Understanding the Ponzi Narrative

[StanleyBoyle]

You only need to understand what a Ponzi scheme is. Ponzi scheme has several salient features: 1. Small returns on investment are large, which does not conform to the law. 2 There are a large number of people, and they are divided into many levels, like a pyramid. 3 This investment can't see the real thing, it's like a dream.

[Darker45]

In my place, there are many networking companies. One way to earn from this setup is by recruiting new members. The new members will pay a registration fee and part of that money will be earned by the recruiter. The new member will now be recruiting as well so that he/she will also earn. Do you know why this setup is not considered a Ponzi scheme? It is because they have a product to sell.

In a way, that's how Bitcoin goes. Bitcoin is not shelling out money for nothing at all. It is not an investment on purely nothing that promises a high ROI, which is what Ponzi really is. Buying Bitcoin means buying a currency that is decentralized, scarce, permission-less, seizure-proof, immutable, pseudo-anonymous, and so on.  

[ChiBitCTy]

People compare bitcoin to a Ponzi scheme because the price increases when more money flows into the underlying asset.  If I buy for X and sell for X+100 that 100 profit of mine came from another person who bought into the scheme after me. In the eyes of many, this is dangerously close to how Ponzi schemes generate value.

What you’re saying here by no means shares any sort direct coordination with Ponzi schemes. What you described here is exactly how the financial markets work and many financial products. This is just basic buy/sell demand which sets pricing.

If bitcoin were a ponzi then Satoshi would have taken off with money long ago. Bitcoin is also established by being open sourced, and designed so that there is no central figure that has any way of stealing or manipulating funds/coins.

[avikz]

What is the best argument against the Ponzi scheme narrative?

In what ways are Ponzi schemes different from bitcoin?

How do they generate value differently?

Bitcoin's value comes from scarcity. If we suddenly increase the maximum supply from 22 million to 22 billions, the value will go down drastically because of increased supply. Bitcoin is fundamentally and structurally different than ponzi schemes. The major difference is bitcoin is decentralized. Ponzi scheme are centralized to core.

When someone says that bitcoin is ponzi because the other investor's money flow increases its price, you just need to say that as per the methodology, the stocks markets are also ponzi because the same things happens there!

[Coin_trader]

I'm commenting base on my opinion and no bias for Bitcoin. There's really a similarity between Bitcoin and Ponzi but that depend on how people perspective. Bitcoin is cryptocurrency so it's normal that it's value will grow when someone bought since it has a limited supply compared to fiat.

Just like Ponzi, Early investors will benefit more from the late investors that entering in crypto. Let's just admit it since it's true but its applicable to tradable assets even on stock market. The only difference is Bitcoin don't promise an insane return for a certain period of time while Ponzi did. You can use this explanation to enlighten your friends.

[MKings]

Ponzi scheme is centralized, Bitcoin is decentralized.
Bitcoin will not deceive anyone and is transparent. Bitcoin has value because of everyone's consensus, and Bitcoin will not collapse because of the operation of a giant whale. No one can control Bitcoin.

[JoyMarsha]

I hate it with passion when someone brings a Ponzi scheme into bitcoin. There is no single comparison between them both. Bitcoin is a digital currency that can not be controlled or predicted upon via the amount of profit you will make in a given time but a Ponzi scheme can be controlled both in several profits if invested a particular amount. The Ponzi scheme always needs a marketer that will introduce you to it before it will be able to excel.
Bitcoin is globally talked about and welcomed but the Ponzi scheme only exists within a country

[davis196]

I can understand the point of view of all the haters,who are calling Bitcoin a ponzi scheme.
The price is being pumped,only when new money enters the BTC market.The early adopters became millionaires/billionaires,while the average Bitcoiner made very little profits(or maybe he lots some money).
However,Bitcoin lacks the referral/affiliate element,in order to be called a ponzi scheme.
Bitcoiners don't refer other people into Bitcoin and they don't get paid a commission for this.
Who knows,maybe cryptocurrencies are better than ponzi schemes,because that illegal referral element is missing.That's why many shitcoin scammers can get away with their scams.
I got sick of all the social media influencers shilling shitcoins and pumping their price in no time.
Those shitcoin scams are more like HYIP schemes,rather than ponzi schemes.
HYIP is kinda similar to ponzi,but there are some really small differences.
The most common thing between those two is the promise for gigantic profits.

[KaliLinux]

From OPs explanation, everything investment sounds like Ponzi. Now let’s take farming for instance.

Stage 1. You need investment for the initial machines/land/crops = Bitcoin invest for miners, etc.
Stage 2. You harvest your crops after maturity = Bitcoin mined
Stage 3. You sell your crops @ price x to the first buyer after harvest = Miners sells Bitcoin
Stage 4. First buyer stores crops for after season and price goes up and sells to new buyer @ price x+100 = Bitcoins Bull market
And the stage can repeat itself over and again with little variations in-between.
 
