Simple PROOF that Bitcoin and cryptos are Ponzi schemes

[fxsurfer]

What is the fundamental principle behind a Ponzi scheme? Well, we have a small group of people that invented an instrument whose purpose is to lure a large group of people into transferring their economic goods or fiat money into it. Once the second group transferred its belongings to the first group in exchange for the instrument, ALL that is left to the instrument holders is FAITH and HOPE that someone else will enter the scheme and exchange their economic goods or fiat money for the instrument. The instrument itself is completely useless.

Let us compare this to economic goods and fiat money. An economic goods is a good or service that has an intrinsic value and as such it can be used to satisfy human needs. Thus, by possessing economic goods we are not left only with FAITH and HOPE but instead, we can satisfy concrete needs.

Fiat money doesn't have an intrinsic value, but it provides its holder with legal path to restore this value in some economic goods. Here is how this works. We are all familiar with the fact that in a banking system, all money comes from debt. That means that all fiat money in circulation, either paper or electronic, must ultimately be paid back to banks. Paid back by whom? Well, by borrowers. By those individuals and companies that received the loans, spent these loans, and in that way put fiat money in circulation. If these borrowers fail to do so they will be taken to court and the bank will seize their property. To avoid losing their cars, homes and other property, borrowers necessarily need fiat money for their loan payments. How will they get it? Well, it's simple. They must sell their economic goods to fiat money holders. This practically provides fiat money holders with an inexhaustible demand for their money. And that is the beauty of fiat. Since it comes from debt, and debt must be paid, the demand for fiat money will exist as long as fiat money do. Thus, by possessing fiat money we are not left only with FAITH and HOPE but instead, we have an instrument which provides us with legal path to restore the intrinsic value in some economic goods. The next instance of legal path comes from the fact that fiat money is legally tied to the bank's assets, which can be seen in a bank's balance sheet, where deposits are recorded as a claim on the bank. Specifically, when a bank grants a loan, the loan contract is shown both, as an increase in bank's assets because the bank now has an additional claim on borrowers, and as a positive entry on the liability side, because money holders now have an additional claim on the bank. So in the event that the borrowers default, and the bank takes possession of the assets used as collateral, the money holders have legal claim on those assets. So one way or another, holders of fiat money will come into the possession of economic goods.

Therefore, by possessing either economic goods or fiat money, we are not left only with FAITH and HOPE but with something that is useful and has practical utility.

On the other hand, by possessing cryptos, FAITH and HOPE is all we have. FAITH that somebody will enter the crypto scheme and exchange their economic goods or fiat money for our cryptos. There is neither legal path to restore intrinsic value in some economic goods nor crypto instrument has an intrinsic value. So, the instrument itself is completely useless, just like in all Ponzi schemes. That is why cryptos are Ponzi schemes and they will ultimately collapse like all Ponzi scheme do.

[romanovst]

Here are some arguments against this:

1) In a ponzi scheme you are paid some monetary reward to add more members below you. There is no such thing with bitcoins and new investors are attracted after listenign to the experiences of other investors.

2) Most of the ponzi schemes make use of some product line (at ridiculous price) to look genuine. There are no such products here.

3) Finally, have you seen any ponzi scheme that ran successfully for 9 years. Do you think that major economies of the world are juts stupid that they will let it run if it was ponzi scheme.

[DooMAD]

Fiat money doesn't have an intrinsic value, but it provides its holder with legal path to restore this value in some economic goods.

And what if that "value" deteriorates due to incessant quantitative easing and poor economic policies?  You have to place FAITH and HOPE in both the government and the central bank not to debase the currency.

So in the event that the borrowers default

And what about when the banks themselves default and they require yet another bail-in or bail-out?  All we've got is FAITH and HOPE there isn't yet more of that on the horizon.

