Bitcoin Forum

I'm inclined to think that bitcoin is a ponzi scheme for a number of reasons:
1. Quality of a currency - It fails this for me in terms of lacking the tangibility of gold. Now people will say that gold or fiat is not 'tangible', but the guns that enforce currencies are, and the fact that millions of ignorant people want to adorn themselves with gold, makes it a value for at least the next 100 years. I guess you could argue its not an investment, but would you make that case? You're expecting/hoping the price to go up aren't you? Capital gain anyone? That makes it at least the illusion of an investment, if not an actual one. This makes it ripe for a 'dump & dump'. Now, I look at efforts by some people to avoid the liquidity problem like the bros in NY who are setting up a listed fund. Such efforts strike me as great ways to increase one's liquidity at other's expense. These are Harvard guys.
2. Bitcoin's usefulness - I've just been to a bitcoin conference in NZ. Unquestionably cryptocurrencies are 'useful'. The technology is amazing. This however does not mean 'coins' are valuable; only that the technology is useful. People will say the technology is the coin, but actually, one of its appeals is that it is scalable, open source, but that just means to be that it will be duplicated.
3. Bitcoin's evolution - Some critics to me at the conference told me that bitcoin can develop insofar as the protocol can be changed. I'd like to know more about this. How a consensus can be reached to change it, because it strikes me as a rubbery problem. My understanding talking to everyone was that 'all parties' (miners, developers, users, et al) have to be satisfied to make changes. I was also told that architecture-wise, some changes are very hard to make. I was told this by developers.
4. Inflation from mining - Bitcoin is limited to 21 million BTC. The implication is that there is 42% of inflation to arise over the next 10 years. That is plenty of timer for a new coin to develop without inflation. Why? No mining. Mining is a cost. I'm told that mining adds a cost of 10% to each coin, but that seems too high. Maybe they mean something else. Ultimately the cost is 42% over 10 years.
5. Redemption - There is a problem getting bitcoins into something I really need - cash. I've heard that its hard to get the currency you want; which strikes me as a liquidity issue. It seems likely that banks will create their own coins, and that these will get far greater credibility. They have 10 years before the inflation of mining expires with bitcoin.

I'm inclined to have more trust in a scheme like Bitreserve, though again I don't hold that because the price of gold is falling and because rather than buy ounces of gold, I can get shares in a stock with millions of ounces of gold valued at nothing, trading at less than their cash holding. Now, the gold price is $1200/oz, the mining cost if $800/oz, so I'm looking at upside of 300/25=1200% in a few years. Scope for better of worse of course. They have a 2nd great project, they might get nationalised, they might strike very high grade intersections. Like bitcoin, you need a technical understanding to have confidence.

The reason I think its a ponzi scheme is that I think developers, having invested in the development of their coin, they want a pay-out. I think anarcho-capitalists, as many are, ethically believe 'market rules', so if you can make money on this 'unregulated market', then why not. Ethically, I think it eases their conscience not to consider the negatives. Its only after I got to the after-party of the bitcoin conference did people seem to agree with me. Everyone at the conference was saying 'you're not a programmer'. True, but I'm more of a generalist than them. They conveyed little understanding of markets and psychology.

Feedback please.

Then the money you have in your bank is a ponzi.

Mods please delete this FUD.

Bitcoin is currency, did you mean all currencies are ponzi?

Welcome to Bitcoin!

I suggest you read the white paper:
https://bitcoin.org/bitcoin.pdf


*misses the newbie jail*

I don't think you've quite got some of this right.

You are correct that bitcoin isn't tangible in the same way gold is.  However, it's just as scarce.  It's the non-artificial scarcity of gold that (in part) makes it a useful store of value.  Bitcoin is also scarce.  People usually say that a currency is supposed to have the qualities of "store of value" and "medium of exchange".  Scarcity is a necessary condition for store of value.  

On the usefulness point you make, you seem to be addressing the "medium of exchange" part.  Isn't it obvious that an electronic medium of exchange is useful?  The "coins" are just this.

