Bitcoin (BTC) is rallying, but that doesn’t stop its critics from, well, criticizing it. It’s perhaps even provoking them to increase their attacks on the world’s number one crypto: calling bitcoiners ‘irrational’, questioning the coin’s scarcity, calling it a fraud, and questioning if it’s money or what. Some accidentally make a case for it though.
How to feed the world with a pizza
Much of the criticism on BTC’s scarcity seem to come from people who either don’t know that bitcoin is capped at 21m, or do not understand the concept, or have unknown intentions. Either way, this time around a debate started following a series of tweets on bitcoin by longtime BTC skeptic, financial commentator Frances Coppola, in which, among other things, she claimed that “subdivision eliminates scarcity.”
Per Coppola, bitcoiners “aren’t rational,” suggesting this to be their default characteristic, as they believe in the hard cap that “won’t come into existence until long after all of them are dead.” As it is known, the last BTC should be mined sometime after 2100, depending on the mining power of the network. Bitcoiners “believe Bitcoin is “the scarcest asset in the whole world”, even though its supply is constantly increasing and it can be subdivided so much that there is in practice no scarcity at all,” Coppola wrote. Truth to be told, while miners generate around 900 new BTC every day, the supply is set to decrease by half every four years, as we saw this year during the third Bitcoin halving.
Meanwhile, on the question about how subdividing bitcoin into satoshis, smallest units of BTC, means lower scarcity, as the percentage of the network remains unchanged, Coppola didn’t reply but said she’d write a piece on why subdivision eliminates scarcity. There are 100 million satoshis in one bitcoin and around 7.8bn people on this planet, meaning that, in theory, each individual could get around 269,000 satoshis. However, it is also possible that new decimals can be introduced, but again, it would divide the same BTC.
Seriously, how can these people think subdivision increases the overall quantity of something? It’s on the level of ignorance of flat earth theory and i’m convinced they’re trolling.
— ExtraNonce (@428a2f98) December 29, 2020
Many have tweeted counter-arguments to Coppola’s argument, given that no matter in how many pieces somebody cuts a bitcoin, the value of that bitcoin remains the same. It’s not to say that everybody in the world couldn’t possibly own a tiny piece of that pie – or pizza if you will – but would it be worth it? “If we cut this pizza into 8 billion slices we can feed the world,” wrote Swan Bitcoin‘s Brandon Quittem.
Or as Cake DeFi‘s CEO Julian Hosp explained it:
How is time scarce if you can divide a lifetime into decades, decades into years, years into months, months into weeks, weeks into days, days into hours, hours into minutes, minutes into seconds, seconds into plancks… we pretty much live forever – right? Right??🤦♂️🤦♂️🤦♂️ #bitcoin
— Dr. Julian Hosp (DFI = DeFi on Bitcoin!) (@julianhosp) December 29, 2020
Quite a few people within the Cryptoverse suggested that Coppola discusses matters she’s not knowledgeable about. Bitcoin developer Ben Carman wrote that “Bitcoin has existed for 12 years and the most outspoken critics are just people who don’t understand fractions.”
Ponzi! Ponzi, Ponzi!
And of course, where would we be without the words ‘fraud’ and ‘Ponzi’ thrown into the mix. “Just in case people forgot: Bitcoin is *literally* a ponzi scheme,” wrote Jorge Stolfi, a professor at the University of Campinas. Per him, all invested money “just disappears,” “USD 25m” in mining rewards and fees a day goes to the miners, and “not a penny gets “stored” anywhere.” At the very least, he said, when one buys gold they get “a chip of a nice shiny yellow metal” which can be sold.
On the other hand, Stephen D. Palley, a partner at Anderson Kill, tweeted that “there’s substantial evidence” that a small number of actors used bitcoin fraudulently and that it was “manipulated by large purchases with questionable assets, wash trading, spoofing, etc., adding “So have Onions. It doesn’t make ’em a Ponzi scheme.” He continues to say that ‘Ponzi scheme’ is a legal term that refers to a type of investment fraud, and “when people use the term to describe Bitcoin they are using it incorrectly.”
Bitcoin is “literally” not a Ponzi scheme. Ponzis are an investment fraud where fraudsters pay old investors w/ new investor $$, unknown to either. Also, $25 million a day in investor cash “literally” does not go to miners.
