Part 5
The Ponzi and the pyramid
Peter Schiff did it; he actually went there. So, I'm not going to blow a fuse like a month or so back (I didn't actually, I just really opened the opportunity to go full deep dive into my argument as such). But, Schiff is someone who really should know better, and if for nothing other than the hypocrisy, I'm calling him out on it.
Peter Schiff, in claiming there is no use case for crypto and it is all going to zero once everyone tries to cash out, is showing a vain lack of intelligence on so many levels, I don't mind using my free time to write about it. The very basics: a Ponzi scheme is a scam, where someone offers an investment with zero value, and newcomers are paid with earlier adopters, giving the appearance of legitimacy as long as new people enter the picture. A pyramid scheme is a business structured where there are products to sell, but the profit is based almost solely on commissions from recruitment, where people at the top earn from a portion of everyone's commissions in their downstream. In both cases, there is a scam going on, where there is nothing of value except participating in your part of a chain, and eventually the scam runs dry when there aren't enough newcomers to validate the flow of funds.
So, this is so misdirected and poorly argued I find it embarrassing, and Richard Heart knows it's weak, which is why it's disappointing a more intelligent debate didn't take place.
Bitcoin has people entering and leaving positions, both parties happy hundreds of times/second, providing a constant sea of 24/7/365 liquidity that offers one of the strong use cases for something people can invest in: use case.
But, every person who enters Bitcoin has the opportunity to research it, learn its function, research every exchange, consider every plus and minus of DEX vs. CEX and everything in between. The idea that someone would blindly walk into a Ponzi or pyramid trap, having no clue they are being scammed, is so empty it does, in fact, make me question what other horrid advice he may be offering. It is careless, and lack of research really makes him lose credibility on every measurable level.
Even if Bitcoin did literally nothing but transact correctly across its network, with no L2, surely someone could understand that it offers similar trading opportunities to most large scale public stocks, and a person who invests has the option, if they wish, to own the actual underlying asset, where a share is just that; the representation of a share; nothing else. You can't trade 'em for bubble gum and technically you can't make a paper airplane out of 'em bc they don't issue your shares physically anymore.
I would love to ask, in a debate, whether Schiff sees the value in the NYSE? I can't see it in the air, where the signals are being carried. I know there's a physical building, but all of those bids are coming in via the internet, and those people could be anywhere. There are stock opportunities literally every day, where someone could be the one left holding the bag and the guys that got out with profit are the lucky ones, and that's called playing the market. The idea that someone is left at a disadvantage in this manner is like suggesting the opening and close of the Roman Empire, suggesting that everyone that paid in Caesar's coins was a part of a Ponzi. Somewhere in the midst of that time, was the way cultures transacted, until corruption led to their demise.
So, when true fiat, backed by confidence, a true scam, does come into Weimar Republic range, people will call it a Ponzi, and they would be right. Do we only recognize the schemes that come from an official source? There's a lot to learn from this, seriously. The idea that we have seen the unrest that has taken place the last 13 years, and Bitcoin has run with 100% up-time, should speak to something worth looking into.
Schiff isn't buying the idea of digital scarcity
It amazes me how easy this was to argue against, and how little was said.
There are marketing programs that offer people a free 'ticket' to a webinar, where they can learn $500 of free educational materials for attending. All they have to do is provide their email for the link. But, the offer has a countdown; 1 hour to go. After that, you can't get the same course for less than $99. Free? $99? 50 minutes left.
That is a digital program running on someone's server. The hardware could arguably make it real, but then you'd have to say Bitcoin is real in the exact same manner. There is legitimate scarcity, if the window closes and the person didn't take the offer. Time is a scarcity model. Programming can make use of it. Why is it only real if it's getting dug out of a canyon somewhere?
Schiff, in all his glory, admitted to finding some good investments in gold mining companies where he didn't see gold itself as an investment. We hear the identical points made in crypto, with Bitcoin mining operations every day. Gold's been mined for centuries. Where is the outrage over the environmental impact? What happens when they figure out how to land on asteroids rich with precious metals and suddenly scarcity isn't what they thought it was? Maybe it is a stretch, perhaps not.
Programmed scarcity is real in the same way that programmed word processing made a program that works.
This thing I'm writing in right now is a free online writing tool. Technically, it isn't real, but when I publish it, you'll be reading the words I wrote in countries all around the world. If I write a few good things here and there, the platform is going to let me withdraw a few bux worth of imaginary internet money that technically doesn't exist, but the interactions are real, the idea of the wallet where those unreal coins go, isn't real but it is there in a browser plugin or desktop app.
Are we really still trying to decide when an intangible is tangible? When I use a desktop calculator and I get the same equation and answer as a physical calculator from 1980, is only one answer valid? Do I need to just use pen and paper to avoid micro-processing completely? I think these are all valid questions.
It really makes me wonder how far they consider their own logic sometimes.
If I played a 'physical' game of PacMan at an arcade 40 years ago, was that real, but the one I play from the original game's rom on MAME is not real, because it isn't a "physical" arcade machine? Seriously, I want to know- where does a person draw the line?
"It's not real", is the same argument as "no intrinsic value" in my book. The same moment that any form of ledger representing something real enters in, we are headed down the slippery slope of logic.
The idea that digital scarcity cannot bring real value, is just so strange to me that anyone can be in the financial sector and still not see the disconnect. I'm not sure how that happens. It's a greater mystery to me than how small the atomic level of semiconductors can get.
So, there you have it; more fun picking apart ideas introduced in this entertaining, far too short, far too shallow debate.
Next, I'm going to dedicate Part 6 to my favorite endorsement Peter Schiff never meant to give for Bitcoin.
And on that note, Crypto Gordon Freeman, for now... out.
