Bitcoin Forum

Q:  Is BitCoin a Ponzi or pyramid scheme?

A:  No.  Like any other currency, BitCoin is designed to be used as money, not as an investment.

A Ponzi (http://en.wikipedia.org/wiki/Ponzi_scheme) scheme is a type of confidence scam where people who think they are earning unusually high returns on an investment are actually being paid from their own money and that of later investors.   If investors try and withdraw their original investment from the Ponzi operator, the scheme collapses because no actual profits exist and there is not enough money to return the deposited amounts.  Alternatively the Ponzi operator may simply leave and take the investors' money with them.

Similarly, a pyramid scheme (http://en.wikipedia.org/wiki/Pyramid_scheme) is a type of confidence scam where people who "enroll" by paying a certain amount of money are made to believe they can make a large return on their investment by recruiting other people and receiving some portion of their enrollment fee.  The scheme collapses because it requires exponential growth, so it quickly runs out of new people to enroll.  The person starting the pyramid scam, who didn't have to pay an enrollment fee, makes money off of all their referrals; while the people at the bottom parts of the pyramid, who cannot find anyone new to refer, are left with no return.

Unlike either of these situations, BitCoin has no person "at the top" who collects money paid for bitcoins, or has to pay out when bitcoins are sold.  Neither is there any kind of scheme in BitCoin to harvest money off of unsuspecting people in complicated ways.  Instead, bitcoins are bought and sold on public exchanges (http://bitcoincharts.com/markets/) amongst members of the general public who must all obey the same rules.  If someone has told you that BitCoin is a moneymaking scheme, they have misconstrued it--bitcoins follow the same economic model as any other finite commodity (http://en.wikipedia.org/wiki/Commodity) and over time will tend to approach a price that reflects the value people ascribe to being able to use them.  People who have made money off of buying and/or selling bitcoins are either lucky or have correctly predicted an increase in demand for them.  People who earn bitcoins through "mining" are being paid for verifying and securing network transactions in a highly competitive market.  In neither case is any kind of fraudulent activity or confidence scam happening.  For more details on earning money through BitCoin, see the "Where do I get the free money?" thread (coming soon).

Despite the fact that BitCoin itself is not a scam, caution is strongly advised when entering into transactions with untrusted entities.  As with any other valuable commodity, there are many people willing to separate your bitcoins from you in sneaky or fraudulent ways.  Remember that for all practical purposes BitCoin works just like cash.  Bitcoin Ponzi and pyramid schemes do exist (http://fxnet.bitlex.org/) and if you fall prey to them you will suffer the consequences.

In addition, bitcoins are a very new and unproven type of money.  Because their value depends on how widely they are accepted, they are susceptible to the same types of economic bubbles (http://en.wikipedia.org/wiki/Economic_bubble) as any other commodity that is surging in popularity. The Bitcoin software is still in beta, and bitcoins should be considered "high-risk" from a financial perspective.  You should not invest money into bitcoins or BitCoin-related technologies unless you can afford to lose it!  Even firm believers in BitCoin tend to think it will take a while for the value of bitcoins to stabilise, and no one knows at what value that stabilisation might occur.  Trade and transact safely!




Note:

• This is a newbie-friendly thread--do not post in this thread unless you are either a newbie with questions or are willing to patiently help one out.  All other activity will be moved or deleted by moderators as off-topic.  DBTN! (Don't bite the newbs!)  There is a thread for general feedback, commentary, etc. regarding this thread here (http://bitcointalk.org/index.php?topic=7911.0).
• Before posting in this thread, ensure you have read the Introduction to BitCoin (http://bitcointalk.org/index.php?topic=7269.0), the answer above, and as much of this thread as possible.  There are many helpful people here, but please respect the time they have already invested.

As an experiment in improving feedback, please send tips for this post to 14nyin6Tiqb38NXN83KpTwJLCtcC8fM9fK , not the address in my signature below.

Thank you for excellent explaination, I translated it in Italian and put it online on my website, now mainly orientated toward Bitcoin, and being the biggest source of information in Italian language:
http://ilporticodipinto.it/faq/bitcoin-%C3%A8-uno-schema-di-ponzi-o-uno-schema-di-marketing-piramidale

I tell you this in case you want to link the italian version to your index page.

