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Opinions/Editorials Title: The Great Bitcoin Scam At the outset, let me clarify that Bitcoin itself is not a scam, but how Bitcoin is being sold is a scam. More about that below. To start out, it is important to understand what Bitcoin really is. It would be easy to bore you with a discussion of the technology, about peer-to-peer servers and sophisticated algorithms, but that is not what you need to know. What you need to know about Bitcoin is that distilled to its technological essence, each Bitcoin is simply a number. That's it: A number. It is simply a series of digits, with each number being assigned to each Bitcoin. To illustrate, I'll randomly pull a $1 bill from my wallet, which bears No. L88793293J. Assuming some minimal level of competency by the U.S. Treasury, no other bill bears that number. The face value of a $1 bill is, of course, just $1 dollar. It is simply a unit of exchange, printed on what many folks would consider to be ugly paper. But two people could privately agree that No. L88793293J is actually worth $5,000. To illustrate Fred wants to buy Joe's golf clubs, but Fred doesn't want his wife to know -- at least just yet -- that he spent $5,000 for golf clubs. So, Fred and Joe agree that No. L88793293J is worth $5,000 and Fred gives No. L88793293J to Joe. Fred then tells his wife that he bought the clubs for the $1 bill. At some later time, when Fred's wife doesn't care so much, Fred pays $5,000 to Joe for No. L88793293J, and gets the $1 bill back. The only difference between Bitcoin No. ABC123 and $1 Bill No. L88793293J is that at the end of the day, the $1 bill physically exists and has a face value that is worth something, i.e., Fred could take the $1 bill and buy something off the $1 menu at McDonalds. By contrast, Bitcoin has no intrinsic value -- it is just a number. The number may have an agreed value between two parties, but the number itself has no value. Consider a bank account number, such as Wells Fargo Account No. 456789. The depositor and Wells Fargo essentially agree that the account designated by No. 456789 has the value of what the depositor puts into it, less what the depositor takes out. But the number itself, No. 456789 has no value. The same situation occurs with credit card transactions, whereby the credit card processing company assigns are unique value to each transaction, but the number itself has no value. Here, the technological difference with cybercurrencies, or crypocurrencies if you prefer, is that they don't require a middleman such a clearing bank. Value, whatever it is, goes directly from A to B, with nobody in the middle. That has some value, but how much? The value, it would seem, would be the difference in the cost of the wire-transfer fees less transaction cost of the cybercurrency unit, which isn't that much -- and in some cases, the wire-transfer could actually be less expensive, although more cumbersome. So, if you find the idea of thinking of Bitcoin as simply a number is too simplistic, then just think of it as a money bag with a lock, the internet version of this. Money goes from transmittor to transmittee, and the transmittee gets a unique code to unlock the bag. What's that really worth? Let's now talk about uniqueness. Bitcoin does have some value because there are only a finite number of Bitcoins available, because the algorithm that is used limits Bitcoin to a particular number of units, of which there should only be somewhere in the neighborhood of 21 million that fit the algorithm. Uniqueness certainly has value. Because there is only one Hope Diamond, it is estimated to have a value in the neighborhood of $350 million. Because there are only 100 of that 24¢ stamp with the upside down airplane printed in 1918, they are estimated to be worth about $1 million each. Ditto for rare coins, original Picasso paintings, etc. But here is where the fundamental flaw in Bitcoin's value lies: It is simply a number, and numbers are infinite -- there will never be a shortage of numbers. Even if you are the world's greatest mathematician and think that you found the largest number ever, there is always that number plus one, plus two, etc. So, Bitcoin may be limited to 21 million numbers, but that doesn't mean that somebody else can't come up with a similar algorithm and thereby create their own unique set of numbers, i.e., their own cybercurrency. In the larger scheme of things, Bitcoin isn't unique. Quite the opposite, as anybody who comes up with their own currency can begin to compete with Bitcoin and any other such currency. It's very much like competing with technical cheeseburgers -- anybody with the necessary mathematical skills can cook one up. For example, let's say that somebody creates a cybercurrency that is based on known prime numbers. There are about 50 million of those, so another 50 million cybercurrency numbers could be created. Indeed, the recent boom in Bitcoin has triggered numerous companies offering their own cybercurrencies, and