Is Bitcoin a Pyramid or Ponzi scheme & what are the ramifications?

[mootinator]

Your bank account that holds your currency doesn't give you a market balance.

Really? I have a Canadian bank account which as it happens quotes me a balance in both Canadian and US dollars. What do you suppose the odds are that if I walk into my bank tomorrow morning and ask for all my cash in US dollars that I get the exact amount quoted tonight?  

Point 4 doesn't prove bitcoin has no intrinsic value, it assumes it.
Kinda like how point 12 "points out" that a market balance is clearly fraud.

[AnonyMint]

Your bank account that holds your currency doesn't give you a market balance.

Really? I have a Canadian bank account which as it happens quotes me a balance in both Canadian and US dollars. What do you suppose the odds are that if I walk into my bank tomorrow morning and ask for all my cash in US dollars that I get the exact amount quoted tonight?

Converting from one currency to another is not spending a currency. When you spend a currency, there is no exchange price. That is a key factor of why one currency always dominates an economy. Imagine if you were paid in dollars but had to purchase your food in Bitcoin. You would go crazy trying to plan your budget, due to exchange volatility.

The OP explained that you can't divest Bitcoin by spending it, not in large size at least. Thus your only option for spending it (in most cases) is to convert it to fiat.

Point 4 doesn't prove bitcoin has no intrinsic value, it assumes it.

Point #3 discusses why it is not a currency as well other posts in this thread.

Kinda like how point 12 "points out" that a market balance is clearly fraud.

I never wrote that market balance = fraud.

I never wrote that market balance = fraud.

Stock exchanges lie about your balance! They seem to imply that you can sell for a certain price, but the market depth (depending on the stock) is often significantly smaller than the market cap, meaning only a small amount of the money in any given stock can immediately get out any where near the current price!!!one!one!!!

Of course stock markets provide market balances. But bank accounts do not, not when you are spending your money on goods and services. That is why comparing stocks to currencies is a strawman.

You can't at the same time argue that Bitcoin is a currency, then tell me I must convert it through a market balance to another currency before I can spend it (in most cases).

And this is why you can't withdraw your balance without losing some of its value, at least if your balance is larger than the current market float.

Unlike a bank account, I can withdraw my balance at full value without worrying about whether the spot-market balance reflects my true account value or not.

As point #12 explains, this is critical when defining a pyramid or ponzi scheme, because not knowing your account's true balance (you can't until you actually sell it on the market) means Bitcoin is not 100% transparent. It can't be 100% transparent.

[hlynur]

@anonymint

thanks for your efforts with the list,
i'll read through when my brain's a bit fresher.
also i have to read through the killswitch thread.
very interesting...will post soon

[Impaler]

It would be better described as a Pyramid scheme, which is similar to but distinct from a Ponzi scheme.

I agreed in the OP:

Bitcoin is amalgamation of some characteristics of a pyramid aka multi-level marketing scheme and all characteristics of a ponzi scheme. Specifically the earlier owners of the Bitcoin, promote the low-risk or no-risk and high-gains benefits to later investors.

I also concur with the other points you made and you stated them more eloquently or lucidly than I did.

Oh sorry AnonyMint, I skimmed your OP too lightly and missed that statement of yours.  Still I would argue that BTC is fully Pyramid in it's nature and not Ponzi.  Both Pyramids and Ponzi's are sustainable only by exponential growth, but in the key areas they differ (central vs decentralized), (one promoter, many promoters), (facts of investment hidden, facts disclosed truthful) each aspect of the Prymaid matches BTC perfectly while the Ponzi scheme dose not.

BTW I added an expansion of my 2nd Paragraph in my first post that deals with the information disclosure differences in Ponzi vs Pryamid situations.

I would best describe BTC a a pyramid scheme with tech-stock bubble overtones and ideological promotions, and I'd advise you to refine your critic of BTC in this manor because it will be more effective.  BTC defenders can and do point out several of these distinctions like lack of centralization which the average person dose associate with a Ponzi scheme.  Thus when you call BTC a Ponzi your argument will be easily undermined by this rebuttal, if you argue it is a pyramid the average person (once they know what a pyramid scheme is) will be far more likely to see the similarity and the standard BTC promoters well trained Ponzi rebuttal will fail.