Please tell me if you want me to credit you for the original text, if you want a link to this page or whatever.

I plan to translate other faq as well in the feature.

Thanks!

Very well written!

While not intended to be an investment, BitCoin certainly can be treated as one.  In particular, it is a speculative investment.  This means if Bitcoin becomes more useful, it's value may increase.  If it turns out that the usefulness is overestimated by the investors, then the value may go down.  Speculative investments are not Ponzi schemes, though.  A speculative investment IS very risky and you could lose a great portion of your investment (even all of it).  This does not make it a scam, though.

There are some similarities between speculative investments and Ponzi schemes that make some people have trouble telling them apart.  In a speculative investment, you are betting that people in the future will want to invest (or use) what you are buying.  There is no guarantee that happens.  In a Ponzi scheme and Pyramid scheme, you are betting that other people will come after you (if you are aware of what you are in).  The difference is there is no actual possible value in a Ponzi or Pyramid scheme.  You are either fooled into thinking what you are buying is valuable, or you think that there will be greater fools that come after you.  A speculative investment is different in that you actually know what you are betting on.  You still can be wrong (it might not be very valuable, or you overestimated its value), so that's why people can get confused.  Speculative investments should not be done with money you mind losing.  A speculative investment actually has a chance of paying off for everyone down the line by actually creating value.  A Ponzi scheme and Pyramid scheme collapses eventually because no value is created.

You shouldn't sink all of your retirement accounts into Bitcoin (unless you don't mind losing most of it!), but it may make a decent investment.  Do not base your decision only on what it's done in the last few months.  The past rate of growth is unsustainable for a long period of time (otherwise owning a Bitcoin would be worth all the wealth on Earth after enough time, and I don't think anyone thinks that will happen).  It might go up.  It might be overpriced now.  It might be fairly priced.  Do your homework, try to figure out what would actually make it valuable and how valuable it would be in those cases.  Figure out how likely each of those scenarios are to play out.  Figure out your risk tolerance (most people would not risk $100,000 for a .1% chance at becoming a billionaire, even though mathematics say it's a good deal).  Then invest.  Or start using them for something useful.  Buy goods where it is cheaper to buy them.  Take advantage of the semi-anonymous nature of it.  Buy something you can't otherwise purchase.  Build a business model that takes advantage of Bitcoins.

Thanks Dusty and and evoorhees!

I like your approach to keep it simple and straight forward for the new guys. I can see this FAQ growing into much more robust hub of information about bitcoin making clear of it's facts and myths. Very nicely done.  ;)

Thanks for the good initial response to this apparently common perception of bitcoin. I've also added an explanation with a slightly different angle on my blog, here http://virtuallyshocking.com/2011/05/22/why-bitcoin-is-smart-and-not-a-scam/ (http://virtuallyshocking.com/2011/05/22/why-bitcoin-is-smart-and-not-a-scam/).

If it's ok with the OP I'd like to add a link to this thread as well.

Go for it!

Done, thanks!

Hi, i'm completely new to BitCoin and am completely baffled by the concept, I'm also not 100% sure I'm asking these questions in the right place, but i will ask, and hopefully be pointed in the right direction.

1. is the 21 million bitcoins equal in value to the sum of global resources (including both physical, and  intellectual)?

2. according to what i've read, everything is transparent. Coupled with the fact that almost every country in the world considers it illegal not to pay tax on transactions, do i have any security from prosecution? or alternatively, why have governments not clamped down on bitcoins already?

3. Am i correct in saying that BitCoin is essentially a global unified on-line autonomous resource tracking system?

4. assuming that the answers to the previous questions are all positive, can BitCoins  be extended to function globally as a complete replacement for the current credit based economic system?

I hope that someone can either assist me or point me to someone who can

thanks

1. Not yet, maybe people will value them that much someday

2. All transactions are recorded in the block chain which every node has. The transactions contain no information about you, so unless you give away the connection between 1fhdjHFS98DKJjdksDS9euDH44 and yourself then no one knows it was you who sent 3.3BTC to 1HE9hd9ejwQ3QnvJKSL4LKccn. I don't know of any countries where small gifts to friends are taxed. It's pretty wrong to say that all governments tax all transactions. Governments are slow as hell.