On the evolution, it's important to remember that bitcoin is an open-source, decentralized network of participants.  No one is coerced to participate, people can do what they want.  If half the miners want to change the protocol, they can try this.   The result might be a fork, or who knows?   In part, miners, users, etc don't try radical changes without talking to each other because most parties in the network have a good-faith dedication to building the network and making it stronger.  So, they try to work together and build consensus.  However, it's important to realize that no on enforces this attitude.  

I think I'm missing something about your point on inflation from mining.  The fact that bitcoin total is capped seems to me to make bitcoin deflationary. Mining is necessary in order to confirm transactions.  Miners will continue to be paid for their work.

You're right that at the moment, buying and selling bitcoin for fiat isn't super-easy.  But this will (hopefully) change.

I guess that's my best attempt at addressing your points, but what I don't see in your post is anything related to a ponzy scheme.  How do these points youre making relate to ponzis?

But wait, the staff thinks that the newbie jail isn't helpful.. sigh.

+1

Actually, there is only one reason to think that Bitcoin is a Ponzi scheme, and that is that people are paying its inventor who promises to invest those monies profitably, but instead he is merely using the money to pay out earlier investors. But this is plainly not even remotely true of Bitcoin, therefore it is not a Ponzi scheme. It may overvalued, a speculative bubble, or any number of other things, but not a Ponzi scheme. A Ponzi scheme is a specific type of scam which Bitcoin is not.

So, something is only valuable if you can force people to accept it? Funny, I thought thought something was only valuable if people are willing to accept it without being forced to. And I guarantee that very few of the people who use gold as money do so because they want to adorn themselves with it.

It has been duplicated. Many times. The duplicates are, without exception, almost entirely worthless. If you want to separate the coin from the technology, go ahead and try. Let us know how that works out for you.

And the problem is?
 
Without mining, how will you incentivise the security of the blockchain? Oh right, you were going to separate the coin from the technology. Carry on.

You've heard wrong.

Really? Every bank using its own currency? How will you pay people who use a different bank? Will you have to exchange your currency every time you go to the store? That doesn't seem very credible to me.

Why 10 years?

How does that make it a Ponzi scheme? In fact, how does that make it different from any other business?

Elaborate. What are the negatives? You can only make money in a free market by selling something people want to buy. You can't force people to buy something they don't want. Seller gets money, buyer gets something they want. What's the problem?

Maybe millions of ignorant people will one day want to adorn themselves with gold bitcoins instead? Regardless of everything else you said, no, bitcoin isn't a ponzi. The value lies in it's usefulness as a currency and payment system and people can see the potential power and future value of that.

Bitcoin Myths:

It's a giant ponzi scheme

In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.

A ponzi scheme is a zero sum game. In a ponzi scheme, early adopters can only profit at the expense of late adopters, and the late adopters always lose. Bitcoin can have a win-win outcome. Earlier adopters profit from the rise in value as Bitcoin becomes better understood and in turn demanded by the public at large. All adopters benefit from the usefulness of a reliable and widely-accepted decentralized peer-to-peer currency.

It is also important to note that Satoshi Nakamoto, creator of bitcoin, has never spent a bitcoin (other than giving them away when they were worthless) which we can verify by checking the blockchain.

A stateless currency is a huge benefit to the world.  The separation of state + currency is soon to come, much like the separation of state + religion.  It's just part of the evolution of society and bitcoin is a really important part of that. 

You heard some words, you made a list.
You've got some parts pretty good, you've missed some parts badly.
And the result is a big ... s**t, sorry.


You have to read and also understand what a Ponzi is.
With Ponzi you get a promise that you'll get your money back and also some extra.
If people stop "feeding" the Ponzi pyramid, you will get nothing, so you were lied.

Bitcoin is more like speculating on the stock market: you can buy or sell stocks. One day the company may go well, one other day it will go bad or the stock market crashes and you may lose money. But you know the risks in advance.
I know, people will jump and tell that it's a currency. No, it's not yet. It needs to reach much more people to become a currency. And may need - we like that or not - regulations.


In this case USD is also a Ponzi. A bad one. Just read about what you could buy with the same amount of USD 20 years ago.
Capital gain? Do you own USD for gain? No. You own USD because you can't go and work 1 day at the bread factory, 2 days at the shoes factory and so on to get what you need.
BTC is intended to be a currency and to work as one. And it has a chance to become one, sooner or later.

