Bitcoin is the world’s first autonomous and self-sustaining pyramid scheme=(twfaassps) There are two types of assets in this world. assets can only provide a return to their current holder if a stream of subsequent investors, buyers, or participants are recruited to provide that return. Type A assets, on the other hand, can provide a return to their owner, even if no subsequent person ever steps forward to acquire that asset. Good examples of Type B assets are gold, land, stocks, and central bank-issued banknotes. Type B …A buyer’s strike suddenly hits the market for a asset. Everyone decides to sell at the same moment so that the asset is offered at $0. An arbitrage opportunity presents itself. Since this asset will either yield a dividend , have some usage in decorating nd/or conducive properties used in electronics ( ), or is destined to be repurchased by its issuer at some positive price , anyone who buys it for $0 is getting something for nothing. As people compete to feast on this free lunch, prices will re-ratchet back up until the opportunity has disappeared… What if Type B (in the case of a stock) gold (central banks withdrawing banknotes by selling assets) …for this reason, assets are characterized by price floors and buyers strikes are not crippling. Type B No equivalent arbitrage opportunity presents itself when a buyer’s strike hits a asset. Say Bernie Madoff issues a bunch of tickets, each providing its holder with a spot in a Ponzi scheme. A few days later, no one wants to purchase Madoff’s tickets. Sure, you can now buy a ticket for $0, but because they have no intrinsic value the only way you’ll be able to come out ahead is by selling it for more to another buyer, say for $1. This will require that you (or someone else) incur expenses on marketing the scheme i.e converting already angry sellers into buyers. This sounds like an awful lot of work, certainly too much to merit paying anything more than $0. Type A It’s probably better to start an entirely new asset than try to reboot the failed one. Type A The upshot is that because assets lack an arbitrage mechanism and marketing is costly, buyer’s strikes quickly bring the game to an end. There is no floor. Type A Bitcoin is a Type A asset When a bitcoin buyer’s strike hits, and bids across all the bitcoin exchanges evaporate, a bitcoin held in your wallet is worthless. There is no underlying business that can throw off dividends nor a central issuer that can cancel unwanted tokens. Sure, you can always purchase a bitcoin for $0, but in order to come out ahead you’ll have to convince someone to buy it for $1. This means you’ll have to regenerate the hype, excitement, and belief that initially spawned a positive bitcoin price. If you’re not willing to spend time and money on these efforts, you better hope someone will. Like other Type A assets, bitcoin lacks a price floor. Given that buyer’s strikes are the death knell for Type A assets, it is vital to recruit a constant stream of new buyers to the cause. In bitcoin’s case, recruitment has been easy. No Ponzi scheme ever boasted as engaging a mythology as bitcoin, starring the dashing and mysterious Satoshi Nakamoto, a radically decentralized digital currency poised to destroy the existing financial system, and “in math we trust”. Because these ideas are so catchy, the mythology has pretty much sold itself — an incredibly cost-effective way of recruiting new participants. Every time bitcoin has experienced a lull in buying and its price has plunged, it has never quite fallen to zero. A batch of new converts, inspired by the latest video on YouTube, has always emerged from the woodwork. Andreas Antonopoulos While the mythology is strong, it has long since spread into the easy cracks, i.e. libertarians and tech geeks. New target demographics, many of which do not agree with the core philosophy underlying the mythology, won’t be so easily convinced to add their bids to the queue. As for Satoshi Nakamoto, he/she is almost ten years old now and getting stale. And one of the core promises of the mythology, the birth of a generally-accepted digital currency, has fallen flat. People are getting jaded. While the technology and philosophy underlying bitcoin might motivate a few geeks, a 5000% price jump is a universal intoxicant. waves of new buyers pushing the stuff ever higher. However, this process faces limits. The bigger bitcoin gets, the larger the stream of recruits needed to drive the price higher. At some point its market capitalization will get so large that the population of buyers necessary to keep the ball rolling will be exhausted. And when bitcoin can no longer demonstrate that it offers a superior return, a buyer’s strike will hit as everyone rushes to sell at the same time, it’s price falling to zero. Luckily, Bitcoin has always had a far more seductive recruiting tool, a rapidly rising price . Past returns bring the promise of future returns, There are no Ponzi or pyramid schemes still running from the 1800s, or the 1920s, or even from 2001. And so bitcoin goes… _There are two types of assets in this world. Type A assets can only provide a return to their current holder if a…_www.adamtownsend.me Bitcoin. World's first autonomous & self-sustaining pyramid scheme - Adam Townsend