3. Sounds roughly correct.

4. I think so. The extensions required are mostly ease of use in a broad sense.

Welcome here!  This is a perfectly good place to ask these kinds of questions. :)


Bitcoins vary in value according to supply and demand.  But if you mean will 21 million bitcoins be enough for global-level trade, then the answer is almost certainly yes.  As they currently stand bitcoins can be subdivided down to the eighth decimal place so that, as an example, even if the entire present-day U.S. economy ran solely on bitcoins, it would still be practical to buy small items with 0.00000001 btc.  Long before bitcoins would ever run into this problem, however, they could be easily "upgraded" to allow even smaller denominations.  So for all practical purposes bitcoins are infinitely divisible.  But it's unlikely that bitcoins will ever be the only currency or means of exchange on the planet.  Does this answer your question?


Are you saying that you plan not to pay taxes on bitcoin transactions or income?  Bitcoins are very much like cash:  even if your transactions aren't centrally stored somewhere, you are still expected to pay taxes.  Cash is used extensively to try and avoid taxes, so it's likely that bitcoins can be used for that as well.  But in both cases you're going to have to explain to the IRS agent where the money came from to buy your new yacht.  Trying to avoid taxes by using bitcoin is both illegal and ill-advised.

To answer your second question, governments have not clamped down on bitcoins already because they haven't needed to.  If bitcoins start to be used to fund illegal activities, launder money, evade taxes, etc. then they will simply pursue the people who do these things as they would if these things were being done with cash, gold, or expensive art.  It would be fairly impractical to shut down the BitCoin network itself, as it doesn't appear to be illegal in most countries, and has no central point where it could be blocked or turned off.  Consider the example of another peer to peer technology:  file-sharing.  P2P file-sharing has enabled activities that some governments have considered harmful, and so both civil and criminal prosecution has been used against companies or individuals participating in them.  But there's no way to shut down P2P file-sharing itself, and it would be ridiculous to make file-sharing technology illegal when it has so many legitimate uses.  Similarly, unless BitCoin devolves into some sort of black market crime tool, it won't get shut down.  But if people use it to break laws, you can be certain governments will prosecute them--both individuals and organisations.


Yes, if I understand you correctly.


In theory, yes.  In reality, however, people tend to use different tools for different things so that they can take advantage of contrasting features.  So it's highly likely that BitCoin will only ever be one of many tools for measuring and transferring value.  Just like many people use cash, credit cards, and PayPal, there will probably be many different products that offer different features and services.  It's conceivable that all of these could end up being built on BitCoin in a similar way to how many world currencies are based on the U.S. Dollar, but we're a long way off from that happening so that would be pure speculation.


You're very welcome.  I hope my answers were helpful--feel free to ask or explain more if you need to.

Thanks, what a wonderful answer.

I do not intend to use BitCoins to evade Tax. That would undermine a global system that at the moment has no recourse but taxes. I am South African, so not 100% familiar with the US taxation laws, but doubt very much they are different to our own.

The main reason I asked what I asked, is because I am currently writing about How to get to a world without a credit-based economic system. Bitcoin fits every requirement for acatalyst to Unified Global Autonomous Resource Based Economy, and the elimination of the trust factor is a stroke of genius.
Someone needs to write a layman's explanation of BitCoin and spread it into other systems. In that one stroke could come the end to many global inadequacies, from resource mis-management, to war, poverty hunger, health care and even education. for a summary of the work I am busy with, please see my blog pages under the pseudonym Rob Cayman : http://therantingsofrob.blogspot.com/2011/05/getting-to-a-better-world-without-money.html
and
http://therantingsofrob.blogspot.com/2011/05/getting-to-a-better-world-without-money.html

I promise that they are good reads even if my thinking is flawed.

I am definitely using and spreading the BitCoin concept!!! Awesome!!!

Fascinating stuff, Rob!  I'll have to read more of it when I get a chance.   I agree that with some careful implementation BitCoin could have incredibly powerful economic consequences.  But something tells me there's still a lot of hard work to be done to get there, so I'm diving in!

I'm not worried about it being a Ponzi or a Pyramid scheme but...