Tangibility? You know that your money is either "records in the bank" (on HDDs) if you work with credit card or, if you prefer cash, that's only paper!! What's the value of that and WHY?
You may tell that I am mixing things, but I only try to follow you. You start with currency and continue with gold, while they are, in the last 100 years, unrelated.

The ones holding BTC do that in the way some hold stocks. They hope that they bought them cheap and sell high. Some do. Some don't.
The interesting thing is that virtually anyone can "produce" such "stocks" (mine) and sell them, which makes the price move more - in any direction.


You are correct in this. The technology and the idea behind it is indeed AMAZING and that's not the one that gives value to BTC.
BTC is given by 2 things:
1. The companies that invested big bucks in mining (especially in the gox bubble) and try to recover that money and also profit.
2. Peoples' hope to get rich someday.

So for now it's "who fools who".


Just take a look at the altcoins. Some of them come with GREAT innovation while still relying on (clone of) bitcoin technology. Some don't even rely on bitcoin technology anymore.
A lot of that innovation can be merged into bitcoin, if "they" want to do so.
The problem is that such change means usually to do a "fork", which will force EVERYBODY to change their programs that work with bitcoin. And this is usually bad/avoided because it weakens the trust in a coin.
I think that at some point in the future bitcoin will have to add best of these features (and do a fork) if it wants to remain "the king" of the crypto-currencies.


Mining is so expensive because there are so many miners. I think that without the gox bubble there would have been less than 10% of the miners for this.
Mining is needed. Miners are the hearth for bitcoin. If all miners stop, next BTC transfer will be stuck forever.
But BTC goes down, miners shut down the rigs because "it's not worth it anymore" and there will always be an equilibrium.
You tell about a new coin - there are plenty of new coins, most of them cost near to nothing, the transfer fees are near to 0, they are mined and all is working. Another price level, another equilibrium.


You don't need cash. You need the goods you buy with cash. Cash is just nicely painted paper. Would you buy ruble today? Why not? It's cash!


Like any stocks, gold or BTC, you should buy when price is low and sell when price is high.
If you want something safe to invest, buy land. Earth will not get bigger, population is on a rise and we don't seem to leave this ball of dirt too soon.


The devs got their share long ago. Also anyone wanted to get a good share made a pool or an exchange.
Now most just try to recover the hardware costs - at least that's what I think -. However, it's not a Ponzi. You have to read and understand what Ponzi means.
Yes, it is a risky investment. Even more risky than stock markets. Still, it doesn't make it a Ponzi.



PS: Apologies for typos, I don't have the patience to re-read it.

hello there,

start learning here:

https://www.youtube.com/watch?v=O0oDDIy0P2s

 :)

Are we still on this inherent value stuff again  ::)

brand new account, 1 post

quelle surprise....

Your title seems to be very misleading as after i read your point of view, it lean more towards addressing the weaknesses in bitcoin rather than a ponzi scheme.
You are right to mention there are limited use for the coin but bear in my we are still at the development stage. The potential for bitcoin is endless.

In fact, many goldbugs make that very argument.  They stress that gold is a store of value, not an investment.

You see, gold is under attack by central banks the world over.  They've declared gold to be a "barbarous relic" that's not money.  And indeed, the value of gold goes down sometimes, as it's been doing in recent years.  So goldbugs are very cautions right now and are eager to not overstate their case.

It's too early to know if bitcoin will be a similar store of value.  But the similarity to gold is otherwise striking.

If you think bitcoin is a ponzi scheme then you don't understand what a ponzi is.


I wonder if these people are getting paid to post this nonsense?

They must be because it's just completely incoherent ranting the majority of the time and they seem to have just completely made up what Bitcoin actually is in their own heads. When people talk about Bitcoin being a bubble or a ponzi scheme I always respond or at least think "If it's a ponzi scheme and a scam, why would they make it open source" people who are infinitely more skilled then they are in programming and cryptography have all looked at it and acknowledged it so they really are just talking out of their own arses.

This isn't anything new though, people spread the same kind of bullshit about the internet, heavy metal and computer games which supporters of Bitcoin have rightly pointed out several time and of course everyone who actually looked at what these people were ranting about knew what they were simply either totally ignorant of the subject or just blatantly lying.