Their is a good reason that FAQ for Bitcoin go out of their way to have "Is BTC a Ponzi scheme" and why every promoter has virtually memorized and can parrot a rebuttal to the Ponzi accusation, so they can essentially knock down a straw man and thus put the prospective adopter at ease because most people lack the sophistication to realize their are more types of scams then just Ponzis.  But they NEVER dare to breath the word Pryamid because their really is NO defense they can mount to that.

Also I'll give your poll a yes vote because I agree with your general opinion but I would have preferred 'some other kind o fraud' as an option.

[mootinator]

Converting from one currency to another is not spending a currency. When you spend a currency, there is no exchange price. That is a key factor of why one currency always dominates an economy. Imagine if you were paid in dollars but had to purchase your food in Bitcoin. You would go crazy trying to plan your budget, due to exchange volatility.

You should tell my credit card issuers that. Whenever I use my Canadian credit cards to import goods or services from the US, some seemingly randomly marked up number of Canadian dollars ends up on my bill!

Your argument is a red-herring. Bitcoin can be a valuable internet currency without being anyone's primary currency.

[AnonyMint]

I'd advise you to refine your critic of BTC in this manor because it will be more effective.

Good advice.

You didn't answer whether we should give up join the Illuminati instead?  

You very confident we can win against this mass mania?

[Impaler]

Well frankly your fighting a Balrog here, but you might as well use a fork rather then a spoon.

I personally don't try to save the whole forum from itself, like the Catcher in the Rye I just look for thouse who want to be saved and try to invite them to Freicoin.

[AnonyMint]

Converting from one currency to another is not spending a currency. When you spend a currency, there is no exchange price. That is a key factor of why one currency always dominates an economy. Imagine if you were paid in dollars but had to purchase your food in Bitcoin. You would go crazy trying to plan your budget, due to exchange volatility.

You should tell my credit card issuers that. Whenever I use my Canadian credit cards to import goods or services from the US, some seemingly randomly marked up number of Canadian dollars ends up on my bill!

Your argument is a red-herring. Bitcoin can be a valuable internet currency without being anyone's primary currency.

The float between all national currencies is sufficiently large that the exchange rate doesn't move 1200% per year and 20% in a day, as it does with Bitcoin. Usually a few % at most per day only. Thus your fiat account balance is still fairly accurate as converted to foreign fiat currencies.

I wrote upthread that if we could better distribute a coin and get a larger float then we could get closer to calling that coin a currency. This is impossible with Bitcoin because of the ASICs and the 21M limit.

There is no mechanism in Bitcoin that can lower the concentration of the coins (at least not significantly enough to matter). You expect to give yours away to help solve the problem? Selfishness and greed was the problem from the very moment Satoshi pitched the gold lie about the coin supply curve.

P.S. We don't do most of our commerce in foreign fiat currencies, and when we do decades from now, there will be a single currency for the world. That is the whole point of why we have to fight against a failed outcome. The elite have a plan and Bitcoin is part of it.

[AnonyMint]

Well frankly your fighting a Balrog here, but you might as well use a fork rather then a spoon.

I personally don't try to save the whole forum from itself, like the Catcher in the Rye I just look for thouse who want to be saved and try to invite them to Freicoin.

I think this is correct strategy. See from the poll that some percentage understand, and they are the ones we should save, because they will run the economy after all the rest destroy themselves.

We are doing our part here to explain it to those who want to be wise and join "us".*

Of course I am joking about joining the Illuminati, because that is enjoining failure too. We must provide a decentralized solution that works well for those who are worth saving.

*Note I am not currently involved with Freicoin in any way.

Also I'll give your poll a yes vote because I agree with your general opinion but I would have preferred 'some other kind o fraud' as an option.

I edited the poll question to include "pyramid".

[AnonyMint]

I added this to the OP.

Edit: Not limiting the supply of coins to 21M has no downsides and has other benefits too:

I certainly could not make this case for Bitcoin, because the marketing demographic is based significantly on the asymptotic limit of 21M coins.

And the only fix I currently see is to not diminish coin rewards asymptotically towards 0.

But crypto-currencies are a broader topic than Bitcoin. And an altcoin could offer the proposed fix, c.f. my upthread reply to MoonShadow where I claim that an inflatacoin with no other compelling improvements over Bitcoin would not succeed in the market place.

