A great argument that they are a modern day pyramid scheme (by design) which will be made illegal at some point for a variety of reasons.
Digital 'Currencies' Are ALL A Scam
2017-06-17 08:35 by Karl Denninger
http://market-ticker.org/
https://cryptorum.com/threads/karl-d...ll-a-scam.217/
"ALL such "digital currencies" are by design and intent a means to separate you from wealth and give it to whoever founded said "currency." They are for this reason all effectively a pyramid scheme. This will inevitably lead to the seizure and closing of all such systems -- if and when governments figure it out. The reason is simple: With a finite and ever-more-difficult means of mining each successive coin the effect on value for participants is exactly the same as it is in any pyramid scheme. Since nothing of physical existence is created or dug out of the ground there is no utility value and thus no floor price, unlike gold or silver (both of which have industrial value due to the metallurgical properties.) The person who "invents" such a system gets to "mine" many coins at very low cost (in electricity or whatever.) He then watches the "value" of said coins escalate as each one becomes harder to "mine" and as hype takes over, and can convert that "wealth" into some other form, whether it be a fiat currency, real property or otherwise.
The founder always makes a grossly outsized "profit" in this fashion with the available profit dropping exponentially and ratably in every single case simply based on the number of participants. At the beginning recruiting others who also make money is easy because mining the coins is easy. However, over time recruiting others becomes harder and harder. This is exactly identical to what happens in a traditional pyramid scheme -- the founder gets a cut off all the sales from everyone under him. The next layer who all find the field "unmowed" with lots of customers make a lot of money too, but always less than the first group and so on. But since the number of customers is finite, just as is the number of coins, with each successive layer of participants it gets harder and harder to find others to transact in sufficient volume to turn a profit because the acquisition of each new (coin or customer) becomes exponentially more-difficult. It is thus impossible on a mathematical basis for any such design to be self-sustaining since it relies on an exponentially more difficult act in a finite world. ALL such systems are inherently ponzi schemes whether we are talking about digital currencies or the alleged sale of products."
Digital 'Currencies' Are ALL A Scam
2017-06-17 08:35 by Karl Denninger
http://market-ticker.org/
https://cryptorum.com/threads/karl-d...ll-a-scam.217/
"ALL such "digital currencies" are by design and intent a means to separate you from wealth and give it to whoever founded said "currency." They are for this reason all effectively a pyramid scheme. This will inevitably lead to the seizure and closing of all such systems -- if and when governments figure it out. The reason is simple: With a finite and ever-more-difficult means of mining each successive coin the effect on value for participants is exactly the same as it is in any pyramid scheme. Since nothing of physical existence is created or dug out of the ground there is no utility value and thus no floor price, unlike gold or silver (both of which have industrial value due to the metallurgical properties.) The person who "invents" such a system gets to "mine" many coins at very low cost (in electricity or whatever.) He then watches the "value" of said coins escalate as each one becomes harder to "mine" and as hype takes over, and can convert that "wealth" into some other form, whether it be a fiat currency, real property or otherwise.
The founder always makes a grossly outsized "profit" in this fashion with the available profit dropping exponentially and ratably in every single case simply based on the number of participants. At the beginning recruiting others who also make money is easy because mining the coins is easy. However, over time recruiting others becomes harder and harder. This is exactly identical to what happens in a traditional pyramid scheme -- the founder gets a cut off all the sales from everyone under him. The next layer who all find the field "unmowed" with lots of customers make a lot of money too, but always less than the first group and so on. But since the number of customers is finite, just as is the number of coins, with each successive layer of participants it gets harder and harder to find others to transact in sufficient volume to turn a profit because the acquisition of each new (coin or customer) becomes exponentially more-difficult. It is thus impossible on a mathematical basis for any such design to be self-sustaining since it relies on an exponentially more difficult act in a finite world. ALL such systems are inherently ponzi schemes whether we are talking about digital currencies or the alleged sale of products."
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