Everyone is pontificating on the economics of it, but what is the crypto doing? The client source code is there, nice... I guess... But that is just going to tell you or me that it's a client to solve a crypto puzzle block. What is it that it's doing? We're running a distributed computing app that works on blocks of a cryptographic puzzle and we don't know what the puzzle is. What are we actually doing with our computer cycles? What is it that we're actually decrypting or encrypting? Until the server side source code is released I'm not touching this because of the commercial and national security implications.

It doesn't help that Satoshi himself is so wrapped in mystery. No one knows who he is or why he's done this. People talk about transparency, trust and decentralisation in the system, but without the server source released and no knowledge of satoshi's background there is a giant black hole with absolutely no transparency whatsoever and no trust for me at all with this guy. If it's all that he says it is then why doesn't he come up and tell us who he is? We're geeks and for the most part we're meritocrats. We'll put our hard earned real life money behind someone who can actually do something for real. We're not gonna dismiss someone for being a girl or a guy or a child or gay or even a furry. Unless there is more transparency throughout, including the motivations of the founder and some background I won't touch it and will strenuously tell people not to go near it either.

There is no server source. There's no server. It's peer to peer. Everything about bitcoin is in the published client source code. If you look around these forums you'll see the cryptography discussed in depth. It's also explained in Satoshi's paper.

Isn't this a vulnerability? What if a Dull starts transacting 0.01 BTC to another Dull and back again, continously?
the chain will grow bigger than my harddrive is?!

Satoshi is an encrypted identity, he might be helping out on the board or wherever, you just don't know. 

https://en.bitcoin.it/wiki/FAQ#What_is_mining?


And, as broctice has noted, all Bitcoin source code is open source. There is no trusted server, everyone running the Bitcoin client is also a server.

@hiakuryu - what brocktice said, and:

See protocol specification (https://en.bitcoin.it/wiki/Protocol_specification). And you're not encrypting or decrypting anything, you're hashing.

That's kind of the point, we don't know and we don't care, because it's not about him. He doesn't have more power over Bitcoin than anyone else.

People talk about transparency, decentralisation and the fact that trust is not needed because the Bitcoin protocol relies on proof-of-work, not trust. (Compare to actually making trade with bitcoins, which requires some sort of trust, reputation or mediation).


There are mechanisms in place to stop transaction spam.

Perhaps Bitcoin is another type of scheme?  Print a new kind of money, then get people to give you fiat money or gold over the next year.  Someone out there has LOTS of coins that they likely mined from during first year, "Bitcoin Year Zero".  They could slowly cash in and buy a big mansion. (instead of giving to the faucet or whatnot).  A mansion they didn't earn by labor.  Granted, this scheme produces a good currency, but someone got rich quick.

If Bitcoins really take off then I will have gotten rich quick too.  I am not sure what I did to deserve it, but I know I won't be giving any to the naysayers.  I do feel sorry for those that haven't heard the "good news".

You made a risky investment and it panned out. Try doing some angel investments to get a better feel of how that works. See also https://en.bitcoin.it/wiki/FAQ#Doesn_t_Bitcoin_unfairly_benefit_early_adopters?

I made a suggestion before that this point should be discussed in the OP, but it was so far ignored.

@Dayfall people who mined or bought coins early helped BitCoin stay alive when nobody knew if it would succeed.  Like most investments that increase in value, their reward comes from some combination of luck and foresight.  If it had been obvious from the beginning that bitcoins would be as successful as they are now, then the price would have shot to 7$ right away (and the difficulty to 400000).  Instead, it took two years to get there, because that outcome wasn't at all obvious until it actually happened.  Looking back it might seem like free money, but at the time they had just as much risk of losing everything they put in.

