03-12-2023, 09:24 AM
Bitcoin Thrived on Misinformation
<!-- SC_OFF --><div class="md"><p>A decade ago, only a few knew about bitcoin – a digital token issued by a computer program of an anonymous person. Today, millions upon millions of people all around the world are giving up their money to become its holders. What caused this? Why people massively started giving up their money for something issued by a mere computer program? Well, they have been the victims of misinformation. For some odd reasons, information about bitcoin is either false or misleading in both legacy and social media. Examples of false information are that bitcoin works as currency or money and stores value. Misleading information is that bitcoin is some kind of alternative to traditional money systems because it is decentralized, scarce, well-protected, immutable, or fast exchanged. In order to expose these misinformations, we must explain the two key properties of traditional products from which their holders are benefited.</p> <p>In traditional markets, products traded have one of two key properties. They are either intrinsically valuable or liability instruments. Products like food, oil, gold, computer software, etc., are intrinsically valuable because they can “on their own” benefit their holders. Food can be eaten, oil used as energy or raw material, gold worn as jewelry or built into electronics, while software can operate computers or execute specific tasks. On the other hand, products like bonds, fiat currencies, stocks, and gold certificates don’t have intrinsic value. However, they are liability instruments with subjects (individuals or institutions) behind them that are legally liable to take the instruments back or do something to benefit their holders.</p> <p>In bonds, the subjects are bond issuers. They are legally liable to take bonds back at maturity and pay the bond’s face value. Also, they are liable to pay coupons once or twice a year. In fiat currencies, the subjects are the debtors that were granted loans in the banking system. Fiat currencies represent their debt, and the debtors are legally liable to return them back to the system. In order to be able to do that, they must work for holders of fiat currencies, sell them goods, or provide them services. In stocks, the subjects are companies. If companies were to go out of business, they are liable to pay stockholders the net value of companys’ sold physical assets. Also, if they decide to take out their earnings, they are liable to give that earnings to shareholders in the form of dividends. Finally, in gold certificates, the subjects are their issuers. On-demand, they are liable to take the issued certificates back and give their holders a specific quantity of gold.</p> <p>Now that we know the two key properties from which traditional products benefit their holders, we can turn to bitcoin. When bitcoin is issued to individuals called bitcoin miners, these miners neither get an intrinsically valuable product nor an instrument of liability. Bitcoin is a token stored in a distributed database called the blockchain. As such, it cannot be seen, touched, tasted, heard, smelled or used to perform specific tasks and provide benefits like intrinsically valuable products do. Also, a person who developed a computer program that issues the token is not legally liable to take it back or do something to benefit miners or other token holders. This brings us to the false information mentioned at the beginning.</p> <p>When you hear that bitcoin works as currency or money and stores value, this is false. Throughout all human history, currency, or generally money, has worked by storing value in either a physical product (a commodity) or liability. When money was a commodity, it benefited their holders from intrinsic value stored in physical products. When money became a gold certificate or fiat currency it benefited their holders from actions performed by subjects according to legally binding agreements stored in contracts and other legal documents. There are no exceptions to that. That is how money always worked. So, when someone says that bitcoin works as currency or money and stores value, they are essentially saying that bitcoin benefits their holders through either intrinsic value or liability satisfaction. And this is not true; it is false information. Bitcoin neither has intrinsic value nor is a liability instrument. And thus, it doesn’t work as currency or money. It simply has no properties in which to store value.</p> <p>The way bitcoin really works is as a token of participation in a redistribution scheme. In that scheme, new participants pay in intrinsically valuable products or liability instruments to pay out earlier participants (token holders). And then, by receiving the tokens from these participants, they wait to be paid out the same way. In short, bitcoin works as a token of participation in a Ponzi-style scheme. All Ponzi-style schems redistribute the existing intrinsically valuable products or liability instruments among the participants. It is just that the Bitcoin scheme has no central operator that arbitrarily governs the redistribution, so it is not a fraudulent operation like traditional Ponzi-style schemes. But regardless, bitcoin is not money that stores value but just a token or a sign showing that one participates in a redistribution scheme.</p> <p>And this brings us to misleading information. As the advantages of the Bitcoin system, you will hear that its tokens are decentralized, scarce, well-protected, immutable, and fast exchanged. This is then presented as some kind of alternative to traditional money systems. Or even that this makes the Bitcoin system superior to them. From the above, we can easily see why this is misleading. Traditional money systems transfer intrinsically valuable products or liability instruments. On the other hand, the Bitcoin system transfers tokens of participation. As such, the Bitcoin system can only be an alternative or superior to traditional Ponzi-style redistributions. And it really is.</p> <p>Unlike traditional redistributions, the Bitcoin one can be entered and exited quickly from around the world thanks to the tokens. These tokens are well-secured, and nobody can kick the participants out of the redistribution. It is impossible for any entity (for example, a government or corporation) to falsify data on participation. The tokens are scarce, so the ratio of investments and tokens is high, and those that were lucky to get them early earned a lot in the redistribution. And on top of all that, the redistribution is anonymous. So indeed, the Bitcoin system is superior to traditional Ponzi-style redistributions.</p> <p>However, the Bitcoin system has nothing to do with traditional money systems or money in general. Its tokens are neither intrinsically valuable nor liability instruments to be able to store value that benefits their holders. All the value is stored in traditional products that the participants pay into the redistribution sceme.</p> <p>If bitcoin hadn’t been misrepresented to the public as money or an alternative to traditional money systems, it would never have gotten to where it is now. In short, bitcoin thrived on misinformation.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/Prodiction"> /u/Prodiction </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/11og2wl/bitcoin_thrived_on_misinformation/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/11og2wl/bitcoin_thrived_on_misinformation/">[comments]</a></span>
