawed. You think the key determinant of a money’s soundness is possession of “intrinsic value”, a nonsensical concept. What differentiates sound money from fiat money is the former’s emergence on the free market rather than by coercive State edicts

— Spencer Schiff (@SpencerKSchiff) December 28, 2020

Roubini again

Meanwhile, New York University economics professor and arch crypto-skeptic Nouriel Roubini has once again (inadvertently) presented BTC as a good example. Roubini tweeted that, compared to “shitcoins” which lost up to 90% from their peaks, and even other top 10 coins which are down up to 80% from their peaks, per his words, bitcoin stands as an exception.

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