Bitcoin: Ponzi scheme or investment?

Thanks, that's a great article! And yes, that subsidy for a Bitcoin mining datacenter is exactly the kind of short-sightedness I expect from people in charge who are unable to grasp what it is they are deciding but are also unable to recognize that they are. *facepalm*
My nephew works for [insert largest financial institution here] as a financial analyst. Bitcoin is already dead. Two years from now nobody will remember it cause they are already building their own. You didn't hear this from me.

Exactly. As eloquently stated in the linked article:

These are all things that people have bought in the past, and driven to completely irrational prices, not because they did anything useful or produced any money and value to society, but solely because they thought they would be able to sell them to someone else for more in the future.

On average, humans are quite simple-minded, impressionable, easy-to-manipulate beings prone to herd behavior and FOMO. Combine that with the excessive idiocy, pointlessness and brutality of a monetary system and you get the perfect storm. Most people will literally do anything for money, including completely switching off their rationality. That's also why I have dire predictions about the lifespan of the human race after it achieves the technology of self-replicating artificial intelligence. The hubris humans ascend to is beyond words. We're well on our way to instead being created by "god" to create our own "god" that will ultimately evolve past the need for us to exist. The parallel here is that the most dangerous combination of circumstances is when people too ignorant to know that they are ignorant (because Socrates' wisdom doesn't apply to them, naturally) get together with people who are too busy trying to do something that they never stop and ask themselves if they should. Time and time again this has led to the fall of empires and entire civilizations.
The city I live in thinks its OK to give away taxpayer dollars for a bitcoin miner operation.
Well... I'm personally not too negative about that. Sort off...

See: when talking about bitcoins most people obviously think about money. But I don't mean "money" as in "crypto currency" but: "How much money can I make from that?". A logical reaction but one which also totally overlooks the grand scheme of the bitcoin: an independent currency which will only be worth as much as "We, the People" put into it. Within that reasoning you can say that bitcoin is probably one of the most honest forms of currency out there (just like any other crypto currency).

But in order to work the network needs nodes. And nodes, by definition, don't have to be reliable. I mean, how many nodes will have stopped their activities now that the bitcoin has taken a few bumps?

That's also something many overlook: keeping the network alive. It's not just about mining, but also about transaction processing.

Personally I think the bitcoin is a very interesting development and from a technological standpoint pretty impressive too.

Of course from a financial perspective it's a soap bubble. However I don't consider that to be a bad thing, because if you understand what a bitcoin actually is then you'll realize that it's actually build upon this "bubble design" principle. Instead of gold, or a government, it relies on trust which people put into it. Well, I'm sure that anyone who has briefly followed the stock market will realize that people's trust can change on a whim, especially where money is involved.

And that brings us to the problem here. My answer is two-folded.

Because of that bubble construction it also means that endeavors such as the one described in the OP will somewhat help strengthen the whole bitcoin. Which I consider to be a positive thing because I think the bitcoin by itself is a very interesting development and I actually hope it'll manage to stabilize itself. From a technological perspective I really support this news because I think bitcoin still has a future. Of course, 500k is a bit overdoing it, especially considering it's taxpayers money.

And that brings me to the other side of my opinion, that from a business / financial perspective. Because I think you'd have to be crazy to invest millions into bitcoin especially if you expect to earn those back.

As you can read above I'm pretty positive about the bitcoin and the involved technology. But would I actually invest money into it? Hell no. I also have a few nodes running because I like what bitcoin stands for and because it doesn't heavily tax my network (I know: "then you're also not going to make any money and you're a fool for even trying", watch me no care!). But there's no way I'd actually invest hard dollars / euro's into this because that's definitely a lost cause I think.

SO yeah, I think it's a positive attitude for a government to somewhat support this, though I also think that 500k is overdoing it. Another problem I have with this is that the article doesn't answer the question if the government expects to get this money back. Because if so: good luck to them!
Aside of the questionabilty of speculation things, there is another thing I dislike about these *coins.
Just because of profitability issues bitcoin miners must concentrate in locations where electricity is cheap.
Even this does not stop many of them stealing electricity, there are quite a few reports from China of people getting caught and arrested for this.

Bitcoin madness consumes more energy than Denmark.
Bitcoin mining consumes more electricity than 159 countries combined, including Ireland.

Personally, I find this insane.
Personally I could not care what people do with their money.
I consider this bitcoin craze similar to the beanie-baby craze.
People do the strangest things for a hobby.
I wound not have paid one dollar for a stuffed bear let alone what they were asking.
The recent Pokemon craze seems like the same thing, Just a silly fad.

When my money starts funding these gambles is where I get pissed off.
Add to this the whole reason the currency exists is to fund crimes and to be anonymous.
Unfortunately that ship sailed with the war on drugs. Your bank is now required to report any suspicious activity including large cash deposits. "Know your customer" laws they are called.
So in essence bitcoin is a bootleg currency that is now being promoted by my city.
Well, I put $20 USD into BitCoin, Eutherium and LiteCoin back in early November and cashed out a couple weeks ago - I was able to buy a $5 Value Meal at Carls Jr. from the profit. So, in the short term, you can make enough to buy a hamburger if you know when to pull out. In the long run, I'm glad I pulled out when I did or I wouldn't even be able to buy something off the Dollar Menu!
Something (*) to think about, especially with regard to all parties involved for whom it's not their money.

(*) The corresponding video.

For something which aspires to be a decentralised currency, not controlled by the State, is it irrelevant that it relies on a centralized electrical grid and an Internet that governments can turn on and off?

EDIT: An academic point of view? :D