Also inflatacoin is entirely the wrong connotation, since non-excessive coin rewards have no algebraic correlation to inflation, even Mises admitted that. Even at the current 12.5% per annum (monotonically decreasing) debasement of Bitcoin, the coin is deflationary (ahem, well not the past couple of days with the fall in price).

[AnonyMint]

Bitcoin is not a ponzi because:

BTC does not give you return `1 btc will always be 1 btc and never become more

Logic fail.

Although I wish that was true, I already pointed out that it can't be true until BTC is a currency, but there is no way for BTC to become a currency, because it can't be deconcentrated and dispersed.

I do appreciate the sentiments, and that is why I offered a solution that would meet your goals.

You are conflating your hate towards the system, with the fact that Bitcoin doesn't help you, because Satoshi designed it to fail. You've been hoodwinked but you are letting your hate of the system obscure your objectivity on the fact that Bitcoin was designed to suck all your system-haters into a scam that destroys you.

Very clever who ever dropped Bitcoin out of the sky.

The fact it becomes worth more $ is because the real ponzi scheme that has been going on for the last 100 years is the ones with pension funds and paper money. The rise in value is only due to the higher amount of user sharing the same amount of coins. When the internet first showed up people sayed it was a bubble, but it where actually all new users who would never leave cyberspace. Same with btc, after using it people are convinced of its workings and make the switch. This is no bubble or ponzi scheme, but a lot of people discovering a new technology.

I do not own a television because i believe it is meant for indoctrination, and i have to say i really believe all people who watch television are brainwashed. They all say the same bogus agrument about ponzi schemes. Did you know Tom Dwam gave a interview to CNBC where the reporter asks if poker is a ponzi scheme?

WAKE UP! People are lying to you, they deliberately give you false information to profit from your ignorance and trust, speak out because this market can't be regulated. This is what your so called money (which is a currency) is worth in bitcoin, it's true free market.

I think China has to wash all their dollars over the bitcoin market until the Americans get it:D

I agree with most of that, but if you think China's elite are any better (they are different but not better) than Western elite, you have a painful lesson coming to you.

You need to also wakeup and stop being so gullible and naive.

You are only 1/8 awake. You haven't reached the level of awareness that Impaler and I have.

[glub0x]

yes if you change a few words bitcoin matches a bit better the definition of a ponzi, that doesn't mean it is one.
Changing a few words for a fiat currency would make it match a ponzi definition too, do it with the Zimbabwe fiat!


Now  even with your little tricks one part of the sec definition remain ineffective with bitcoin

Why do Ponzi schemes collapse?

With little or no legitimate earnings, Ponzi schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.

It is quite obvious that if you stop putting money in bitcoin the price of a bitcoin will simply have no sense anymore because nobody will want to buy. But also nobody will want to sell.
That doesn't mean that the bitcoin network would stop.

This has been proven true in the past, bitcoin already survive sevral big depression with less poeple on board willing to put less money for quite a long time. Bitcoin did survive to this when a ponzi would colapse.

Bitcoin might collapse, but it certainlly won't collapse only for the reason that poeple stop putting money in it.



Finally you make the assumption that bitcoin is a currency or that bitcoin must be a currency to succeed or that bitcoin holder "want it" to be only a currency and this is a false assumption until you proved it.

[AnonyMint]

yes if you change a few words bitcoin matches a bit better the definition of a ponzi, that doesn't mean it is one.

See the posts by Impaler. He lucidly explained Bitcoin matches better a Pyramid than Ponzi, which I had also included in the OP. Read again the title of the thread.

Changing a few words for a fiat currency would make it match a ponzi definition too, do it with the Zimbabwe fiat!

Absolutely not. Hyperinflation is nothing like the mechanism of a Ponzi scheme. That is very sloppy analysis to conflate those two very different mechanisms.

In hyperinflation, the central actor is increasing the supply forcing all the users of the currency to race faster to unload the depreciating currency.

In Ponzi (or Pyramid), the later investors are bringing in all the money to pay the gains of the early investors.

If you don't see that Cat is not Horse. Then I can't help you.

Now  even with your little tricks one part of the sec definition remain ineffective with bitcoin

Why do Ponzi schemes collapse?