When I first heard about BitCoin there wasn't much information available, they were trading at only a couple cents a bitcoin, and I didn't think it would amount to anything.  It wasn't until the end of 2010 when someone referred me to BitcoinMe.com (http://bitcoinme.com/) that I ended up digging into the details and realising that the technology could really work.  By then the community had grown larger, the value had risen, and people were finally starting to accept bitcoins for business, so I bought some bitcoins, started using them, started accepting them for my business, and also started processing transactions for the network.  But if I had invested the same amount of time and money when I first heard about it, I would have made thousands of dollars.  The reason other people did instead of me is that they understood, believed, and/or risked when I didn't.  So I think that's fair.  Without them, things never would have gotten to the point where I believed BitCoin would work.  And without people like me, things wouldn't have gotten to the point that they're at now.  Money needs to be widely used before it's useful for anything, so early adopters are serving a very critical role.  And don't forget that less than a third of the total bitcoins have entered circulation--there's still plenty of time to be an early adopter!

The OP currently says "People who have made money off of buying and/or selling bitcoins are either lucky or have correctly predicted an increase in demand for them."  I think that talking more about people who have made money would detract from the "BitCoin is not designed as an investment" message that people are supposed to take away.  But as noted I do plan an expansion of the "free money" idea in general under a new thread.  One of the reasons work is going more slowly is that's it's unclear to me if the community considers these threads a priority.  Lately, for example, I've been getting more tips from regular posts than from the New to BitCoin? (http://forum.bitcoin.org/index.php?topic=7269.0) thread (1 tip) and this one (0); so work on these threads tends to sit a little bit lower in my (http://forum.bitcoin.org/index.php?topic=9854.0) very (http://area51.stackexchange.com/proposals/30763/bitcoin-crypto-currency) large (http://www.bitSyndicated.com) stack (http://forum.bitcoin.org/index.php?topic=4599.0) than it might if I had a more solid indication that people find these threads important.  If there aren't 20 people who can put .05 btc toward saying "please do more of this" then this is really nothing more than a pet project of mine.  Whereas if the community is really behind me I would be willing to put in more than just spare time here and there.

This is getting a bit off-topic, and I know you like things to remain on-topic... But FWIW, I think this kind of threads is extremely important and shares the spot of "most important project development goal" with developing (and documenting) SCI modules for merchants. Though I think they might be a better fit for the wiki than the forums. Personally I've taken the habit of adding questions to the FAQ (https://en.bitcoin.it/wiki/FAQ) as I encounter unanswered questions, and referring to it. I really do appreciate the work you're doing in this regard, so I've just sent 1 BTC to your "New to Bitcoin" address. I know you'd much rather have smaller donations from multiple people, but I didn't want to feel like a hypocrite not putting my money where my mouth is.

How do we know that the bitcoin currency will ever be used for buying/selling real-world things and services? As it is today (2011-05-30) very few users are using this bitcoin currency to trade real-world things and services. What reasons do we have to believe that this kind of usage will ever increase? If it doesn't, then the bitcoin value will eventually decrease to zero. The "deflationary spiral" faq didn't cover this part of the question. Please give me some arguments or point me to where this has already been discussed/explained.

For one thing, the number of merchants that accept Bitcoin is steadily increasing. Have you looked at https://en.bitcoin.it/wiki/Trade ? I'd say the list is quite impressive by now.

Also, merchants can accept bitcoins even without having faith in the currency. They can programmatically sell them for another currency whenever they make a sale, treating it merely as a superior money transfer mechanism. Because of its advantages it is only natural that more and more shops will accept it.

Yes, I looked at it and had trouble estimating if that was an expected amount of merchants or not, for the current level of bitcoin adoption. Even if I had a graph for the number of merchants over time, I still wouldn't know if that was "normal" or not for a newly created currency such as bitcoin. I wouldn't have anything to compare the data to.


Good point. The point would however carry less weight if/when nationstates make bitcoin transactions illegal, because when that happens most irl merchants/businesses would stop using/accepting it. And then the value of bitcoins could drop very much (approaching and perhaps reaching zero) very fast. Because why would criminal organizations want to continue using a currency that cannot buy legal goods and services? I think even they would abandon bitcoins if they wouldn't be accepted by legal businesses.

I mean if bitcoins would be illegalized, then I would no longer be able to buy McDonald's food for it, greatly diminishing the value of having bitcoins for me. How do you think sudden illegalization of bitcoin payments would affect the value/usage of bitcoins, and why? The reason I think bitcoins will very soon be illegalized is because if everyone would start using bitcoins instead of classic currencies, nationstates would loose their ability to tax transactions and stored wealth. They depend on taxes and would fight to keep their ability to tax.

