Neighbor says bitcoin is a ponzi scheme

[notme]

go change your tampon sally, theres no need to be yelling at newbs. does it make you feel cool?

The newb in question clearly said that he didn't even google it because he is lazy. I was actually helping him by giving him an obvious BS answer so that he might do some critical thinking himself in the future. This is a must in the Bitcoin world, unfortunately thankfully.

Herd behavior is how we wound up with the current financial system.  More critical thinking is needed at this point in time.

You better hope the average dumbass can use Bitcoin or this really is a Ponzi scheme! Now apologize to the newbie and get him buying coins so mine are worth more. LOL

Oh, they will be able to.  They might get upset when they invest in a bitcoin based ponzi scheme, but as long as they stick to transacting in bitcoin they will be fine.

[Phinnaeus Gage]

I still don't know what it means. I could use google, but for the sake of conversation, I'll wait for an answer here

Somehow, I don't believe you, considering you penned the following:

Bitcoin isn't really an accepted form of currency. By accepted, I mean believe that it's legitimate. It's going to take time. Try not to forget what money really is. It's the flow of goods and services. When the quantity of people that use it goes up, the economy will improve be. I'd rather have a volatile currency than hyperinflation which puts the future generations in debt

I'm pretty sure you know what a Ponzi scheme, but wanted to plead ignorant of the subject to further some agenda. What's your next thread going to be? What is exactly fiat money? I could Google it, but I'd rather have a discussion on it.

BTW, who is Sean Arce? I could Google it, but opted to asked.

[franky1]

What is exactly fiat money?

i know your just playing but the best way to answer the question for noobs is

Federally
Insured
And
Taxed

[Lethn]

I didn't actually know that, is fiat just an acronym then?

[Biomech]

I didn't actually know that, is fiat just an acronym then?

No. A Fiat is a decree by a ruler. Thus fiat currency, or "legal tender" if you will, is a promissory note decreed to be lawful money in lieu of any actual backing.

In truth, and I am sure to ruffle a few feathers here, bitcoin is similar in several aspects, but due to it's unique properties and decentralization has a good shot at becoming a better alternative.

[r3wt]

I didn't actually know that, is fiat just an acronym then?

No. A Fiat is a decree by a ruler. Thus fiat currency, or "legal tender" if you will, is a promissory note decreed to be lawful money in lieu of any actual backing.

In truth, and I am sure to ruffle a few feathers here, bitcoin is similar in several aspects, but due to it's unique properties and decentralization has a good shot at becoming a better alternative.

thanks for providing that tidbit. didn't know that

[QuestionAuthority]

What is exactly fiat money?

i know your just playing but the best way to answer the question for noobs is

Federally
Insured
And
Taxed

Good grief dude - do you ever say anything that's true?

The term derives from the Latin fiat ("let it be done", "it shall be").

http://tinyurl.com/FiatDefined

[johnyj]

What exactly does he mean?

I think most of the people use this word to refer to any kind of activity similar to this:

Early adopters of a certain asset attract more and more people to join the game by a fast price appreciation and sell the over-valued assets to them later

In this case, he might refer to bitcoin early adopters who accumlated large amount of coins pump up the exchange price and sell them to late adopters to profit

But there is one thing he missed: Any kind of such scheme is rely on the supply of fiat money, so typically when FED tightens and fiat money supply becomes less, this kind of scheme will collapse. But bitcoin itself is money, it can exist without fiat money, as long as you use it to buy and sell goods/services

Anyway, the early adopters' benefit is very clear due to current design of halved coin supply every 4 years, this is the main reason that people relate bitcoin to a ponzi scheme, and also the reason that many people want to make alt-currencies to become an early adopter. If bitcoin protocol defined a different supply speed of coin (for example daily coin supply only reduce 33% or 25% every 4 years), then this kind of complain will be less. But then people might not generate enough interest in it so quickly and it would not have that kind of degree of price appreciation

Even if bitcoin are a ponzi scheme, due to its limited supply, this ponzi scheme might last hundreds of years

[keelba]

OK first of all, most people do not understand what a Ponzi scheme is in the first place. A Ponzi scheme is very similar to a pyramid scheme with one key difference. But first, what is a pyramid? A pyramid is a scheme that is very up front in telling you that only the people at the top of the pyramid will make money, while the people at the bottom will fund those at the top. Your goal is to get in at a point where there is still new money coming in, hopefully soon enough that you'll be able to make money before it all crashed down.

