Bitcoin / Cryptocurrency - is it really a scam / Ponzi scheme or such ?

I was watching John Olivers video (shared with me by concerned family after seeing my fervour for these currencies) and wondering - Is it really a scam? Are the 500+ billions put into it that now have reduced to 300+ billion going towards Zilch? Is it all a scam?

John Olivers video

Why did people put 1.5 billion into EOS?

Who knows, but I have my own theory.
People support EOS, because the people behind EOS are also the folks behind successful ventures like bitshares, steemit? It takes good technical skills to build blockchain solutions and people support such ventures? If tomorrow Larry Page wanted to start something and asked for funds in a crowdsale, how much would he be raising without any MVP even? Telegram owners are getting into blockchain with their own cryptocurrency. They have raised 800 million USD in private sale (not foolish public throwing money into ICOs and crying bitconnect! bitconnect!) and plans to raise another 800 million with another private sale (that is 1.6 billion). Is that a crazy amount, yes. But Telegram already has approximately 170-200 million users worldwide. User acquisition costs can be calculated by what Facebook paid for WhatsApp (Facebook bought WhatsApp for 20 billion when it had roughly 500 million users). So 1.5 billion is not that high without an usable product, but it is if the folks are not serious about building the product, take the money and just fold and exit.

Is the fear of scams true

Are there scams going on, are folks just copying bitcoin technology and launching new coins which don’t add any value to the ecosystem other than make their creators a lot of money? Most of us know that the answer is an emphatic Yes.

Will you lose money in ICOs

The answer unfortunately is again Yes.

Prior to ICOs startups raised money from Private funds, VCs, Banks and the likes. How many billions did it take to get the likes of Amazon and Uber in the state they are today (and I am not sure if Uber is profitable yet)? Now with ICOs, the companies are raising funds more easily. Will some of them fold? Yeah, many will. What happens today to private investors when companies fold is same what is going to happen to public who are putting money in crowdsale. The big thing to know is that 90% startups fail. But even if 1 succeeds and you have invested in that you make it (but no way of knowing that in advance).

I don’t think that the crypto startup space is foolish in anyway even if ICOs are folding. They are using blockchain to solve some problems. Some will stay, most will fold. Your due diligence is what will help you and loads of luck. It is always a gamble. All these cryptocurrencies may fold, but blockchain is a new space and some companies will surely build innovative solutions here. If the startups on blockchain need to compete with IBM, Microsoft, Amazon, Apple and the likes, then they need lot funds (millions, maybe billions). Either they get this from Private Funds or ICOs. If you want to be part of it, you put money into ICO, knowing well that it may just fold. Knowing well that you will lose all your investment. That is why the wise always say, only invest what you can afford to lose. Ensure you diversify. Ensure you do your math, know the company and invest in an idea and people behind the idea and not out of FOMO.

So if Crypto / blockchain is not completely a scam, then why we hear so much negative news?

Take a look at some large companies involved in Crypto (I say crypto and not necessarily blockchain for a reason)

• I got this from google, so it could be false, please do your own research.
  • IBM works with a currency called Stellar Lumens (ICICI bank partners with them)
  • Amex partners with Ripple (BoA also partners with them)
  • JP Morgan chase backs ZCash
  • Microsoft partnered with IOTA
  • UK gave eMoney license to coinbase
  • Barclays partners with Coinbase.
  • Goldman Sachs just bought Poloniex

There are many more partnerships being forged daily by hundreds of large companies for blockchain projects, technologies and ICOs. I only stated a few above.

IMF likes blockchain, but not bitcoin. JP Morgan backing ZCash, but saying not interested in bitcoin, or its buyers are stupid. Countries, governments etc, don't seem very happy about cryptocurrency. They need regulations and they need to ensure that things do not change without them having a hand in it. Everyday they release a news that scares investors and makes them sell (and who is really buying the dips is what piques my interest). Maybe world powers want to acquire their own crypto money first, before accepting whats going on, so their own money is safe? I just wonder as a naive person who just entered this space. I read about countries supporting eMoney, giving crypto licenses, starting their own crypto coins at national level. I don't doubt there is speculative bubble built up, but if all was so bad, what are these big companies doing with the tie-ups with cryptocurrencies and governments planning their own eMoney in stealth modes? They can just say blockchain is great and will be used for other purposes than crypto (by they way they are doing that as well - all of them have put tons of money and resources into blockchain technology), but shy away from these partnerships. IBMs business is regulated, so that Pump Dump animations shown by Oliver can't be its model for supporting Stellar Lumens. Neither can Goldman Sachs run an exchange which supports illegal business. So then its all legit and good? No world leader is saying that either and openly supporting cryptocurrency, leaving poor investors who have to pay their bills unable to hodl all, to just lose it all (and into whose hands I wonder - or is it truly down the drain).