The next instance of legal path comes from the fact that fiat money is legally tied to the bank's assets

Exactly.  "The bank's assets".  Not yours.  Because the legal path dictates that every deposit made to a bank belongs to them.  They own the money, not you.  You're just an unsecured creditor.  All you have is FAITH and HOPE that when you try to withdraw "your" funds (but again, they're not yours) the money is actually there.

Even if Bitcoin is a ponzi scheme (and I'm not convinced that it is), I'd still rather not place all my FAITH and HOPE in the fiat ponzi scheme you're advocating, but thank you for your concerns anyway.
 

[Ashleybarnes2]

You could replace all that you have written about cryptocurrency with fiat and the same faith and hope are linchpins to the ability to use the currency. Quantitative easing is the biggest Ponzi scheme going. We are going to help you by giving you money...oh wait I'm going to give it too my friends first for 0% interest who will then add their own mark up and give it too me and you at normal prices, and thats if you even get money of them in the first place.

[pleght]

If we say bitcoin and crypto money ponzi, we should say the same thing for banks and country stock exchanges.I do not understand why people are say  crypto money is bad 

[Lancusters]

There are weaknesses in your theory. For example, the production of parts for computers. Miners are buying all of the GPU which can produce manufacturers. This stimulates the development of many industries. The market has a large shortage of chips. Electricity producers also received additional demand. All this stimulates the real sector of the economy. This fills the value of bitcoin with real money.

[Kprawn]

Ponzi schemes are very different than Bitcoin. For one, NOBODY is being rewarded a fixed amount of money for every investor

he/she brings to Bitcoin. It is just like any other commodity or product. If you buy gold or silver or maize for that matter and

you want the price to go up, you get more people to buy it. {No difference} A Ponzi scheme have a fixed reward system that

was developed to pay a fixed amount of money to people, when they get more people to invest. Ponzi schemes usually have

a fixed interest rate that they pay their users, where Bitcoin's price is determined by supply and demand. {again, like other

commodities and currencies}

[cryptohunter]

this ground breaking analysis is going to make a big difference.... you are the first person in over 9yrs to suggest this and give such convincing evidence.

i just sold my crypto stash

thanks for the heads up.

[First77]

this ground breaking analysis is going to make a big difference.... you are the first person in over 9yrs to suggest this and give such convincing evidence.
i just sold my crypto stash thanks for the heads up.

You should see my Twitter page (below) for more hypes/lies about bitcoin and final blow to bitcoin  

[Alone055]

Very simple answers to your article like post.
Did Satoshi ask people to invest in Bitcoin in order to get profit out of it? No!
Does Bitcoin itself promise high returns on investments? No!
Thus, Bitcoin is by far not a ponzi scheme or whatever you call it. About other cryptos, some of them can relate to your arguments, but not all indeed.

[staywoke081]

You mention FAITH & HOPE a lot and I would like to address that. Any time you are investing in something, especially something new you are using a lot of those two characteristics because this is not a proven thing. Building on that, just because somebody invested in something first and is making profit doesn't make it a ponzi scheme. Yes that is one of the characteristics but you can't just apply it all willy nilly, that is what we call a fallacy.

[odolvlobo]

What is the fundamental principle behind a Ponzi scheme? Well, we have a small group of people that invented an instrument whose purpose is to lure a large group of people into transferring their economic goods or fiat money into it. ... blah blah blah ...

A Ponzi scheme is a fraudulent investment scheme in which bogus returns are paid from invested money, and the operator simply keeps the rest.

Bitcoin cannot be a Ponzi scheme.
1. Bitcoin is not fraudulent. It is 100% transparent.
2. Bitcoin does not generate returns.
3. Bitcoin is not run by anyone.

[Mometaskers]

No, we don't go around recruiting people to buy bitcoins and get paid with the money they paid which, is obviously unsustainable and eventually collapses. As for faith and hope, that is also what you have with fiat and you can't always be sure that government would do anything about it. The bank won't even insure the rest of your money when it exceed a certain amount (the more reason not to keep them in there).