So a Ponzi scheme is very similar in this regard, however, a pyramid, as I stated is very up front in telling you how it is going to work and how it is going to go down. Whereas a Ponzi scheme is not up front. The seller in the Ponzi scheme will tell you that he is going to be doing this and that and this with your money but in reality, is not paying investors with the wonderful profits that the scheme is making, but rather with the new money coming in. It is very possible the company or investment vehicle is doing absolutely nothing and just a pyramid in disguise. I think, though, that most Ponzis do not start out with the intention of being a Ponzi. It is usually a trap for the poor individual trying to raise capital for his company.

The way it could go down is like this. A couple of guys want to start a business but need to raise several million dollars to get it off the ground. Of course, it is difficult to raise several million dollars, so in their pitch they sensationalize it a bit, or perhaps a lot. They tell their potential investors that they've done some market studies and that they'll make 50 million in the first six months. They will talk a lot about technical mumbo-jumbo and other things they know the average person will not understand. The less the potential investor understands about the business, the better. The investor sucker, the guy who doesn't really know how to read a business plan and has no real investing experience, is impressed by all of the talk and great sounding returns and puts in his money.

The company manages to raise approximately $5,000,000 but pretty soon they realize they've burned through $4,000,000 and need much, much more due to their bad planning in the first place, or maybe they shouldn't have bought those Ferraris just yet.. The company hasn't made a dime yet and they need to go back to the well. At this point, they have not done anything wrong (at least as far as returns go but the lying, or fraud, is another story). They do not want to admit that they've burned through all of the money. But the only way these types of investors will put in more money now is if they believe in the potential and see some return on their investment. They do not want to hear that they could lose everything. So the company makes a payment of 10% ($500,000) to its investors after six months with the promise of so much more but now they need a little more money. The investors are so impressed that they want double-down. And they tell all their friends about this hot new deal they found.

The problem here is that a company should pay back its investors only with profits it has made. The only way the Ponzi can flourish is if it is perpetuated by lies. That is the key point in a Ponzi, people do not understand what is happening within the investment vehicle and keep getting lied to in order to keep milking more money, or at least put off the inevitable collapse. It is important to note, that if the investors simply closed shop and paid no returns that they would still be guilty of fraud but not a Ponzi. It becomes a Ponzi when they try to pay off old money with new money.

So now, what does any of this have to do with Bitcoin? Is it a pyramid? No. In a pyramid, money can only be paid out when new money comes in. You, as the investor, have no control in this, other than to find more people to put more money in to feed the system. With Bitcoin, you have the right to put money in and take money out any time you like. If the whole system comes crashing down then, yes, a lot of people will lose money. But a collapse is not inevitable the way it is in a pyramid. The money that goes into Bitcoin is speculative but it is also based on perceived value. A pyramid has no value.

So is it a Ponzi scheme then? No. There are no lies about Bitcoin. Bitcoin does exactly what it promises. You can either choose to invest in it or not. No one is ever going to come back to you and tell you that you need to put more money into it so that it can generate more profits to pay you back your initial investment.

Bitcoin has usefulness outside of an investment vehicle. The hope is that soon enough Bitcoin will have enough usefulness that people will choose to use it rather than invest in it. Of course, the more people use it, the more its value goes up.

Bitcoin is, however, a commodity traded on the open market. It is subject to speculation and wild price swings as a result. This is the part that confuses people and why they want to call it a Ponzi. They can point to the Mt. Gox induced price crash and say, "See! I told you." But it cannot be a Ponzi. There are no lies. Everything about Bitcoin is transparent. You either choose to put your money in because you see the value in it or not.

Hopefully now you can explain to your neighbor why Bitcoin is not a Ponzi. Then you can start a whole new conversation about the biggest Ponzi scheme in the world: The US dollar.

[BitChick]

Hopefully now you can explain to your neighbor why Bitcoin is not a Ponzi. Then you can start a whole new conversation about the biggest Ponzi scheme in the world: The US dollar.

Right!?  If we tell people this though they just laugh at us.