the amount of such numbers that they can generate is limited only by the ability of their mathematicians to create the necessary algorithms, which of course is similarly infinite. According to that tome of all knowledge known as Wikipedia, as of November 27, 2017, there were 1,324 cybercurrencies in use. Just multiple each cybercurrency by the number of units they each support, and you get a pretty big number. And that is just the presently existing cybercurrencies, recalling that all it really takes is a sharp mathematician to come up for an algorithm for a new one. And that brings us back to the main point: Cybercurrency units are simply numbers, and there is not a finite supply of numbers. Rather, the numbers available are infinite. This further means that the supply of cybercurrency units is likewise infinite. This has profound implications for pricing. The true value of any widget is determined by the aggregate street price of the item, i.e., the sum total of what all units could be purchased for today, divided by the number of additional units which are available for sale. This is where uniqueness comes into play. There is only one Hope Diamond, which means that you take its estimated value of $350 million and divide by one, yielding $350 million. Collectively, those 24¢ stamps with the upside-down airplane are worth $100 million, but there are 100 of them, so they are worth about $1 million each. Or think of it simply in common-sense terms: The more there are of something, the less valuable each one is; if the market is flooded with something, they each have little value. Consumers see this every day at the gas pump, as the price of fuel varies primarily based upon available oil supplies. Herein lies the problem with cybercurrency, which is that there are an infinite number of cybercurrency units available. Divide anything by infinity, and you get a number that is almost zero -- not quite zero -- but as close as you can get to it as possible. This is true even if we assign a current aggregate value of all the existing cybercurrency units at $500 billion. Because it is not quite zero, we can assign it a value of 1¢, not because it is necessarily worth 1¢, but simply because that is the smallest unit by which we can designate value in our currency. Actually, it is some number larger than zero, and thus 1¢, mainly because the Bitcoin folks have put in a lot of effort to keep each number unique and assignable to a given owner, and there are some merchants who will accept Bitcoin as if it were a government-issued currency. This is known as acceptability. Bitcoin has value in excess of 1¢ because it has some (albeit, pretty limited) acceptability. But how much does that really add, and how unique are those features as other cybercurrencies take hold? Suffice it to say that the answer is much closer to 1¢ than $15,000 per unit. This now brings us to the economic law of supply and demand, by which value is determined by what a willing seller will let a unit go for, and what a willing buyer will pay for that unit, at a particular moment in time. Take the 24¢ stamp with the upside-down airplane as an example. Presumably, the U.S. Postal Service would honor the stamp only for 24¢, which is its face value. Otherwise, the stamp creates no other value. But collectors of stamps and other valuables would offer $1 million or more for such a stamp, due to its rarity, and their belief that the value of the stamp will increase over time. And now for something completely different: Tulip bulbs. Tulip bulbs have no intrinsic value, other than that they can produce a pretty tulip flower. Yet, beginning in 1636, the price of tulip bulbs in Holland began to skyrocket, as buyers started believing that -- with demand driven by exports to the apparently then tulip bulb hungry French -- the price of tulip bulbs would keep appreciating. They were right. Eventually, the price of a single tulip bulb hit many multiples of the average Dutchman's average wages, and reportedly 12 valuable acres of land were traded for one particular tulip bulb. Individual tulip bulbs were traded for many times each day, with the price increasing with each trade. Then, one day in February of the following year, 1637, the price of tulip bulbs quit going up, and by May 1, the price for tulip bulbs had fallen back to their original value. Thus, was tulip mania the first recorded bubble. Many centuries later, more specifically in November, 2013, the President of the Dutch Central Bank, Nout Wellink, reflected on the tulip bulb bubble with the following: "At least then you got a tulip, now you get nothing." He was referring to Bitcoin. But Wellink wasn't exactly right, since with Bitcoin you get a unique number. What that unique number is worth, as discussed above, is something pretty close to zero, which makes Wellink's statement much closer to the truth. Poster Comment: This is only half of the article. More at Forbes. Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest Begin Trace Mode for Comment # 8.
