This caught my eye from a JPM piece. It's an instructive article on bitcoin et al but ends on quite a sour note
Are they Pyramid Schemes?
- Another worrying aspect of cryptocurrencies are some parallels to fraudulent pyramid schemes. Initiator of a pyramid scheme often ensures ownership of a disproportionally large share of future profits.
- For instance, in the case of bitcoin, it is believed that an unknown person (or persons) known as 'Satoshi Nakamoto', before disappearing, mined the first 1-2M coins or ~10% of the coins that will ever exist ($4-8bn USD current value).
- While initial mining requires a negligible effort, the benefits for subsequent participants start diminishing. Mining becomes progressively more difficult, and eventually unprofitable, marking the likely end of a scheme.
- A way around this in Pyramid schemes is to bypass the original chain and start a new one of your own. The cryptocurrency analogy would be to start a new coin if it is more profitable than mining the existing one. This can work as long as there are enough willing and uninformed buyers.
- While we don't know whether the price of cryptocurrencies will go up or down in the near-term, the history of currencies, governments and financial fraud tells us that the future for cryptocurrencies will likely not be bright.
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There is more in the piece from JPM is there is any interest