By definition Bitcoin is not a Ponzi scheme.
Bitcoin could be called an ingenious, kinder, gentler Ponzi or pyramid scheme.
Why?
It has some obvious similarities, but that does not == Ponzi.

Hello

I have only recently discovered Bitcoin and have to say l am very excited by what l have seen.

Bitcoin is similiar to a trade exchange, without the exchange. I have been involved in Trade Exchanges off and on over the last 20 years and one of my concerns has always been the ability of the exchange to hold you to ransom. In addition they have been able to expand the money supply as and when they wish, usually to line there own pockets and as a member you are powerless to do anything about it.

Bitcoin has retained all the positives of a trade exchange and appears to have removed the negatives.

I note that the value of each Bitcoin has increased substancially over the last 6 months, l expect that it will continue to increase as more and more goods and services become available using Bitcoins. The value of any medium of exchange is attributable to the value stored in the goods and services available through the exchange. The supply and demand will set the value of each coin and having a cap of 21 million coins will ensure that there are no helicopter bens manipulating the market place.

I have recently launched an online auction site in Australia and am in the process of adapting the checkout so that Bitcoins will be an acceptable method of payment. I am looking at the SCI available through https://www.mybitcoin.com/ . Can anyone comment on this application or suggest any other ones?

Thanks

You could say that for any investment. Moreover, you could say that any inflationary currency is an ingenious, kinder, gentler Ponzi or pyramid scheme for banks and governments who print money. We just limited money supply and reversed who prints money.

I'm such a newbie that I don't even know how to post a separate question. Sorry if I intrude in your discussion.

Here's my question. One of the many article I read mentioned that if your laptop crashed or is broken you loose all your bitcoins.

- Is that true? 
- Is there a way to retrieve my bitcoin using another computer?

If I decide to buy a new computer, will I use all my bitcoins stored in my old computer?

Thank you for answering these questions.

Sincerely, alaingb

Yes this is absolutely true, and this is why you should make backups of any important data on your computer, not just your wallet. Even RAID won't save you in the case of, say, a fire or flood. I recommend JungleDisk for truly secure cloud-based encryption and backup.

If your hard drive dies, hooking up the drive to another machine won't save you (probably).

Moving to another computer is easy, you can copy the wallet.dat, or just set up a new bitcoin instance on the new machine and send all your coins over.

I'm just a regular guy and not a computer programmer, so forgive me if these sound stupid...

Yes this is absolutely true, and this is why you should make backups of any important data on your computer, not just your wallet.

= What file do I need to back up?

= Where is and how do I find that file?

= I currently back up my most important data on a USB key. IS that good enough?

Even RAID won't save you in the case of, say, a fire or flood. I recommend JungleDisk for truly secure cloud-based encryption and backup.

= What is RAID?

= I have to assume that JungleDisk is an online backup system I have to sign up for, right?

If your hard drive dies, hooking up the drive to another machine won't save you (probably).

= OK

Moving to another computer is easy, you can copy the wallet.dat, or just set up a new bitcoin instance on the new machine and send all your coins over.

= Where do I find wallet.dat?

= How do I create a new bitcoin instance?

I know, I know but this IS a newbie board, right? Thanks for bearing with me.

alaingb

wallet.dat

That depends on which operating system you use, but basically it's where the OS keeps application data, in the folder for the Bitcoin application. It will probably be easiest to let the OS search for the file wallet.dat

It's better than nothing. But if you have serious amounts of bitcoins you'll want to have multiple backups in several locations. The backup must be relatively recent, so you should update it every week or so (at least some of them). And you'll also want to take precautions against theft, not just loss.

You don't need to know.

AFAIK, yes.

This just means installing Bitcoin on the new computer, which will automatically create a new wallet file. It will have a receiving address to which you can send coins from the old computer.

Yes, but since this thread is for one particular topic, if you have additional questions you should probably go to http://forum.bitcoin.org/index.php?board=4.0 and click on "new topic" to start a new thread.

Thank you Meni for your explanations and patience. Much appreciated.

alaingb

I am a newbie here. My question is if Bitcoin is still a good currency, not yet a ponzi?