With little or no legitimate earnings, Ponzi schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.

It is quite obvious that if you stop putting money in bitcoin the price of a bitcoin will simply have no sense anymore because nobody will want to buy. But also nobody will want to sell.

Nonsense. The 90+% concentration of coins in a few hands, tells you that people are not investing in Bitcoin to use it for spending. They are investing for gains. And if gains stop they will exit. Here I quote an investor (a "friend") who owns 10,000 Bitcoins:

Today was a really intense day. I turned bear.

Just to clarify. Is the a short/medium/long bearish sentiment?
thnx

In my terminology, a bear is someone who holds fiat in hopes of buying back the coins. If I did not trust bitcoin in the medium/long term, I would sell out and not waste a word on this forum. These are not bears. (Being "bearish" on something that you don't have and don't intend to buy, is just talk, because only money has a vote.)

The long-term is outlined in the trend analysis thread. Bitcoin has a very convincing history and promising future from an investor point of view. AnonyMint has broght some political dangers to our attention, which is good. You should carefully monitor if the promise of conquering the fiat system still holds, because most of the exchange rate is based on speculation that this would be the case.

That doesn't mean that the bitcoin network would stop.

This has been proven true in the past, bitcoin already survive sevral big depression with less poeple on board willing to put less money for quite a long time. Bitcoin did survive to this when a ponzi would colapse.

Bitcoin might collapse, but it certainlly won't collapse only for the reason that poeple stop putting money in it.

That is precisely the reason it will collapse and not come back up again. But we are a long ways from that. Appears the elite and the media are pushing it. It will likely reach $trillions in market cap with all of the liberty lovers in it before it collapses in a ball of fire stampede to the exits.

Finally you make the assumption that bitcoin is a currency or that bitcoin must be a currency to succeed or that bitcoin holder "want it" to be only a currency and this is a false assumption until you proved it.

I am sorry to hear you can't follow the logic on why it isn't a currency and why that means no one can exit.

Lets do a little simple math as follows.

Joe invests $100 to buy all the BTC from Satoshi on day 1, all of BTC is worth $100
Sally invests $1000 to buy 10% of BTC from Joe, all of BTC is worth $10,000

Joe wants to withdraw his $9000, but there is only $1100 invested in BTC.

You see if they can't spend it as BTC, then it is never worth the level of cash that was brought in.

You see most people can't do math in their head. They need to see it.

So now you see it.

[bitcoinpsftp]

It cant possibly be a ponzi scheme because it goes against the definition.  There is nobody in charge that is payign you extra money.  It is pure supply and demand.  It could bubble like the tulip bubble, but bitcoins are very convenient, so I doubt it.

[AnonyMint]

It cant possibly be a ponzi scheme because it goes against the definition.  There is nobody in charge that is payign you extra money.  It is pure supply and demand.  It could bubble like the tulip bubble, but bitcoins are very convenient, so I doubt it.

Repeating:

See the posts by Impaler. He lucidly explained Bitcoin matches better a Pyramid than Ponzi, which I had also included in the OP. Read again the title of the thread.

It is not like a tulip bubble, because tulips have intrinsic value. I hear they are still very valuable today.

Why do I need to keep repeating that Bitcoin has no intrinsic value if it is not a currency.

And there is no way to deconcentrate it from the current 90+% of BTC is in a few hands. Thus it can't be a widely accepted currency, because it is not widely held and can't be widely held. By the time 1% of the global population has purchased, it will be priced on the order $30,000+ and then the other 99% won't be able to afford to get much BTC at all. You say that is okay, but it means you impoverish the rest of the world relative to early adopters so the velocity of money would collapse, because very rich people spend a much smaller % of their money than middle class people. The 99% will never go for that arrangement, they will stick with fiat and then the collapse of Bitcoin's bubble will ensue and the stampede to the exits with all trampled and value lost.

A fiat is a currency and so far no virtual crypto-currency is a currency:

https://bitcointalk.org/index.php?topic=341594.msg3660007#msg3660007

Just because you call it a currency, doesn't make it so.

A currency is anything used as a currency.  It's as simple as that.  Just because you say otherwise based on your own made-up definition doesn't make it so.

