I'm making no such assumptions; I don't think I'm making the argument you think I'm making.
As for "money has already exchanged hands," that can be true of any Ponzi scheme as well. When we talk of "old" and "new" money in a Ponzi investment scheme, we don't mean two literally segregated categories. You might have some old money and some new money at the same time.
It's a kind of distributed Ponzi scheme that lacks the ordinary intent and centralized accounting associated with them.
It's different from startup in that a startup's shares increase in value, at least theoretically, on the likelihood of future dividends from the company. Startups can have bubbles or be Ponzi schemes too, but if they're indeed successful, they can earn money, and that money (or at least the bet that it will materialize) is a basis for sound investment by passive third parties who have capital.
Bitcoins increase in value only if you can sell them to future owners who are willing to pay more than you did. It's not quite a Ponzi scheme, but it has all of the important characteristics of one: old money is paid back from the new, and the value increases only on the hope that you can involve more new money.
I'm not "bitter" at Satoshi Nakamoto, or really at anyone. I'm trying to do what I can, as I have from the beginning, to prevent people from falling for a scam. I'm not alone in doing this, and many other good analysts are doing the same thing. Is it worthwhile to try to apply arbitrary, amateur, and frankly embarrassingly bad psychology to all of them?
I honestly don't see why. Most of the people involved in the major Bitcoin businesses, or in promoting Bitcoin publicly, are reprobates. Have you spent any time reading bitcointalk.org? Hal is very different from them.
As you'll see from my comment history, I was playing with significant money in Bitcoin early on. I have at least paper gains that are quite satisfying. Nothing I'm saying is personal or is based on any kind of jealousy. It's weird of you to assume that it is.
On "little practical use," I mean today. Why does anyone buy a bitcoin today? The only reasons that I can see are (1) ideology, (2) illegal activities (including the circumvention of gambling restrictions), or (3) speculation, hoping to sell it to someone who will pay more later.
I think the technology is great. The technology itself gives absolutely no reason for those who don't own bitcoins (in the main block chain) to buy them for any value.
Or the seventeen others founded on the same technology. It's important to distinguish the Bitcoin software from the particular block chain in whose private keys naive people are now speculating.
Well, rather than armchair psychology, you could consider the points I made themselves. Do you think there is a good reason for the world to transfer massive wealth to those who currently own bitcoins, rather than setting up an alternative (assuming that the fascinating technology of Bitcoin solves a problem that anyone except ideologues have in the first place)?
I'll give it a go. The early distribution of bitcoins seems to have been enough to motivate lots of relatively early adopters to promote it aggressively, maybe out of ideology or maybe just out of greed. Their claims, which fueled the recent speculative frenzy, have always been that Bitcoin would have a continuous, exponential growth against all other currencies. "It always goes up." "Get in before it's too late."
I can see how relatively small amounts of money could be invested into Bitcoins as speculation or just play. Several tens of millions of dollars have presumably been transferred to Bitcoin holders so far, in the aggregate. But many people are investing on claims that a single bitcoin will eventually be worth $10,000, $100,000, or $1 million. For that to happen, the world would have to transfer massive wealth to the early adopters, as this early adopter explains:
Why would anyone do that rather than setting up an alternative? Massive delusions are possible, but it seems far more likely that the claim that a bitcoin will be worth $10,000 will start to seem ludicrous to everyone, as it obviously is.
After that, why would anyone buy a bitcoin for $100, or even $30 or $10? There's little practical use for them other than drugs or illegal gambling. And they're hardly worth speculatively buying at $100 just so that they could be sold at $120 or $150.
It's got to die eventually, unless everyone decide that they don't mind depreciating the value of everything else just so that the early adopters of this scheme can have untold wealth dumped into their laps. It's a fascinating technology, but that doesn't mean the speculative delusion will last forever.
Pyramid scheme? Just so. Of course, to some degree so is gold -- but gold has a much wider existing distribution (compared to Bitcoin), a much deeper history, and backers far more significant, both intellectually and financially, than the childish ideologues of bitcointalk.org.
