It is not really shocking that some politicians are against bitcoin.
Introduction
I was planning to do a post on protein folding today however as is often the case a few online discussions made me almost spit out my coffee in astonishment.
I am often surprised by how people who seem to be otherwise intelligent know absolutely nothing about how our modern monetary systems work.
That is the "kind" interpretation of their words and actions.
More cynical minds might say that they feign ignorance because the current systems benefit them.
In this case I was surprised to see famous actor James Woods comparing Bitcoin to a Bernie Madoff style Ponzi scheme.
Around the same time I saw a report in which Indian politicians were denouncing bitcoin legalisation due to the "crime risk".
Now there is an argument to be had on whether "legalisation" is a good or a bad thing (it could mean greater regulation) however what struck me were the crazy kind of arguments being made by the politicians against Bitcoin:
Bitcoin Increases Crime and Corruption?
This is another common argument and seems to be one of the arguments that some rather clueless (or perhaps villainous) politicians were making in the Indian situation.
Yes Bitcoin can be used for criminal purposes but so can most other forms of money or goods.
The biggest and least easy to trace source of crime and corruption is actually government issued cash.
In many ways, new techniques mean that bitcoin is actually easier to trace and follow - the information is available on a public ledger.
The thing is any type of item that has value can be used to commission crime. I have even heard of pieces of artwork being used for this purpose.
After all, there is no limit to human ingenuity and resourcefulness when it comes to crime.
Given how some of the most corrupt people in India are the politicians themselves I can't help but think they want to maintain the status quo so that they can continue to do what they do with less scrutiny.
It is much harder to track cash transactions. This was the supposed reason for the removal of certain denominations of currency from circulation in India last year.
If these transactions switched to Bitcoin they would be visible to everyone.
The Bitcoin as a Ponzi Argument
This is one of the oldest arguments that Bitcoin critics have made.
So what is a Ponzi scheme? - Wikipedia has a nice summary:
"A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate investments or business activities.
Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.
Ponzi schemes occasionally begin as legitimate businesses, until the business fails to achieve the returns expected.
The business becomes a Ponzi scheme if it then continues to operate under fraudulent terms. Whatever the initial situation, the perpetuation of the high returns requires an ever-increasing flow of money from new investors to sustain the scheme."
The thing is nobody runs bitcoin - it is not making any claims on returns. Further this interpretation stems from a fundamental misunderstanding of what bitcoin is.
Bitcoin is not a business, it is not a company. It is a technology and a network.
In many ways it is more similar to a commodity like gold. People value it because they value the underlying network and it's ability to store value (as well as transmit it).
I also think such statements prey on people's ignorance and bias which make them believe that anything that is open to speculation and volatility MUST be a scam.
Just because something is open to speculation does not make it a Ponzi. Nearly all types of assets in the modern world are affected by speculation and have some level of volatility - even the most solid stocks and shares. It is part of how markets work.
Unlike paper money which can be printed at will (and created out of nothing), bitcoin requires ACTUAL work to mine it - which is a lot more similar to gold.
The terms of creation are fixed and baked into the system - there is no room for any fraud in the way that occurs in many methods of conning people.
When examined closely it is pretty clear that Bitcoin is NOT A PONZI scheme and that people who suggest this are either being ignorant or are attempting to spread misinformation due to their own vested interests.
We should not be surprised though - some people have always done this and likely always will.
Bitcoin and cryptocurrencies in general threaten to disrupt and democratise the whole economic system. It is natural that those who are benefiting from the current system might have a "problem" with that.
Conclusion
It seems to me that governments are struggling with the implications of a technology which could disrupt their ability to enrich themselves.
The more corrupt a nation is the less sense it makes for the politicians (who are often one of the most corrupt groups) to support a technology like bitcoin which is aiming to democratise the financial systems that have failed the vast majority of their populations.
Further, ignorant people with large audiences (like Woods) get wheeled out to support this agenda.
I suspect as time goes on we will have more and more celebrities talking about how "Bitcoin" is bad and dangerous.
I would not be surprised if vested interests such as banks are already enlisting these kinds of shills to put out their own message - i.e. cryptocurrencies bad fiat money good.
Don't fall for it. If you need a celebrity to tell you if something is good or bad then something is very wrong.
Thank you for reading
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- Soul_Eater_43
