Blockchain, NFTs, Bitcoin

If something looks like a duck, walks like a duck and quacks like a duck, it’s a duck. I am not a fan of bitcoin because it looks like a ponzi scheme, works like a ponzi scheme and sounds like a ponzi scheme.

Most people don’t see bitcoin as a ponzi scheme because most people don’t understand the basics of the underlying technologies and how they operate. Fortunately, there are good guides on the internet. Unfortunately, they don’t come cheap. The cost is in the time you invest.

So if you are really interested, pay the cost in terms of time. I think the return on investment is worth it. Here’s a video that is really excellent. Enjoy.

Written and performed by Dan Olson.

  • 00:00:00 Preface
  • 00:01:12 0. In 2008 The Economy Collapsed
  • 00:07:09 1. Bitcoin
  • 00:18:18 2. Ethereum
  • 00:24:34 3. The Machine
  • 00:39:07 4. NFTs Exist To Get You To Buy Crypto
  • 00:57:54 5. The Unbearable Cringe Of Crypto
  • 01:11:46 6. A Self-Organizing High Control Group
  • 01:16:57 7. Crypto Reality
  • 01:25:36 8. There Is No Privacy On The Chain
  • 01:32:52 9. If This “Looks Like Scam” Then Every NFT Room I’m In Looks Like Scam LOL
  • 01:38:29 10. Play To Earn Exists To Get You To Buy Crypto
  • 01:46:39 11. We’re All Gonna Make It And By “We” I Mean “Us” Not You
  • 01:56:08 12. DAOs Exist To Get You To Buy Crypto
  • 02:13:21 13. I Know It’s Rigged, But It’s The Only Game In Town

I realize that most people would be put off by the over 2-hour length of the video. But give it a spin. After 15 minutes, I bet you that you will be hooked.

Author: Atanu Dey


15 thoughts on “Blockchain, NFTs, Bitcoin”

  1. Atanu – I have been a lurker on your blog since 2004/2005 (Soumen C from IIT-B told me about your blog back then), and have taken away many wise lessons from your writings.

    You have to be able to separate Bitcoin from the rest of the crypto-morass. As someone who looks up to Hayek, it’s unbelievable to me that you cannot see this emergent form of new neutral money, and how it fixes a fundamental rent-seeking bug in our society: the government’s control of monetary policy.

    Blockchains are painfully slow databases and they have only one use case – a use case that needs to be worth it, to give up all the speed and efficiency of centralized databases. Money is that use-case.

    NFT’s, DeFi, and the rest of it are just regulatory arbitrage noise. Bitcoin is where the actual socio-technological magic is.


    1. Tejaswi:

      You surely missed these bits —

      I have been a big fan of private currency and of course now that the technology is mature for cryptocurrencies, I favor them. But I think Bitcoin is a Ponzi scheme that will eventually collapse. It will end badly for most people except those who got in early and bailed out before the end.

      Central bank digital currency is bound to happen. I would guess in less than 10 years. Will central banks and central planners give up their game and will there be massive “non-compliance”? Nope. People are sheep. They dutifully go to their slaughter.

      [March 1st, 2022]

      Then again, two weeks ago on May 12th, I wrote:

      I am not against cryptocurrencies. In fact, I am all in favor of alternative currencies, private currencies, LETS, etc. I believe that people should have the freedom to choose what assets they want to hold, and what to use as a medium of exchange for their market transactions. But I have never been in favor of Bitcoin. I think it is a stupid ponzi scheme.

      Ponzi scheme do not create wealth; they’re pure wealth transfer from one group to another. It’s a zero sum game: the aggregate gains by some is equal to the aggregate losses by others. That’s a mathematical certainty.

      I am not a fan of fiat currency either. Governments cunningly inflate fiat currency for their own nefarious ends. Aside from the occasional bout of crippling hyperinflation that tinpot dictators inflict on their helpless citizens, most fiat currencies inflate slowly enough for people to take suitable action. Instead of a government monopoly on the issuance of currency, there should be a vigorous competition among private providers of money, and the government money must be required to compete with other currencies (if not constitutionally prohibited from issuing fiat money.)

      I am consistent in my belief that alternative currencies must be tried, and this view is consistent with Hayek’s view.

      We perceive the world through lenses which are the theories we adopt or develop to explain the world. I think bitcoin is a bad idea and is not suitable as a currency. I think the video above does a good job of explaining why.

      Thanks for your comment.


      1. I have read your earlier pieces on Bitcoin, and I disagree with those as well. A few points without structure:
        1. Fiat currencies are already fully digital. So, CBDC’s already exist. Nothing new to see there.
        2. Private providers of money will not be tolerated by the state. The state has a monopoly on violence, and private money providers will be subject to outright persecution by the state, or will be forced to bend to the will of the state like many other “private enterprises” which rely entirely on government largesse.
        3. Most people cannot take suitable action against inflation, without risking those inflation-protection assets also being seized by the state. And most of these inflation-protected assets are not transferable across jurisdictions.

        You really have to seriously think about how one might construct a neutral money that is free of a trusted third party and bootstrap it. Bootstrapping a new thing is bound to have initial winners, but either these winners will die, or will consume the money for goods and services as time goes on.

        Bitcoin is the only thing that has come even remotely close to this ideal new money. Bitcoin has flaws (and no, energy consumption is not a flaw), but it’s a giant leap of progress compared to what had been attempted before.


        1. Tejaswi,

          I suppose we will just have to wait and see if bitcoin is the answer to the problems of govt-issued fiat currency. Bitcoin is new — just around 14 years old. Another decade or so, and we’ll know. If bitcoin dies, you owe me a beer, and if it survives, I owe you a beer at a pub of your choosing. Deal?