I wonder where the early regulation was when Dotcom bubble, real estate bubble or financial bubble was building up. The regulations came in later, after the burst happened. For crypto, the shouting is starting first, and forcing the bubble to burst and prices to fall and maybe collapse completely. You would imaging world leaders learnt from their past mistakes and are now trying to help average Joe early on before he loses all he has. Good thought.

I really need to understand in more depth, but I am sure all these big companies have put tons of scientists and money in to do that already and if they are staying put, so will I until my understanding tells me to exit or they start exiting.

Bitcoin is the purest of them all when it comes to just currency. It is not coincidence that it rose to such levels despite better blockchain solutions.

What about falling crypto markets then

Again I am a newbie, so my theory could be all Messed up. This is what I believe.

There are ppl holding millions of bitcoins and they want to cash out. Cash out = dump = markets falling. Bad news = dump = market falling. Trustees of Mt. Gox announcing that they will sell their billions worth bitcoins = dump = market falling. Major Govts, institutions saying negative things about cryptocurrency = dump = market falling. Govts planning regulations = dump = market falling. SEC or similar organizations wanting crypto trading exchanges under their purview = dump = market falling. SEC tightening classification of security token for a ICO = dump = market falling. It is fear or losing it all just like fear or missing it all that makes people dump.

If bitcoin folds, then so will all the blockchain companies claiming to provide a currency solution, but some with smart contracts (like ethereum) may stay to enable other solutions on the blockchain. If blockchain itself folds as a technology - well new technologies come and go. If they don't fold, the early adopters are successful (worst case a good job in that field, even if not millionaires). For now blockchain does not seem to be folding and bitcoin becoming worthless will not dent its adoption (though I don't think bitcoin will fold either - for all I know the large companies and banks are the ones buying them).

So why are companies like Facebook, Google and JP Morgan seem to be against this wave?

JP Morgan may be the easy one to answer. I read on Google that JP Morgan in its annual report stated that bitcoin is a threat to its business for the very first time in Feb 2018.
https://cointelegraph.com/news/jp-morgan-sees-crypto-as-competition-and-risk-to-its-business-in-sec-annual-report

For Google and Facebook, you need to understand how they make money. Approximately 90% of their revenue comes from ads. Why are their ads better than what you see in TV and newspapers and why are they raking billions in ad revenue? Possibly because they show targeted ads to viewers. How can they show targeted ads? Because they track everything you do on on their websites, on their apps, on the phones that they power with their software. They use this to build a history about you, your likes, your dislikes and then show you ads. But its your data, not theirs. What if you owned your data on blockchain and could sell it companies that can directly show you ads against the payment they made you. Today they pay Google and Facebook. Tomorrow they will pay you directly. After all it is you who will be buying their products if you like them. Why should an intermediary like Google and Facebook make money? Internet is supposed to be for everyone and free and yet these companies make billions off your data. Many blockchain companies are building solutions around this. Many will fold, but some will stay. You would think Google and Facebook would be supportive of these companies? The world leaders care for the money they might lose or not have OR maybe they really care very much about you and therefore the ban.

So do we have a great thing here in blockchain then and not be too worried with current market conditions?

Startups are coming with great solutions. Some are experimental and yet not catching enough fancy or trust of people that these solutions need to be on blockchain.

• EU has approved tough data protection and privacy laws. Others will follow suit. There are companies coming that allow you to own your privacy and share on a need to know basis only parts of it.
• Blockchain may make micro loans easily possible for the unbanked.
• Things like Shipping, tracking, Vehicle history, medical records and what not, where in the end as users your data is with you and yet people can trust what you have over the blockchain with reputation scores built around your identity (which may mean cheaper loans for the right people).

Today the world future is being defined by software engineers on the blockchain, which may or may not be a great thing, but someone always does it for you. Steve jobs did it for smartphones, financial gurus always do it for economies at global scale. So why not some power to software engineers as well. They have been supporting the systems of the world for the last 4 decades. Cut them some slack and see where this industry heads, instead of shouting scam, scam on cryptos.

Some interesting links
https://themarketmogul.com/blockchain-technology-future/
https://themarketmogul.com/bitcoin-bubble-2/

Disclaimer - I am only sharing my limited knowledge and for the sake of knowledge alone. This is in no way an investment advice or legal or taxation counsel. I am not qualified to provide any of these. This is also not a recommendation or encouragement to invest in cryptocurrencies or ICOs