<!-- SC_OFF --><div class="md"><p>A decade ago, only a few knew about bitcoin – a digital token issued by a computer program of an anonymous person. Today, millions upon millions of people all around the world are giving up their money to become its holders. What caused this? Why people massively started giving up their money for something issued by a mere computer program? Well, they have been the victims of misinformation. For some odd reasons, information about bitcoin is either false or misleading in both legacy and social media. Examples of false information are that bitcoin works as currency or money and stores value. Misleading information is that bitcoin is some kind of alternative to traditional money systems because it is decentralized, scarce, well-protected, immutable, or fast exchanged. In order to expose these misinformations, we must explain the two key properties of traditional products from which their holders are benefited.</p> <p>In traditional markets, products traded have one of two key properties. They are either intrinsically valuable or liability instruments. Products like food, oil, gold, computer software, etc., are intrinsically valuable because they can “on their own” benefit their holders. Food can be eaten, oil used as energy or raw material, gold worn as jewelry or built into electronics, while software can operate computers or execute specific tasks. On the other hand, products like bonds, fiat currencies, stocks, and gold certificates don’t have intrinsic value. However, they are liability instruments with subjects (individuals or institutions) behind them that are legally liable to take the instruments back or do something to benefit their holders.</p> <p>In bonds, the subjects are bond issuers. They are legally liable to take bonds back at maturity and pay the bond’s face value. Also, they are liable to pay coupons once or twice a year. In fiat currencies, the subjects are the debtors that were granted loans in the banking system. Fiat currencies represent their debt, and the debtors are legally liable to return them back to the system. In order to be able to do that, they must work for holders of fiat currencies, sell them goods, or provide them services. In stocks, the subjects are companies. If companies were to go out of business, they are liable to pay stockholders the net value of companys’ sold physical assets. Also, if they decide to take out their earnings, they are liable to give that earnings to shareholders in the form of dividends. Finally, in gold certificates, the subjects are their issuers. On-demand, they are liable to take the issued certificates back and give their holders a specific quantity of gold.</p> <p>Now that we know the two key properties from which traditional products benefit their holders, we can turn to bitcoin. When bitcoin is issued to individuals called bitcoin miners, these miners neither get an intrinsically valuable product nor an instrument of liability. Bitcoin is a token stored in a distributed database called the blockchain. As such, it cannot be seen, touched, tasted, heard, smelled or used to perform specific tasks and provide benefits like intrinsically valuable products do. Also, a person who developed a computer program that issues the token is not legally liable to take it back or do something to benefit miners or other token holders. This brings us to the false information mentioned at the beginning.</p> <p>When you hear that bitcoin works as currency or money and stores value, this is false. Throughout all human history, currency, or generally money, has worked by storing value in either a physical product (a commodity) or liability. When money was a commodity, it benefited their holders from intrinsic value stored in physical products. When money became a gold certificate or fiat currency it benefited their holders from actions performed by subjects according to legally binding agreements stored in contracts and other legal documents. There are no exceptions to that. That is how money always worked. So, when someone says that bitcoin works as currency or money and stores value, they are essentially saying that bitcoin benefits their holders through either intrinsic value or liability satisfaction. And this is not true; it is false information. Bitcoin neither has intrinsic value nor is a liability instrument. And thus, it doesn’t work as currency or money. It simply has no properties in which to store value.</p> <p>The way bitcoin really works is as a token of participation in a redistribution scheme. In that scheme, new participants pay in intrinsically valuable products or liability instruments to pay out earlier participants (token holders). And then, by receiving the tokens from these participants, they wait to be paid out the same way. In short, bitcoin works as a token of participation in a Ponzi-style scheme. All Ponzi-style schems redistribute the existing intrinsically valuable products or liability instruments among the participants. It is just that the Bitcoin scheme has no central operator that arbitrarily governs the redistribution, so it is not a fraudulent operation like traditional Ponzi-style schemes. But regardless, bitcoin is not money that stores value but just a token or a sign showing that one participates in a redistribution scheme.</p> <p>And this brings us to misleading information. As the advantages of the Bitcoin system, you will hear that its tokens are decentralized, scarce, well-protected, immutable, and fast exchanged. This is then presented as some kind of alternative to traditional money systems. Or even that this makes the Bitcoin system superior to them. From the above, we can easily see why this is misleading. Traditional money systems transfer intrinsically valuable products or liability instruments. On the other hand, the Bitcoin system transfers tokens of participation. As such, the Bitcoin system can only be an alternative or superior to traditional Ponzi-style redistributions. And it really is.</p> <p>Unlike traditional redistributions, the Bitcoin one can be entered and exited quickly from around the world thanks to the tokens. These tokens are well-secured, and nobody can kick the participants out of the redistribution. It is impossible for any entity (for example, a government or corporation) to falsify data on participation. The tokens are scarce, so the ratio of investments and tokens is high, and those that were lucky to get them early earned a lot in the redistribution. And on top of all that, the redistribution is anonymous. So indeed, the Bitcoin system is superior to traditional Ponzi-style redistributions.</p> <p>However, the Bitcoin system has nothing to do with traditional money systems or money in general. Its tokens are neither intrinsically valuable nor liability instruments to be able to store value that benefits their holders. All the value is stored in traditional products that the participants pay into the redistribution sceme.</p> <p>If bitcoin hadn’t been misrepresented to the public as money or an alternative to traditional money systems, it would never have gotten to where it is now. In short, bitcoin thrived on misinformation.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/Prodiction"> /u/Prodiction </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/11og2wl/bitcoin_thrived_on_misinformation/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/11og2wl/bitcoin_thrived_on_misinformation/">[comments]</a></span>