[Vivisector999]

There are many people who believe Bitcoin is a ponzi scheme.  To a point they are correct.  Well sort of.  They are going off the facts that the first people into the game have alot of "valueless" coins, which are pumped up to have a "believed value" of roughly $100 each atm.  The more people invest into the game, the more the value of the Bitcoins are worth.  Here is the problem.  The entire cryptocurrency value is a huge risk.  Looking at the graphs from a year ago, and listening to people talking, alot of people believe the value of a Bitcoin could be as high as a million dollars+.  So they get alot of people pouring their life savings into Bitcoins.  But if something happens to the network, like the US Gov't actually succeeds in taking it down, something random totally screws up, someone 51% attacks it, or if everyone sitting on their piles of Bitcoins suddenly cashs out and the price plummets to a value that miners find themselves turning off their miners because they are losing money due to electricity costs being more than they make.  Then you will be left with nothing, and you can't go back to anyone to get your money back.

Hopefully none of those things will happen, and Bitcoins will take off.  As they say without risks there is no reward.  And people too afraid to take risks will always try to convince others to do the same.   That way, if you succeed, they can't feel bad that they didn't take the risk as well.

[smoothie]

Means he hasnt done his homework.

 

[frott]

This thread is a ponzi scheme.

The initial poster made zero effort, and only by the hard work of those following after will the time spent face palming ourselves and slamming our heads onto the keyboard recoup.

Yet the initial poster reaps the wealth of our knowledge and insight.

[keelba]

This thread is a ponzi scheme.

The initial poster made zero effort, and only by the hard work of those following after will the time spent face palming ourselves and slamming our heads onto the keyboard recoup.

Yet the initial poster reaps the wealth of our knowledge and insight.

You may be on to something there.

[franky1]

I didn't actually know that, is fiat just an acronym then?

no its not officially an accronym. its just a sweet way of explaining fiat with only 4 words that people will remember

What is exactly fiat money?

i know your just playing but the best way to answer the question for noobs is

Federally
Insured
And
Taxed

Good grief dude - do you ever say anything that's true?

The term derives from the Latin fiat ("let it be done", "it shall be").

http://tinyurl.com/FiatDefined

i never said thats the TRUE FACT of the history of fiat. but its the fastest way to explain the difference between fiat and lets say........ bitcoins.

some of you guys take "comments" "opinions" and "jokes" and seem to some how think everything on this forum is legal fact. and then knitpick it as if this forum has to comply by a code of conduct that lawyers have to obide by

if your looking for a small bit of guideance then fine use the information here to guide you in the right direction. but if you want the literate facts and legal opinion. then put your money where your mouth is and speak to IRS/FINCEN/government.

Fiat is indeed federally insured and taxed. so my statement is not false. i am jsut sorry that i did not write a 500 page legal dcument about the last few centuries of fiat, to please the knit pickers.

i guess social skills are lacking to realise this is a forum and not a encyclopedia. some people need to take a break from the forums and have a coffee to chill out. seems they rely on this forum for legal fact, just a little too much.

it should be known by now that forums should be taken with a pinch of salt and everyone should do some due diligence beyond whats been wrote.

and because of this.. i shall put in a footer

[defaced]

What exactly does he mean?

He means he calls anything he doesn't understand a ponzi scheme.

Bitcoin may be many things.  It may be horribly flawed, it may be naively optimistic, it may never gain more than a marginal niche, hell it may crash and burn spectacularly tomorrow but it certainly isn't a ponzi scheme.

Let him know the ECB (no friend to Bitcoin) said as much in their report on virtual currencies.  Actually no regulator, governmental agency, or consumer watchdog group has stated Bitcoin is a ponzi.

this

[Come-from-Beyond]

Every kid knows that Bitcoin is a snowball.

[Spaceman_Spiff]

Don't listen to them. They are just grumpy old men. I'll tell you what it is but first I have an investment idea for you. Since you seem new and I like helping out new people I'll give you the exclusive chance to double your money. Send me 5 Bitcoins today and I'll send you back .0001 Bitcoins a day in interest for a year and at the end of a year I'll send you 10 Bitcoins doubling your initial investment. Ok?

 

[norulezapply]

pm pirate@40 here on the forum he will explain it for a small btc donation

Actually lol'd at that, thanks

[DannyHamilton]

Wow.  Some newbie comes in and makes 2 posts saying "What's a ponzi" . . .

Two days and 40 posts later the newbie hasn't been back, and you're all still discussing it?

Please, don't feed the trolls.