A lot of neo-keynesian types are definitely going to come after cryptocurrencies as much as possible, partly because they're going to be put out of business finally.

Bitcoin is not a scam but totally overpriced  :) It should be something like 2$ each  :) There's paypal so bitcoin is needed only in drug and weapon purchases  :)

It most likely is, with most banks thee days operating on a fractional reserve. *Sigh*

BTC is not a ponzi scheme, you can sell, buy BTC in various exchanges. Well at this stage you can not exchange BTC at banks - but this is future  ;D

no where near  a ponzi scheme but have to agree with number 5 on yours list. Its to hard to get money in and out of btc still years later

You're even worse than OP himself.

New OP with this 1 post ::)

Why not use your real account? You might be taken seriously then.

Think about it.  You need mining in order to process the transactions.  Just like the banking system uses their own telecommunication and server infrastructure when you are trying to get money out of an ATM or electronic EFT payment.   Mining to mint coins.  That can change.  But there has to be a reward for that work being done.  You will not have a network with fast transactions do it at no cost.  End of story

1. I don't agree with any statement of the author;
2. Ponzi is an organization in which the income of the early investors are paid from later investors. Bitcoin a virtual currency and has nothing to do with Ponzi.

It's better than a pyramid scheme.

http://www.veteransnewsnow.com/wp-content/uploads/2014/01/Federal-Reserve-Pyramid-Scheme-640-x-550.jpg

http://www.veteranstoday.com/wp-content/themes/_stylebook/timthumb.php?src=http%3A%2F%2Fwww.veteranstoday.com%2Fwp-content%2Fuploads%2F2012%2F04%2Fwolf_in_sheeps-clothing.jpg&q=90&w=795&h=470&zc=1

In ponzi sheme just early members earn something.
Here, everybody can earn BTC, sell or buy and profit eventually when price go up.
We can't exchange BTC at banks but can use BTC ATM :)

It's obvious the OP isn't as well versed learning about Bitcoin as he thinks he is.  Probably doesn't know how a true Ponzi scheme runs by definition.  If he had read more or asked questions here in this forum, he'd know Bitcoin couldn't be a ponzi scheme.

A good link to read:

https://www.cryptocoinsnews.com/world-bank-bitcoin-not-ponzi-scheme/

There have been operators in the Crypto space that have ran illegal Bitcoin ponzi schemes, but the same can be said for regular money.


Bitcoin itself, is not a ponzi scheme. 

Oh no, you're so close-minded, you poor OP.

And IRS take more and more TAX on your ... life BECAUSE state inject SPAM-FIAT in your seller.

Bitcoin solve many problem ... and the others problems will be solve because of the trust involve by Bitcoin about the "money for the people".

Actual money is for rich people not for the people.

Thanks for the feedback people. Don't know why anyone would consider me 'close-minded' for asking questions, and genuinely conveying some ignorance about certain facets of this complex tool. Like I say, I believe in the long term future of crypto-currencies.
Many people have alluded to the fact that 'crypto-currencies' are 'not ponzi schemes'. I was speaking metaphorically.
Many of these comments I heard at the conference and did not find them persuasive. Being a critic, one does tend to bear some 'heat' from people who don't like to hear it. I can appreciate that its re-iterated, as I'm a newbie to forums. But I did research. I did attend a conference. I did seek other's opinions, at the event, and at after-parties and online. I've been called a 'troll' for disagreeing.
If we can not agree that this is 'technically' a ponzi scheme, maybe we can say that there are parties who partake in the system to make money because money is involved, and they have a gross conflict of interest. Is there an undertaking to commit fraud? Certainly they are selling benefits. But its true, you could say the same about a 'scum' salesperson who only alludes to benefits. Certainly I hear a lot of 'good news'. Dnotes up 45% overnight. People believe in this stuff, as I believe in stocks, and I certainly 'believe in (say gold) stocks', until I don't. Of course I have reasons for this.