Oh, I don't mean to suggest that at all. I'm just trying to suggest that an offer from Google doesn't, to me, at present imply that the offeree has any special merit. Google is cash-rich and can use cash strategically.
It wouldn't be right to assume that because Google has many smart people, everything they do as a result is smart. Google is hardly an innovative company anymore. In fact, they seem mostly to be coasting on existing models and paying lots of people mostly just so that they don't work for existing and potential competitors.
It's a huge myth that Bitcoin is beyond the reach of governments. There are three reasons for this.
First, Bitcoin isn't actually decentralized. It's not a true open-source community of developers; the core group is tiny, and few others are knowledgeable about the protocol, which is poorly documented. Remove the mainline client and you'd destroy Bitcoin. The exchanges are hugely centralized. Exceedingly few people use Bitcoin for anything else other than buying and selling dollars, and there's only one place to do that in any volume - an unregulated Japanese exchange of questionable legality.
Second, Bitcoin is extremely vulnerable to denial-of-service attacks, both network-based (even the original developers were aware of this) and as a result of the higher-level Bitcoin protocol itself. The best analyst on these matters, someone using the label "ComputerScientist" at, among other places, Ben Laurie's blog (links.org) estimated that it would cost less than $1 million to topple the system without even any cleverness - just by obtaining a majority of the "legitimate" hashing power of the network.
Third, though this is more speculative, most people don't like to engage in financial crime; it's not psychologically the same thing as downloading a CD or a television show. Nobody thinks they're supporting significantly illicit activity by downloading some music that otherwise would have cost them $7. People can be easily persuaded -- rightly -- that they're supporting money laundering, significantly illegal and immoral purchases, and so on using Bitcoin. Indeed, because Bitcoin is essentially unneeded for legitimate transactions (and probably can't compete in the long term on transaction fees with other legitimate payments systems), its primary use aside from speculation is currently illegal activity, and there's no reason to think that will change.
Bitcoin's not at all resilient in the face of an attack by a government.
You're right about limiting damage from a 50% attack, however. Of course, you could agree in advance on an amount of time the majority of hashing power would have to assert that an upgrade was needed, but it's possible that would raise other problems. It may be that there's no good way to handle upgrades without an out-of-band mechanism, but if so, that counts as a strike against Bitcoin, not one in its favor.
I think you've misunderstood his focus. He's describing the network protocol, not the overall "Bitcoin system" that's sometimes called the "Bitcoin protocol." He explicitly points out that the economic details are beyond the scope of his argument.
You could tie an upgrade of the protocol to a consensus by a majority (or perhaps supermajority, if you're clever) of mining strength. Or you could try to give up the total decentralization of Bitcoin, given that it's an illusion anyway and the source of most of the expense, security problems, and unwieldiness that will come to haunt the protocol.
Those are the most superficial points of the post; everything else he says is spot on, particularly the disconnect between the claim the the protocol is easy to update and the nearly impassable practical obstacles to doing so for a contentious update.
I haven't seen a good argument for why the blocks need to be prevented from being found in advance or why the proof-of-work has to depend on the contents of a particular new block (rather than simply authenticating that block).
If that requirement is removed, anything that's (1) useful, (2) hard to do, and (3) easy to check could satisfy. Searching for Mersenne primes could work, for example.
That said, the need for proof-of-work comes only from Bitcoin's arbitrary design criterion of full decentralization. It's an academically interesting criterion but one that is almost certainly too expensive in practice for nearly all applications. Eliminate full decentralization and, even if you allow practically useful forms of decentralization, you get a much simpler, easier-to-defend, secure, and cheaper system. Even if Bitcoin plods along under its current speculative bubble, there's very little reason to think it will be able to compete successfully with other payment systems on transaction fees, because in the long term, those transaction fees will need to pay for all the proof of work.
I think you may have missed the point of the comment to which you were replying. What's the humor of the comic, in your view? I can't discern it myself.
It does seem to need a punchline. Perhaps a zoom out to a larger group of people saying "Bitcoin Rally!" sitting on piles of Bitcoins that they're compulsively counting.
(I also get the reference in your username, btw. I don't know if it's obscure or not, but I don't see it often.)