People are confusing ponzi scheme with pyramid or MLM scheme but neither of them are like Bitcoin.
Ponzi scheme - A central actor (person or 'company') receives money with a promise of quick and significant returns. All people that buy into the scheme interact directly with the central actor who pays out money he has received from 'investors' as returns in order to drum up more investment in a fictitious investment opportunity. It is by design centralized, non-transparent and has a hierarchy of 2 levels - CEO of ponzi and everyone else. The investors do not realize they are being payed out with their own and others principle investments.
O O O
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O - (CEO of ponzi) - O
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O O O
Pyramid scheme - A central actor encourages a number of other actors to invest in something in return for something of little to no real world value in a fixed hierarchy on a promise of a) high profit margins on a cheap product and b) getting more new actors into the hierarchy directly underneath you feeding your personal revenue stream (and by design, those directly above you). This structure allows large profits to flow up the streams towards the tip of the hierarchy. A pyramid scheme by design is centralized and non-transparent in nature. People lower down are often not allowed to know exactly how far down they are in the pyramid, only seeing those they directly interact with.
(CEO of MLM)
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O O O
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O O OO O O O O O
Bitcoin - Every bitcoin is worth the same so every actor benefits proportionally with the growth of the network. Note that with a pyramid scheme the goods you purchase either have little utility like a poor quality 'how to' guide or a good whose market value is vastly lower than what you just paid to purchase it ($600 for 24 energy drinks). With bitcoin wealth is being traded 1:1. If you buy a bitcoin at a market price of $600, that is what it is worth at that moment and neither party can be said to have 'lost any wealth'. There is nothing stopping you from turning around and selling it right back to the market for market price, just like gold or an antique vase. Bitcoin has a flat hierarchy with no central authority and is transparent.
O - O O
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O-O O - O
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O O - O
What confuses people is the exponential growth and the religious zeal of some bitcoiners giving the impression it is a get rich quick scheme.
this is really good. To make it perfect, you should point out, that Ponzi and Pyramide Scheme are dependend on new investors. In a Ponzi Scheme you need them, because otherwise the scammer could not pay out investors (they will not reinvest forever). In a pyramid you need investors otherwise the new investors get no return. In Bitcojn you don't need new ones.
I think this confusion is, because Bitcoin has a few paralells with such systems:
- possibility of high and quick returns
- many people don't really know why Bitcoin has value. So the same with a Ponzi Scheme, investors don't really know why there is a return.
- there is a possibility that bitcoins are only worth a few cents tomorrow. So you invest an significant amount of your wealth and tomorrow your hands are empty.
First and thirh you have with any stock, too.