I suggest you try to survive in a small town in Canada carrying only Mexican pesos.

More saliently I challenge you to buy 20 BTC and then spend them without wasting your money. I mean buy only the things that you would normally spend your money on daily without converting to a fiat. And don't use any fiat at all.

In almost every way Bitcoin is exactly the opposite of Government issued fiat currency:

Not. The difference between fantasy and delusion, is only the whether the hair grows on the palm of your right or left hand.

[PrymeTyme]

the Worldwide Financial System as a whole is a Pyramid/Ponzi  !!!!!

a lil example on interrest rates

If Joseph in the year zero, had laid in  One cent  on the imaginary bank of Jerusalem, at five percent interest, after 15 years would be due to him two cents,
after 29 years, four, after 53 years  8 cents. One hundred years later, his descendants would then be able to withdraw € 1.11 and after 250 years,
there were already about a thousand euros ...

In 2000, out of the One cent would finally become  2 times 10 ^40  (2.000.000.000.000.000.000.000.000.000.000.000.000.000 euros).
Extrapolating this amount into gold, so Joseph's descendants would be entitled to 436 billion globes of pure gold! Corresponding large the debt would be to the other.

[bitcoinpsftp]

Curious what intrisic value these tulips had/have???

[AnonyMint]

Curious what intrisic value these tulips had/have???

I saw a post on it yesterday but I can't find it now. It was saying they collapsed from the peak bubble price to equivalent of $1200 in today's money if I am not mistaken.

[AnonyMint]

the Worldwide Financial System as a whole is a Pyramid/Ponzi  !!!!!

a lil example on interrest rates

If Joseph in the year zero, had laid in  One cent  on the imaginary bank of Jerusalem, at five percent interest, after 15 years would be due to him two cents,
after 29 years, four, after 53 years  8 cents. One hundred years later, his descendants would then be able to withdraw € 1.11 and after 250 years,
there were already about a thousand euros ...

In 2000, out of the One cent would finally become  2 times 10 ^40  (2.000.000.000.000.000.000.000.000.000.000.000.000.000 euros).
Extrapolating this amount into gold, so Joseph's descendants would be entitled to 436 billion globes of pure gold! Corresponding large the debt would be to the other.

Interest does indeed concentrate wealth to the lenders.

And debt is eventually unpayable if total debt grows faster than productivity.

And debt can be expanded faster than the supply of base money would allow by employing fractional reserves of any base money, whether it be fiat, gold, or Bitcoin. For example, I've heard that Ripple is fractional reserves of Bitcoin.

So having a pyramid ponzi scheme in the base money doesn't help! It makes it worse.

We need the decentralization, but we also need to deconcentrate the distribution of the coin.

We need to do that with capitalism and not socialism, i.e. not just giving away coins for nothing. Impaler might disagree with me on this point.

I explained how in the OP.

[PrymeTyme]

the Worldwide Financial System as a whole is a Pyramid/Ponzi  !!!!!

a lil example on interrest rates

If Joseph in the year zero, had laid in  One cent  on the imaginary bank of Jerusalem, at five percent interest, after 15 years would be due to him two cents,
after 29 years, four, after 53 years  8 cents. One hundred years later, his descendants would then be able to withdraw € 1.11 and after 250 years,
there were already about a thousand euros ...

In 2000, out of the One cent would finally become  2 times 10 ^40  (2.000.000.000.000.000.000.000.000.000.000.000.000.000 euros).
Extrapolating this amount into gold, so Joseph's descendants would be entitled to 436 billion globes of pure gold! Corresponding large the debt would be to the other.

Interest does indeed concentrate wealth to the lenders.

And debt is eventually unpayable if total debt grows faster than productivity.

And debt can be expanded faster than the supply of base money would allow by employing fractional reserves of any base money, whether it be fiat, gold, or Bitcoin. For example, I've heard that Ripple is fractional reserves of Bitcoin.

So having a pyramid ponzi scheme in the base money doesn't help! It makes it worse.

We need the decentralization, but we also need to deconcentrate the distribution of the coin.

We need to do that with capitalism and not socialism, i.e. not just giving away coins for nothing. Impaler might disagree with me on this point.

I explained how in the OP.

this might Help

http://www.youtube.com/watch?v=s0K65v_V8Sg