I am also thinking that the Internet is some sought of a Ponzi, we can use it when we pay to access it. I don’t even understand why people keep using the argument about when new money enters BTC that’s when the price pumps, this is the same for most if not all financial assets does that make them a Ponzi scheme?

[Chato1977]

Ponzi scheme is centralized, Bitcoin is decentralized.
Bitcoin will not deceive anyone and is transparent. Bitcoin has value because of everyone's consensus, and Bitcoin will not collapse because of the operation of a giant whale. No one can control Bitcoin.

Great small but very valuable answer , sad that i have no remaining merit to send for you.

Ponzi scheme only succeed because there are still some people that is a willing victim, meaning those people that does now look deeper in any project instead just looking to How much they will earn,
and that is GREED that made them loser .

[witcher_sense]

Just like Ponzi, Early investors will benefit more from the late investors that entering in crypto.

The comparison you made, while may seem astonishingly convincing at first glance, especially for those who aren't used to giving much thought to misleading narratives and myths randomly thrown at them and thinking critically in general, is very simplistic and superficial because it doesn't take into consideration a very important factor, namely the fact that the risk taken by early investors in Ponzi scheme is much much lower than that in the case of Bitcoin. Early investors in bitcoin couldn't know bitcoin would be valuable in the future. The "early" couldn't have known there would ever be "later" investors.   Still, they invested their time and effort in developing and learning about bitcoin, they invested their money to mine something that had no market value. Still, they took a risk and continued to mine at loss. Maybe they believed in bitcoin, they believed in the idea of decentralized digital money. If bitcoin had failed, these people would have lost their money, and you would probably have been mocking them for the stupid decision they made. They were rewarded justly for being right.

[yazher]

I think those people are just a victim of the Ponzi scheme where they didn't move on with it and think of every investment opportunity the same as it. But people who are far more intelligent than them don't take their senseless advice rather people like us take the consideration to see the truth with ourselves and guess what? The problem is not with bitcoins but with those crooks who used Bitcoin or Ethereum as their props to fool people about their fake investment scheme where they promise high returns or short-term ROI to get some investors. This was the main problem back in the days but right now, it's all different and people already know the truth about it.

[omone1]

To the best of my knowledge, bitcoin has value attached to it which ranges from the point of it generation otherwise known as mining, a lot of hurdles are been overcome to get the bitcoin into live and this doesn't come cheaply, and huge finance has been invested in science of mining and securing bitcoin by thousands of people all over the world.

Bitcoin as a digital currency has been able to solve a lot of financial lapses bedeviling the traditional finance and it seeks to give back power to the people rather than the central authority and it growth and adoption in price and popularity has been phenomenal. These are just few points to prove that it's not a ponzi scheme.

[Akash1243]

Bitcoin is decentralized which means no one can control or manipulate value, whereas ponzi scheme is centralized where only few people at the top who makes profit out of getting investment for new people promising crazy insane profits quickly.Bitcoin's value comes from its utility, being limited and also demand and supply. Although there are some altcoins which are ponzi scheme so you have to do your own research where to invest.

[Jawhead999]

Ponzi scheme is centralized, Bitcoin is decentralized.
Bitcoin will not deceive anyone and is transparent. Bitcoin has value because of everyone's consensus, and Bitcoin will not collapse because of the operation of a giant whale. No one can control Bitcoin.

Actually you're not completely correct.
It's true Bitcoin is decentralized and anyone can own Bitcoin no matter what his country, ages, religions, etc. But there's a whale who own large amount Bitcoin in a single address, we also don't know how many address he have. If the large amount Bitcoin were moved to another address, it will be posted on whale alert and sometimes it's affect the market.

They (whale) may not controlling Bitcoin, but they've a big impact on the market.

[odolvlobo]

For those who are not readily familiar; A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. The scheme leads victims to believe that profits are coming from legitimate business activity, and they remain unaware that other investors are the source of funds.

I think that is a poor description. A Ponzi scheme is a fake investment scam in which the scammer leads the victims to believe that their investments are earning returns when they are not. The scammer may convince the victims that the investment is real by paying returns from later investments, but it is not necessary.

There are many examples of a Ponzi scheme paying returns on paper, but not actually ever really paying anyone anything. So-called "cloud-mining" is a good example of a Ponzi scheme that may never pay any return (except on paper). Many Ponzi schemes make the victims wait a long time before they can cash out, and then the scammer takes off with the money before that time has passed..

[romeareo]

One of the largest roadblocks I have in defending bitcoin (and cryptocurrency in general) is when people compare it to a Ponzi scheme.

There is plenty of bitcoin FUD that is easy to defend, but when people pull the Ponzi-card, that is when I begin to get agitated. This is because I don't have a sound argument to combat this claim.
.....

What is the best argument against the Ponzi scheme narrative?

In what ways are Ponzi schemes different from bitcoin?

How do they generate value differently?