If it wasn't a Ponzi to begin with, then it can't magically turn into one 3 years down the line unless someone were to somehow take control (which is impossible with Bitcoin), so no, it's still good.

I didn't notice the necrobump till I'd read 90% of the thread! Just goes to show that the fundamentals haven't changed much in the last 3 years.

Nice to know that it is still good. Just currently set up my Bitcoin account.

Its a supply and demand equation.

Having lots of Bitcoin copycats may or may not be good for the BTC future.

what is Bitcoin ? sample  and funny video that presents  bitcoin and how it works !
http://youtu.be/OJV8qTkFwZk

I am new to BTC, there is a lot of good info here but will take time I see to learn it all.

My question is: what happens if i loose my mobile with my 2 A Athentication on it? How do I log back in to the exchange? Will I have to email them and jumb through lots of questions? Would it be easy to set up again on new phone?
I have not lost it but was just wondering?

Thanks for the detailed information. This would help me a lot to fully understand bitcoin.

Thanks. Great explanation for new coiners. I'd bookmark this.

I can't fathom how someone comes to that conclusion, Bitcoin and Ponzi schemes don't have anything in common.

Thanks a lot. You left me in no doubt that Bitcoin is not a ponzi scheme. Bitcoin has no operator, that is the point.

nice faq, thanks for that. it will help some noobs.

@ Dillar

not only that: bitcoin has a value because its a TOOL!

Yes, you are able to buy some things using Bitcoin too. Unfortunately, not all can be bought or sold, but it is great that the use of Bitcoin is growing. :)

I am newbie here and newbie to bitcoins. But my client proved to me that BitCoin is not a pyramid scheme. He pays me through his bitcoins and transfer to my bank account and I got it for less than 12 hours.

Thanks a lot!

This is a pretty old post and I think due to the recent fork possibilities needs updating in order to be completely truthful.  There WASN'T a person at the top as it was a rather collective open source project.  But as Mike Hearn has pointed out - all Open Source Projects ultimately have a "Benevolent Dictator" (I think that is the word he used).  In this case we have Mike and Gavin as our proclaimed benevolent dictators - and they are "at the top" and they have introduced an Upgrade "XT" that is very controversial and threatens to split the Bitcoin Chain.  If that happens, then anyone on the other chain will indeed experience the crashing effect of the pyramid falling on their heads.

So be aware of what is going on and get your info from multiple sides / sources.  And if it is all over your head..... well, be careful.

But with that said, I advise everyone to go to a major exchange and buy a couple of bitcoins at minimum, and wait things out.  Because I have talked to many of the major exchanges and they pretty much want XT.  But they will NOT make the move and convert until it is clear it will succeed.  So I think your bitcoin is safest there, and I definitely think that having a couple of bitcoins is worth the gamble.  Because IF this is resolved satisfactorily, Bitcoin is going to soar.  Even if it doesn't I think the flight will simply be delayed.  My guess is that the next year is going to see a huge paradigm shift in the Global Finance system.  By 2017 Fiat Currency will be gone.

The only real worst case is if the Fork goes so badly that it results in Mutual Destruction and the Powers That Be start their own Fiat Coin.  That would indeed suck and is my greatest concern - but I think it is highly unlikey.  However, one way for that to happen would be to use a Massive Global Financial Crisis to scare the masses into a suddenly new solution.  And it is possible, and it is why I wish this Fork crap would resolve quickly - in order to avoid that - because I do think the Powers that be actually want to just use Bitcoin as this transitional vehicle.

Thank you for the good explanation!

Thank u

thanks

Yes i also think bitcoin has lots of potential. Thanks for this well written review.

Well, If you are a Bitcoin shill {Someone paid to bad mouth Bitcoin} you would make any connection, even if it has a 10% chance. Most of these shills wants to come from a angle

to say that the early adopters of the technology have the advantage over the late adopters of Bitcoin. So they are hyping up the price to get more people to buy Bitcoin and then

they offload for maximum profits. That is not how Ponzi schemes work... as explained in the OP's great post.  ;)

You want the one fact I've learned that had me convinced? That at least 3 of your largest Bitcoin partners have stolen from you recently and Bitcoin is still here and in court. The high ups could've cut and run.

