Can someone explain to me why Bitcoin is compared to a Ponzi scam so often. I understand what a Ponzi scam is and have a decent understand of Bitcoin. I'm curious if people just mean it's scam and a Ponzi scam is fresh in their memory.
I don't know if it's a Ponzi scheme but it's definitely a strange phenomenon.
Is there a bank where after you deposit your money, it grows in value if other people after you also deposit in the same bank? The more and more people deposit the higher your deposit becomes?
I know it's insane. The danger is that if more people start withdrawing your deposit will start shrinking.
This is one of the reason Bitcoin is not really money.
The other reason is that it's not a measure of value. Is there any one who will give their product or service price in bitcoins? The way the price of Bitcoin fluctuates, it's impossible to do so.
People holding it want the price of it to go as high as possible. There is no incentive to have a stable currency when people are still wanting to buy into the hype and liquidity is still there to dump it.
I don't think it is a true Ponzi scheme but I definitely think people mistreat it.
Here's one way to see it: if you need to use Bitcoin to pseudonymously transfer large amounts of money anywhere in the world relatively easily, then you should worry not about the price it's currently trading at. If you want to transfer 1 million $'s, then you buy the appropriate amount of BTC and cash out when the transaction is done. A lot of people who are "invested" in Bitcoin are there to make money selling it for a higher price than they bought it for.
That's not what a Ponzi scheme is. Specifically, Ponzi's require fraud, not just making money off new investors. All investments make money from new investors, it's the fraud that makes something a Ponzi where there's no actual underlying asset but just a money pumping scheme. Bitcoin is an actual underlying asset.
No because a lot of investments intend to create value along the way. Investing in a startup for example hopes that one day they will be profitable. You may intend to sell or exit before that point, but the people who buy from you are looking forward to real world profits from adding real value.
It's only ponzi-esque if each person just expects the next one to pay more than the last, with no value-added at any point in the process.
> IMHO, Bitcoin is a more brilliant scam than GP gives it credit for. It was a scam that was designed to end up not a scam. IIRC, Bitcoin being a pyramid scheme was explicitly stated in the original design doc from Satoshi. The problem was that even though bitcoin could work well once it was widely adopted, it had a chicken-egg problem in the beginning. It had no value until it was widely adopted, but no rational person would adopt it until it had value.
> The solution was to prime the pump with a pyramid scheme. By structuring the system to highly reward risk-taking early adopters, Bitcoin motivated millions of dollars of high-risk early investment which is worth billions today.
> But, return on investment was only a nice side effect on the way to the end game. The end game was to get Bitcoin up and running as an exchange medium --only coincidentally as an investment vehicle. As an exchange medium, Bitcoin is not yet 100% solid. But, in general the plan has already worked. Someone in Haiti can exchange value with someone in the Ukraine and for once there is little that the games of the politicians or the banks can do to stand in their way. That was the real goal. A bunch of nerds gambling was just a necessary bit of fun on the way to setting that up.
Simple really, most people don't actually know what a Ponzi scheme is nor what qualifies something as a Ponzi. Bitcoin is not remotely a Ponzi scheme so you can immediately tell those who claim it as as someone without the faintest clue as to what they're talking about.