Maybe dumb for you to spend $$ on, but not a Ponzi. https://t.co/H9aM80KnKA
— Palley (@stephendpalley) December 28, 2020
Another partner at Anderson Kill, Preston Byrne, chimed in, saying that BTC is actually a “Nakamoto Scheme.’ “The Nakamoto Scheme is an automated hybrid of a Ponzi scheme and a pyramid scheme which has, from the perspective of operating a criminal enterprise, the strengths of both and (currently) the weaknesses of neither,” wrote Byrne in his 2017 piece.
My bros @stephendpalley and @propelforward are right. Bitcoin is *not* a Ponzi scheme.
There are echoes of Ponzi in how speculators interact with it. But it’s not a Ponzi. It’s a “Nakamoto Scheme.”https://t.co/AJmDdSN1U8
— Preston Byrne (@prestonjbyrne) December 28, 2020
Money, not money, money, not money…
As is the eternal case, the existential debate over whether bitcoin is money – if so how, if not what is it? Arguments are given that bitcoin is a store value, which many disagree with. Another argument is that it is sound money, which again, many disagree with. “Bitcoiners know that -contrary to its original purpose- it will never serve the unbanked. What is worse, bitcoiners see it as a store of value. Now they stack sats, they do not use it as payment,” claimed commenter Eduardo Cobián Roig. However, data shows that BTC is actually being used for payments.
Some say, however, that bitcoin “wins the sound money race” due to its reliability, predictability, and immutability, not better technology. But others wondered if its financial asset then, instead of currency. Nonetheless, another longtime skeptic, author David Gerard tweeted that this race can be won only if the definition of sound money is made to fit bitcoin.
bitcoin can win the “sound money” race, where “sound money” is carefully defined to closely fit bitcoin
what the real world wants is *useful* money, and that’s why USD won in March
and why the bitcoin pitch has an 11-year record of appealing to bitcoiners and not the public https://t.co/XeFn7lmpsp
— David Gerard 🐍👑 (@davidgerard) December 28, 2020
My theory of why hard money lowers time preference in a tweet:
— Saifedean.com (@saifedean)
And while this is happening, a related father-son disagreement continued, between crypto skeptic, gold bug Peter Schiff and his son Spencer Schiff, with the latter saying the former’s “understanding of money is flawed.”
Your understanding of money is flawed. You think the key determinant of a money’s soundness is possession of “intrinsic value”, a nonsensical concept. What differentiates sound money from fiat money is the former’s emergence on the free market rather than by coercive State edicts
— Spencer Schiff (@SpencerKSchiff) December 28, 2020
Meanwhile, New York University economics professor and arch crypto-skeptic Nouriel Roubini has once again (inadvertently) presented BTC as a good example. Roubini tweeted that, compared to “shitcoins” which lost up to 90% from their peaks, and even other top 10 coins which are down up to 80% from their peaks, per his words, bitcoin stands as an exception.
How to lose money trading Shitcoins. With the exception of BTC all other top 10 are still down 50% to 80% from their all time peak. 1000s of other Shitcoins have lost 80% to 90% from their peak. So that stinking cesspool is digging deeper into its scammy crap. pic.twitter.com/rQKA5SmYa7
— Nouriel Roubini (@Nouriel) December 29, 2020
But people were quick to catch on to this unintended message. “There’s only one king: Bitcoin. Im glad you figured it out,” commented Ryan DeLongpre.
Some industry insiders have already noticed a change in Roubini’s critique of BTC, from the “biggest bubble in human history” and “the mother of all scams” a couple of years ago to “maybe a partial store of value, because … it cannot be so easily debased because there is at least an algorithm that decides how much the supply of bitcoin raises over time” today.
However, don’t get too excited.
“Bitcoin has no role in institutional or retail investors portfolios. It is not a currency: not an unit of account, not a scalable means of payment & is a highly volatile store of value. It is heavily manipulated,” Roubini said a month ago.
Meanwhile, at the time of writing (11:24 UTC), BTC trades at USD 26,798 and is unchanged in a day and jumped by almost 17% in a week. It rallied by 48% in a month and 266% in a year.
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(This article was corrected at 13:53 UTC: There are 100 million satoshis in one bitcoin and around 7.8bn people on this planet, meaning that, in theory, each individual could get around 269,000 satoshis. Updated at 16:11 UTC with an interview with Kraken CEO.)