It is interesting that no one really spoke to much of the 'adaptability' of bitcoin. This seemed to be one of the most endearing 'potentials' of bitcoin. That it could change. No one commented on the consensus model. Grateful if someone knows. In the interim, I will look at those resources provided. Thank you.

although i read the whole post of the OP.. as soon as i read the word 'tangible' i face planted my hand and came to the conclusion the OP does not understand bitcoin. or that of any investment tht is not commodity related..

tangibility is a concern for ONLY the commodities market. FIAT does not have to be tangible. stocks and shares dont have to be tangible. and neither does bitcoins or any other currency... in short welcome to the digital age.

this also goes towards the word intrinsic.. which again only the commodities market care about. bitcoin is an asset by its very definition, rather than a stock, share or commodity. and thus assets do not require to be tangible or intrinsic to still have value.

i feel the OP is a potato, wheat and oil trader and has only just moved across to asset/currency trading.

so i wish him luck and i hope he does further research

 

I assume you're trolling, because you can't possibly be that stupid.

There's really no such thing as "overpriced" or "underpriced".
Price is what buyers and sellers agree on..

Any lables are nothing more than personal opinions
that are mostly irrelevant to the market...
and this is even more true for something fungible like Bitcoin.

No offence but you clearly don't know what a Ponzi scheme is in that case.   If you want to argue it has some properties of a ponzi, that's a huge stretch but all right.  If you say "Bitcoin is a Ponzi scheme", nobody who knows anything about Bitcoin will take you seriously because that statement is clearly untrue.  Whether or not you like Bitcoin, it's not a Ponzi or an ice cream sandwhich or a nation state - your calling it one of those things won't make it true.

GAWWWDDDD Im so tired of people like you.
Hey, I learned about bitcoin today at 8 am.. .it's 6 pm and I think i found a flaw!! feedback please??

Just a side note. If there's something you don't understand about bitcoin (or anything else), if something doesn't make sense - just ask, start a thread like "I have a few questions about BTC", if you start with "bitcoin is a ponzi" and support your statement with completely missed arguments - people will see you as a troll (or paid FUDster).

Anyhow, welcome to the forum.

Bitcoin is NOT a Ponzi scheme, but it does have some real similarities:
For example, the earliest investors (and miners) have a much better chance of making HUGE % profits, also people talking of "new money" needing to come in, etc.

BTC is so much better than a Ponzi, that I find the similarities fascinating, and not at all bad. 

Bitcoin made us all think about how we can revolutionize the way we pay and store value and the many possibilities of the blockchain.

How can any one compare such a great technology with a ponzi?

Ponzi's leave a trail of destruction behind. Bitcoin brings innovation.

How?
In addition to what I said above, 'Satoshi' is holding over ~1,000,000 BTC, which represents an almost insane amount of real and potential wealth.

Someone has a different opinion and you ask for it to be deleted? I don't agree with it either, I'm not hoping some central authority is going to protect me by silencing it. Sound familiar?

Everyone has the freedom of expressing their own point of view about bitcoin, but that doesn't mean it's true.

I think bit_happy has done a much better job connecting bitcoin to ponzi than the OP.

You are only looking at qualities of a ponzi, you are not looking at the reasons why something is a ponzi.

The early miners were not promised any kind of exorbitant reward for mining in the early days, they probably though that they would receive nothing of value for their computer's work.

All the money, in the end, is a consensus and protocol among its users. A child will not accept gold in exchange of his candy, since for him that consensus has not been reached

It will take a long time to form a widely accepted consensus of bitcoin's payment and wealth store function

I do like the way that was worded.  But I can't imagine that this experiment has ever actually been run and hell, if it were, I'm not convinced, I mean some gold is pretty shiny and cool looking.

This is true of any asset bubble. People don't use terms like real estate ponzi, dot com ponzi, etc. Why do they only say that Bitcoin is a ponzi scheme?

Because they aren't looking at the absolute definition of a Ponzi. The ignorant masses use generalizations of terms that they hear on Oprah and the nightly news to determine what things in life really are because most of them are too stupid or lazy to find out the truth through research. 99% of the American idiot populace think schizophrenia means someone with multiple personalities because the term has been misused for decades in the media.

