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Bitcoin is useless as money. It cannot be used to measure profit and loss when trading goods and services, as the 'unit of account’ is unstable and deflationary by design. Deflation advantages the holders of money over the holders of assets, which is the opposite of inflation. Both are bad, but the rate of deflation in Bitcoin when the market is rising is orders of magnitude greater than inflation across the developed world.  While the crash is also worse when it comes.  Nor can Bitcoin handle the number of transactions required across the whole economyNor is it a commodity. Unlike a commodity, Bitcoin cannot be used as an input to anything useful.Trading in Bitcoin is not like trading currencies.  Currencies are impacted by demand (like Bitcoin), but unlike Bitcoin, the demand for currency is ultimately derived from the 'worth' of the economies underpinning it.  Bitcoin has nothing 'underpinning' it.So, what is it?To really understand what Bitcoin is and why it's a scam, we need to see it split into the purchase of coins, and mining as two separate operations.When a person buys an existing token, all they get is the key to some code. They make money only if they can find someone who will pay more. This is a classic Ponzi. This destroys the rationale for mining. If the basic function is worthless, any process to deliver it is worthless.Miners are simply spending huge amounts of energy (around 40 kilowatts per transaction!!!) to simply sustain a Ponzi. They are not adding value, and as such, ought not to profit from it.A miner is like a counterfeiter. Counterfeiters use energy, paper, plates, ink and presses to make fake notes that give them access to community resources. Miners use energy, hardware and software to create tokens that do the same. When a miner sells a token they get fiat that gives them unearned access to society's resources (at great cost in terms of energy). While the buyer just gets a bunch of code that is useless apart from being on-sold to another mark.This article in the Wall Street Journal claims that at their peak, miners were making $60 million PROFIT PER DAY, while processing around 400,000 transactions.  That's $150 profit per transaction. This is on top of the enourmous energy costs the miners incur (as well as realestate, hardware and staff costs... and they call bankers rip off merchants!  These costs and profit are all hidden from the people undertaking the transactions as they are taken in Bitcoin tokens.  The total cost (expenses + profit) to the community are realised when the miner sells their tokens to get fiat that they then spend.Simulations run by Phillip Rosedale, founder of Second Life, across a wide range of crypto (including Bitcoin) show that most of the benefit accrues to the original promoters who retain most of the initial coins. He claims crypto-wealth is more concentrated than wealth in the real world… so much for helping the ‘unbanked’, which is a core claim of crypto-warriors!Worse, these ‘whales’ control the markets bidding up prices, selling out, and buying in again when it falls, using accounts that cannot be tied back to them.Unlike counterfeiters, Bitcoiners can do it in the open without threat of gaol... and they get increasing returns for simply holding the tokens (as prices are bid up). This is not like holding a share, where the increasing value must ultimately be underpinned by the cash flow derived from the sale of some good or service.Like all scams, Bitcoin should be outlawed. This will not stop it, but outlawing it for all legal purposes can push it to the margins.I am advocating for this with Australian Authorities, and globally.I'm happy for entrepreneurs to keep investing in different cypto ideas... as long as they provide real value. Some do. In this case, the gains on the tokens should be taxed like any other gain on a security, and they should be regulated to limit fraud.



Once was a Seeker

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