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Wednesday, July 24, 2013

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Neil Bartlett

Your question in the first paragraph is silly: "Why does Bitcoin attract [Ponzi] scams like this"? Because it IS money, of course. Because it DOES have value, otherwise why on Earth would the scammers bother?

You might as well ask, why do Dollars attract so many scams? This feels too obvious to explain, yet apparently it still needs to be explained.

The Madoff scam was four thousand times the size of the recent "pirateat40" scam and had absolutely nothing to do with bitcoin. Maybe there's a problem with the social infrastructure around dollars...?

Hamlet Au

However, Madoff's Ponzi scheme wasn't based around US$ per se, but his non-existent investments. Bitcoin scams seem largely based around the ambivalent state of Bitcoin itself, and the fact that it's not socially and universally recognized as legal tender. Madoff's scam would be like a Bitcoin scam if Madoff was selling his investments for sea shells or somesuch.

webspelunker

I'm still trying to understand the difference between bitcoins and sixteenth century Dutch tulip bulbs!

Ananda

Is this really that surprising? Bitcoin depends utterly on convincing people that it can be exchanged for something of value to survive. Bitcoin itself is openly designed as an artifically generated scarcity of *nothing*, which rewards early adopters heavily over latecomers, at least until the inevitable bubble burst. After that, no one really has a good reason to hold onto it as a commodity, as there are no government guarantees of its value. At that point people still holding the coins *have* to become hucksters and fraudsters in order to unload the coins for any (real) money returns.

It's all much better as an object lesson in how finance transfers money from the poor to the rich than as an actual currency.

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