You are getting agitated because you are not able to handle the truth. The truth is that Bitcoin *is* a Ponzi scheme. At-least until now.

People who get in early and HODL will make way more money than those who come in later and HODL and so on and so forth.
Right now Bitcoin is valued at $47k. The only way it will shoot up in price is if more and more people get into crypto and buy more and more of Bitcoin. This includes institutional investors, Billionaires, regular people, people who switch from Alts to BTC etc.

If nobody ever buys another BTC, the price will collapse because most people (99.999%) who "invest" in BTC/Crypto are only doing so to make more money.

This is how BTC started out and how it blew up and grew like a wild fire on a hot summer day.

We have a suicide hotline posted regularly after the bubble crashes after a new batch of retail noobs get slaughtered every cycle. This is almost a meme now to sell when grandma starts talking about crypto.

Let's see the definition of a pyramid scheme as per usa dot gov

"Pyramid schemes need a constant flow of new participants to keep them going. They use new recruits’ "investments" to pay “profits” to those participating longer.

Pyramid schemes collapse when they can't recruit enough new participants to pay earlier investors."

Having said this. I also think that BTC is slowly transitioning away from no longer being a ponzi. BTC was not inherently valuable in the beginning. But now BTC is  *famous* and has a rich history and will simply never ever go away. It is fast becoming a vanity asset and it akin to digital gold. Every Billionaire, Millionaire will eventually want to have some just for sake of vanity. Each BTC will be like a painting of Mona Lisa with it's rich transaction history and being a scarce asset.

A random guy spent 10000 BTC to buy a $10 pizza 10 years back. Now, most of middle class in the world cannot afford to buy even 1 single BTC. Becoming a whole coiner is kind of a big deal now. Even people who do buy 1 BTC get nervous and sell it off if it declines by 10% in a single day.

Eventually, 1 BTC will end up trading around $5 Million per coin or more for a simple reason that big players want to get hold of it and there is simply not enough to go around.

[Ararbermas]

One of the largest roadblocks I have in defending bitcoin (and cryptocurrency in general) is when people compare it to a Ponzi scheme.

There is plenty of bitcoin FUD that is easy to defend, but when people pull the Ponzi-card, that is when I begin to get agitated. This is because I don't have a sound argument to combat this claim.

For those who are not readily familiar; A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. The scheme leads victims to believe that profits are coming from legitimate business activity, and they remain unaware that other investors are the source of funds.

People compare bitcoin to a Ponzi scheme because the price increases when more money flows into the underlying asset.  If I buy for X and sell for X+100 that 100 profit of mine came from another person who bought into the scheme after me. In the eyes of many, this is dangerously close to how Ponzi schemes generate value.

What is the best argument against the Ponzi scheme narrative?

In what ways are Ponzi schemes different from bitcoin?

How do they generate value differently?

how bitcoin become ponzi? That's nonsense mate because that's the way how bitcoin works even before whrein through demand and supply, so without such thing there's no chance for us to make money in it as well. Many people saying its a scam because they don't have knowledge how they can become successful in it after how many losses. Lol  Without knowing that it requires knowledge especially when it comes demand and supply where a lot people are buying and selling..   and what do you mean if you bought bitcoin it came from fraud?   Shut the front door mate. Unless if you don't use a trusted platform.. And if not your a lucky human to receive bitcoin from frauds. Lmao
Make some research sometimes.!!

[o_e_l_e_o]

The truth is that Bitcoin *is* a Ponzi scheme. At-least until now.

It seems you don't understand what a Ponzi scheme is.

People who get in early and HODL will make way more money than those who come in later and HODL and so on and so forth.

Yet plenty of the people who go in early also sold early and made very little profits, and plenty of people who got in later traded well and made lots more profits.

The only way it will shoot up in price is if more and more people get into crypto and buy more and more of Bitcoin.

Not at all. If everyone decided to stop selling at the current prices, then the price would immediately shoot way up, regardless of whether or not any new people or new money got involved.

If nobody ever buys another BTC, the price will collapse

While true, this has nothing to do with whether or not Bitcoin is a Ponzi. If nobody ever bought another ounce of gold, then the price of gold would collapse. If nobody ever bought another barrel of oil, then the price of oil would collapse. Doesn't make those things Ponzis.

[LogitechMouse]

Ponzi scheme often is used when the project or the company is a centralized one.
For example, there are some investment company that turns out to be a ponzi scheme. In crypto world, ponzi schemes are often used when a project is promising high return rates to its investors. When you see the word "guarantee" and a high of return rate then its 101% scam.

In this case, Bitcoin isn't owned by a company because its a decentralized coin but if whales who own huge amounts of Bitcoin and Satoshi's address which is holding a million Bitcoin sold all of their holdings at the same time then it will have a huge effect into the market as a whole.

I think that you've got the answers that you want here . I just hope that if somebody tells you again that Bitcoin is a ponzi then you can get other people's answers here. Good Luck.