Signed, Jeffrey Geller

Today almost all things seem like ponzis. It is more or less true that to profit from Bitcoin, one depends on more people putting money into it. But it is used as money too.

If we define ponzi as "you get paid only if more people buy into it", even fiat is a ponzi: you sell your goods for fiat, and you will only profit if more people decide to trust fiat. If not, you just have useless paper.

You forget about supply and demand.

Ponzi is investment come from nowhere, fake investment.

My hope is all this discussion about the validity of different types of currencies will get the general public to realize what fiat truly is. Then all we have to do is wait for the next 2006 style economic disaster.

Bitcoin is not a ponzi or pyramind scheme
I think bitcoin is the future of money :D

Interesting paraphrasing here, I largely agree with what you're saying..

I started separate reply going into what people define ponzi to be because that itself is part of the answer to the thread.

I found that as you said, markets are dynamic and the ponzi scheme in its traditional form is not very dynamic at all. It is almost the simplest form possible.

But lets not forget that what happened to Madoff is what's happening to alot of countries.

Debt being repaid by refinancing and issuing new debt is essentially what even the United States are doing by raising their debt ceiling.

Guys, just an idea - there has been a lot of talk about the halving coming in July. You could include a bit of info and nerve calmer into the main post to better instruct newcomers. What do you say?

Hi! I'm a newbie. I'm not sure this thread is a right place to ask, but could somebody please provide me with a link to a good long-range bitcoin price forecast? I saw a lot of them on the web, but numbers are always so different. I'd like to see something more or less veracious. Thanks!

The Bitcoin market is volatile still. There is really no way to accurately predict  long term where the price will be. The OP stated it best.

First, I am really new here but I signed up a long time ago and gave up. I came back at the urging of my partner because we argue when we talk about bitcoin. Is there an introduction thread here where I introduce myself like on other forums?

My question is that maybe bitcoin does not meet the requirements of a Ponzi or a Pyramid but might it meet the definition of some other scheme that could be considered illegal? Could I get into trouble for playing with bitcoin? I am in the USA.

bitcoin not bussnies not return not ponzy
bitcoin only digital curency same with paypal perfectmoney solidtruspay and more

Bitcoin is legal in the USA. However, the community is fraught with a bunch of schemers and scammers. If you decide to get involved with Bitcoin and other altcoins, just know there is a lot of underhanded and downright criminal stuff going on.  The same can be said when you take the internet as a whole into consideration...

Bitcoin is not a ponzi neither a pyramid scheme. It is a currency and should be used as a currency only. Even through some people like me, likes to think bitcoin as an investment, but it is actually not.

But investing in bitcoin can fetch you a very high return, which any traditional investment can't fetch. So use it as a currency or as an investment, profit will always be yours. Only thing is that, you need to know how to safeguard your bitcoin from the hackers.

In my opinion bitcoin is not ponzi or pyramid scheme and if bitcoin is it, bitcoin will not survive until right now because there are not system ponzi or pyramid scheme that can be survive until more than two years.

Quite agree with you. There was once a skeptical programmer who went into a frenzy buying butcoin once he downloaded and analyzed the open source. He further predicted bitcoin will rise to 50,000 usd in 50 years.
*bitcoin was a mere $30 at that point of time. LOL.

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money, or the money paid by subsequent investors, instead of from profit earned by the individuals running the business. Ponzi schemes are designed to collapse at the expense of the last investors when there is not enough new participants.
Bitcoin is a free software project with no central authority. Consequently, no one is in a position to make fraudulent representations about investment returns. Like other major currencies such as gold, United States dollar, euro, yen, etc. there is no guaranteed purchasing power and the exchange rate floats freely. This leads to volatility where owners of bitcoins can unpredictably make or lose money. Beyond speculation, Bitcoin is also a payment system with useful and competitive attributes that are being used by thousands of users and businesses.

OP, is there a reason, why you are writing Bitcoin 'BitCoin'?

You explained everything in detail and I think this post will clear the doubts of a lot of people. I will share this on my Facebook wall so that my friends who had been doubting on bitcoins can get better idea of bitcoins. We should encourage these type of posts on bitcointalk forum as the forum gets visitors from Google search as well.