#1. To: A K A Stone (#0)
BITCOIN Bitcoin is a 'pyramid scheme,' warns former Wells Fargo CEO Dick Kovacevich
Wells Fargo, huh? In August 2016 the Consumer Financial Protection Bureau announced that Wells Fargo would pay a penalty of $3.6 million plus $410,000 in restitution to customers to resolve allegations that it engaged in illegal student loan servicing practices. In September 2016 the CFPB imposed a fine of $100 million against Wells Fargo in connection with the revelation that for years bank employees were creating more than two million new accounts not requested by customers, in order to generate illicit fees. The company also paid $35 million to the Office of the Comptroller of the Currency and $50 million to the City and County of Los Angeles. The case generated a major scandal, and the bank's CEO John Stumpf was denounced in a Senate hearing and then one in the House. He was forced to return about $41 million in compensation, but this did not diminish the controversy. The California Treasurer announced that the state would suspend many of its business dealings with the bank; Chicago later did the same. Stumpf subsequently gave in to the pressure and resigned. The bank later clawed back an additional $75 million from Stumpf and another former executive. In a separate case, Wells Fargo agreed to pay $50 million to settle a class action lawsuit alleging that the bank overcharged hundreds of thousands of homeowners for appraisals ordered after they defaulted on mortgage loans. In April 2017 Wells Fargo was ordered to provide $5.4 million in back pay, damages and legal fees to a bank manager who had been terminated in 2010 after reporting suspected fraudulent behavior to superiors and a bank ethics hotline. In July 2017 it was revealed that more than 800,000 customers who had taken out car loans with Wells Fargo were charged for auto insurance they did not need. Several weeks later, the bank disclosed that the number of bogus accounts that had been created was actually 3.5 million, a nearly 70 percent increase over the bank's initial estimate. *** And that's not even half of their corruption.
Wells Fargo, huh? Hey, sport....do you think maybe since Forbes, Bloomberg, Financial Times and Warren Buffett are all in agreement with what former Wells Fargo CEO Dick Kovacevich is saying ....that Kovacevich is right? Or does your agenda bias prevent you from seeing this and the name “Wells Fargo” only presented you an opportunity to use your copy and paste trash file?
The man known as the "Wolf of Wall Street" has said once again that Bitcoin will collapse in value, saying it is highly prone to market manipulation. By Miguel Gomez , 02 February Jordan Belfort, the former stockbroker known as the “Wolf of Wall Street,” sees Bitcoin’s future as bright in the short term, but does not believe the cryptocurrency stands a chance against market forces over the long term. He went on to elaborate that Bitcoin has no inherent value, relying only on its scarcity to command its current price. This is in some way similar to blind pools, according to Belfort. These financial instruments were often based on trust from investors that the money they dipped into the pools would be put to good use. During the 1980s and 1990s, blind pools acquired a toxic reputation due to the ease with which investors could be scammed. Belfort believes that people are moving into “Bitcash” (presumably Bitcoin Cash) to participate in a pump-and-dump scheme. This wouldn’t be the first time the Wolf of Wall Street has taken a stance on Bitcoin. Late last month, he said the phenomenon was dangerous and “a bubble for sure.” In an interview for The Street, he pulled no punches, calling the cryptocurrency a fraud. In each of these statements, he used different reasoning for his assertions. In the December presentation, he dubbed Bitcoin dangerous because it is both unregulated and seen as a “get rich quick” scheme. In his interview, he cited the cryptocurrency’s volatility as the reason he thought it was a fraud.
#9. To: Deckard (#8)
I must go for now. As I do, I will leave you with this:
We should use world of Warcraft artifacts for currency. They are rare and people buy and sell them.
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