Schizophrenia (/ˌskɪtsɵˈfrɛniə/ or /ˌskɪtsɵˈfriːniə/) is a mental disorder often characterized by abnormal social behavior and failure to recognize what is real. Common symptoms include false beliefs, unclear or confused thinking, auditory hallucinations, reduced social engagement and emotional expression, and inactivity. Diagnosis is based on observed behavior and the person's reported experiences.

Dissociative identity disorder (DID), previously known as multiple personality disorder (MPD),[1] is a mental disorder on the dissociative spectrum characterized by at least two distinct and relatively enduring identities or dissociated personality states that alternately control a person's behavior, and is accompanied by memory impairment for important information not explained by ordinary forgetfulness. These symptoms are not accounted for by substance abuse, seizures, other medical conditions, nor by imaginative play in children.[2] Diagnosis is often difficult as there is considerable comorbidity with other mental disorders. Malingering should be considered if there is possible financial or forensic gain, as well as factitious disorder if help-seeking behavior is prominent.

Yes, this is the problem 100% for these kinds of discussions.   Outward facing, the social problem with a Ponzi scheme is that you have one or more people trying to convince the lay person that the scheme is legal/solid/worthy of investment, while privately they have other plans.

With Bitcoin, we see an increasing number of people who got on board and are now imploring new users to get on board and "see the light".   It feels so forced and cult-like, therefore when you take a step back, it looks like a pyramid or confidence scam, which is the heart of what Ponzi did.   

The other aspect of Bitcoin that is much ignored and may inhibit future fiat price - Unlike other stores-of-value such as Gold, a single transcation can have the bitcoin amount recycled up to 240 times in a day (average 10 blocks/hour, 24 hours).   The same e.g. 1Oz Gold coin would at most see a turn around of once in a few days.
This is the "velocity" of money that fiat also has in spades.   Bitcoin's potential velocity is so much higher than gold, but not close to fiat.   The current fiat price is still a bubble price from investors last year who mis-timed when Bitcoin goes mainstream and shows how it can perform.

You'll struggle to find many respected members or bitcoin experts actually encouraging people to invest in Bitcoin. They will tell you about advantages of bitcoin and of its potential, they'll advise you to give it a try. But, at the same time, most of them will advise you not to put all your wealth in it and don't invest more you can afford to lose.

And I never got those "cult-like" accusations. Still the most valuable and constructive criticism (whether about economical aspects, PoW etc) comes from within the community, rather than from the 'outside' experts (who usually just fixate on price and 'no intrinsic value' bullshit).

Maybe the reason is that many outside watchers will use a simple logic: "BTC price goes up - bitcoin's doing good. BTC price goes down - bitcoin's doing bad". So when they see others not caring that much about the current price (focusing on adoption and development), they'll automatically assume it must be some sort of cult.

Exactly, the great horde lacks the breadth or depth of understanding required to classify Bitcoin. Their limited ability to understand complex subjects combined with mass media's continuous misuse of terminology makes them label Bitcoin as a Ponzi. Simpletons love to cubbyhole everything. By doing that they create an intellectual "safe zone" where they can live in peace, safely ignoring the true complexity of life.

Ok sure. You should do some fucking homework before posting this kind of garbage!

True, everything has to be black or white, any shade of grey is for "indecisive" people.

I also suggest to read these articles about Ponzi schemes:

https://en.wikipedia.org/wiki/Ponzi_scheme (https://en.wikipedia.org/wiki/Ponzi_scheme)
http://economics.about.com/od/financialmarkets/f/ponzi_scheme.htm (http://economics.about.com/od/financialmarkets/f/ponzi_scheme.htm)
http://www.investopedia.com/terms/p/ponzischeme.asp (http://www.investopedia.com/terms/p/ponzischeme.asp)

Hey, you have a right to your opinion, and it seems as though, you did some research on the matter, but somewhere a long the line, you got side tracked, and you formed your opinion on flawed information.

Look at BitCoin for the potential it has in lower banking fees, remittance, opportunity for the un-banked to have access to the financial system, store of value... etc etc..

It is so much more than a "currency" 

Don't invest more than you can lose is wise advice.
Especially true since in the last year you have seen bitcoin drop from $1200 to $300.

As I see you look on Bitcoin from a bit wrong angle. Many things you expect to happen are already there. In alt coins. They are allready tested, there for you to check and see if your assumption are right.