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There are two kinds of people who label bitcoin a ponzi

Summary:
There are two kinds of people who label bitcoin a ponzi. The first group is made up of salty nocoiners who launch the word ponzi as an insult. These people disliked bitcoin and/or bitcoiners pretty much from the get-go. They criticize it at every chance they get. The second group uses the word ponzi in a neutral, or analytic sense. They aren't describing bitcoin as a ponzi in order to insult bitcoin, but in the same way that a biologist would describe a certain mosquito as belonging to the family Culiseta longiareolata rather than Culiseta minnesotae.In philosophy, this distinction is captured by the contrast between descriptive and normative statements. A descriptive claim is one that describes a situation. "Brutus killed Caesar." A normative one is that makes some sort of value

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There are two kinds of people who label bitcoin a ponzi. The first group is made up of salty nocoiners who launch the word ponzi as an insult. These people disliked bitcoin and/or bitcoiners pretty much from the get-go. They criticize it at every chance they get.

The second group uses the word ponzi in a neutral, or analytic sense. They aren't describing bitcoin as a ponzi in order to insult bitcoin, but in the same way that a biologist would describe a certain mosquito as belonging to the family Culiseta longiareolata rather than Culiseta minnesotae.

In philosophy, this distinction is captured by the contrast between descriptive and normative statements. A descriptive claim is one that describes a situation. "Brutus killed Caesar." A normative one is that makes some sort of value judgement about how things ought to be. "Killing is wrong."

Likewise, economists distinguish between positive and normative economics. (The economic distinction is the same as the philosophical distinction, so I won't rehash it, but here is a good article.)

So returning to our two kinds of people who label bitcoin a ponzi, the first is hurling normative statements about bitcoin. "Ponzis are frauds, which makes them bad. And bitcoin is a ponzi, so it too is a fraud." The second group is making descriptive or positive statements about what sort of thing bitcoin is in the universe of financial things.

Now, bitcoiners tend to bristle at all bitcoin is a ponzi statements. And that's because they perceive them to be attacks on their tribe. And the normative statements are, for the most part, designed to be attacks. And so bitcoiners raise their defences and engage in blustery counterattacks. These counterattacks are also composed of value-laden normative statements.

I find these flareups of normative versus normative statements to be unhelpful.

The positive/descriptive claim that bitcoin is a ponzi isn't an attack. And it can't be countered with ideological bluster. It deserves a much more nuanced critique.

And to clarify, the word ponzi is not an entirely accurate description of what bitcoin is. Back in 2017 Preston Byrne provided a more precise description of Bitcoin as a Nakamoto scheme. Give it a read. It's quite well-written. For my part I've been using the Bitcoin as a chain letter descriptor since 2018 and more recently here.

Byrne's and mine are essentially the same idea, that bitcoin is a ponzi. Except not quite. Bitcoin is a decentralized ponzi scheme, one without a schemer. I describe it as an honest chain letter. Byrne uses the word automated.

After all these years, I still haven't seen a convincing explanation for why bitcoin is neither a Nakamoto scheme nor an honest chain letter. That is, I haven't seen a good positive/descriptive response to the positive/descriptive statement that bitcoin is a decentralized ponzi. One of the best alternative theories, bitcoin-is-money, broke down long ago in the face of empirical evidence. And the bitcoin-is-gold description isn't panning out too well.

Bitcoiners haven't turned the perceived slight into a virtue. If someone is calling you names, then proudly adopt the slur. If the descriptive statement bitcoin is a ponzi is accurate and popular, then adopt it and make it your own. "Yep, of course bitcoin is a chain letter/Nakamoto scheme. And that's a good thing."

I mean, there are many ways to go about making bullish normative statements about bitcoin being a ponzi. For instance, a chain letter is managed in a decentralized manner. That make it almost impossible for authorities to suppress them. A creative bitcoin meme artist could rejig this descriptive statement into a celebration of bitcoin being impregnable.

Put differently, up till now all normative statements invoking bitcoin's ponzi nature have been used by critics to attack bitcoin. Where are the normative statements that embrace bitcoin's ponzi nature in order to defend bitcoin?


P.S. After publishing this post, someone sent me a perfect example of a meme that puts a positive slant on bitcoin's ponzi nature.

About Jp Koning
Jp Koning
Working in the bowels of the finance industry. Blogging about monetary phenomena is my side gig.

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