          An alternate numeraire to fiat money? I bet that there will be many. Crypto? Certainly. Here’s what I wrote on a different forum with many bitcoin enthusiasts to be super clear about my position:


          1. Beer? Deal.

            Bitcoin has been designed with simplicity and a cockroach like resilience in mind. All of its cryptography is from the 20th century, and so are its programming paradigms. It’s lean, and purpose built to resist state capture. Betting against it is a bad idea, but I am not the one to say no to a free beer.


          2. Beer? Sure.

            Bitcoin is especially designed to be lean, and resistant to state capture, and survive like a cockroach. Recently, more than half of Bitcoin mining disappeared – and nothing happened. Proof-of-work is designed to be self-evident, with no authority required to stamp it. You really should take a few hours to study why it’s built the way it’s built. I promise you countless hours of joy, and a profound sense of relief that Bitcoin exists in a world with so much uncertainty and a feeling of being a hapless pawn in control of those with power.

            Running a Bitcoin node on a computer you control, being able to read the source code, and see for yourself that it indeed does what it says it does, and the almost unbelievable simplicity of the entire thing – made me a happier person.


    1. Hi Anirudh:

      Thank you very much for the pointer. Excellent article by the redoubtable NN Taleb. From the abstract of the article, of particular interest to me is the bit “the speculative variations in the price of a zero-sum maximally fragile asset with massive negative externalities.” Even with my limited knowledge of what bitcoin is, I came to the same conclusion — that it’s zero sum and has massive negative externalities associated with the “mining” of bitcoin.



      1. What do you mean by Zero Sum in this context? Is money supposed to not be zero sum? Money is just a tool to solve the coincidence-of-wants problem. Keeping its supply capped makes it fair. Keeping it non-zero-zum (inflating) makes it less fair.

        Anything useful to society consumes energy. Calling consumption of energy a negative externality is a bit – er – absurd. Would you rather go back to a society that does not consume energy?

        There are many rebuttals to Taleb’s scornful paper – here’s one:


        1. Tejaswi,

          Zero sum is when the gains to one party exactly equal the losses to another party.

          The concept and utility of money is not a matter of zero sum or non-zero sum. Money is gained or lost by one or both transacting parties — which then characterizes the game as negative, zero or positive sum.

          The consumption of energy is not a negative externality. For something to be an externality, it has to have an uncompensated effect on someone. Energy is the basis of all production. The use of energy is a necessary factor for production but it is not a sufficient condition. All production requires energy but all energy use does not result in production.

          One can use energy to just generate unwanted heat. Or as a bitcoin miner remarked, he has not had to pay for heating since he started mining. But in most cases, the mining of bitcoin generates unwanted heat. The effects of the use of electricity in bitcoin mining is an externality from the point of view of those neighbors who don’t want their homes to be heated.

          Whatever Taleb’s faults, he is certainly not an idiot. He’s mean to his opponents, harsh in his language, relentlessly attacks those he calls intellectuals yet idiots (IYI), etc. He understands finance and money better than 99.99999 percent of humanity. But of course he’s not infallible. It’s possible that he’s wrong about bitcoin but it is improbable. The distinction between possible and probable is important. It’s possible that a commercial jetliner crashes today but it is improbable given the record of airliner safety.

          Does NNT have his critics? Sure he does. Many of his critics are also experts in their fields, no doubt. But I am certainly not qualified to adjudicate wrong. It’s my guess that bitcoin will fail, and this guess is based on my understanding of the fundamentals of economics. Just BTW, my full time job is to understand the fundamental principles of economics, a job I’ve been at for around 30 years. Without the least shame I admit that I am pretty clueless about money and finance. My core competency is understanding the fundamental principles of economics — which appears to serve me well in figuring out a few things about how the world works.

          Thanks for your comments.


          1. I still don’t see what you mean by the negative externalities of Bitcoin mining. Sure, computing generates uncapturable heat. But that’s also true for most general purpose computing, or any other use case of energy itself.

            I think most criticisms against Bitcoin’s energy consumption are normative in the sense that critics find Bitcoin itself not worth any energy consumption whatsoever. On the contrary, Bitcoin mining computers are some of the most purpose-built computers on the planet – with just one operation in mind: mining Bitcoin. They might get more efficient in the future, as there is money to be made with efficiency. Or miners will continue to find cheaper forms of power.

            I am curious to know your economic intuition that tells you that Bitcoin has to fail. The more arguments against Bitcoin, the better my understanding gets.


            1. I diagnose OP with an acute case of BDS (Bitcoin Derangement syndrome)

              OP denies to have any interest to learn bitcoin’s design, while claiming they know enough to conclude bitcoin is a ponzi and waits for its ‘inevitable’ fall.

              OP claims a good money must inflate, but denies to answer who gets to do it and why/how?

              One can lead a horse to water, but you can’t make it drink.
              Each gets to understand bitcoin whenever they are ready for it.

              Here is a witty piece by Allen, if you missed.


  2. Whenever someone uses Computer Science or related terms to describe the benefits of “Crypto” or Bitcoin – a supposed currency – its a telling sign that something is a miss.
    Like Feynman used to say “if you cannot explain something is very simple terms to someone then you havent really understood”.
    I like to describe Bitcoin as “Pet Rock” (a fad from 70s and reference in the movie Office Space)
    The upcoming recession will “take care” of this fad.


    1. “It’s electronic cash.”

      “Sure but what’s the use case?”

      “You can freely earn, save, and spend money over the internet 24/7 without asking for permission. It’s open source, no seigniorage, and it can’t be diluted.”

      “Yeah cool but can you explain it without computer science?”



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