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Author Topic: [FAQ] Is BitCoin a Ponzi or pyramid scheme? (Newbie-Friendly)  (Read 49003 times)
fifivotch
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June 18, 2014, 09:23:12 PM
 #41

what is Bitcoin ? sample  and funny video that presents  bitcoin and how it works !
http://youtu.be/OJV8qTkFwZk
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Night Owl
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August 03, 2014, 12:04:28 AM
 #42

I am new to BTC, there is a lot of good info here but will take time I see to learn it all.

My question is: what happens if i loose my mobile with my 2 A Athentication on it? How do I log back in to the exchange? Will I have to email them and jumb through lots of questions? Would it be easy to set up again on new phone?
I have not lost it but was just wondering?
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August 03, 2014, 08:49:09 AM
 #43

Thanks for the detailed information. This would help me a lot to fully understand bitcoin.

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August 03, 2014, 01:28:55 PM
 #44

Thanks. Great explanation for new coiners. I'd bookmark this.
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August 04, 2014, 09:43:12 AM
 #45

I can't fathom how someone comes to that conclusion, Bitcoin and Ponzi schemes don't have anything in common.
Dillar
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August 04, 2014, 10:10:30 AM
 #46

Thanks a lot. You left me in no doubt that Bitcoin is not a ponzi scheme. Bitcoin has no operator, that is the point.
LiteCoinGuy
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August 04, 2014, 12:51:49 PM
 #47

nice faq, thanks for that. it will help some noobs.

@ Dillar

not only that: bitcoin has a value because its a TOOL!

Dillar
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August 04, 2014, 01:00:11 PM
 #48

nice faq, thanks for that. it will help some noobs.

@ Dillar

not only that: bitcoin has a value because its a TOOL!

Yes, you are able to buy some things using Bitcoin too. Unfortunately, not all can be bought or sold, but it is great that the use of Bitcoin is growing. Smiley
ashleygrey08
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December 23, 2014, 12:31:46 PM
 #49

I am newbie here and newbie to bitcoins. But my client proved to me that BitCoin is not a pyramid scheme. He pays me through his bitcoins and transfer to my bank account and I got it for less than 12 hours.
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August 20, 2015, 07:40:36 PM
 #50

Thanks a lot!
keepdoing
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August 20, 2015, 08:11:55 PM
 #51

Q:  Is BitCoin a Ponzi or pyramid scheme?

A:  No.  Like any other currency, BitCoin is designed to be used as money, not as an investment.

Unlike either of these situations, BitCoin has no person "at the top"................

This is a pretty old post and I think due to the recent fork possibilities needs updating in order to be completely truthful.  There WASN'T a person at the top as it was a rather collective open source project.  But as Mike Hearn has pointed out - all Open Source Projects ultimately have a "Benevolent Dictator" (I think that is the word he used).  In this case we have Mike and Gavin as our proclaimed benevolent dictators - and they are "at the top" and they have introduced an Upgrade "XT" that is very controversial and threatens to split the Bitcoin Chain.  If that happens, then anyone on the other chain will indeed experience the crashing effect of the pyramid falling on their heads.

So be aware of what is going on and get your info from multiple sides / sources.  And if it is all over your head..... well, be careful.

But with that said, I advise everyone to go to a major exchange and buy a couple of bitcoins at minimum, and wait things out.  Because I have talked to many of the major exchanges and they pretty much want XT.  But they will NOT make the move and convert until it is clear it will succeed.  So I think your bitcoin is safest there, and I definitely think that having a couple of bitcoins is worth the gamble.  Because IF this is resolved satisfactorily, Bitcoin is going to soar.  Even if it doesn't I think the flight will simply be delayed.  My guess is that the next year is going to see a huge paradigm shift in the Global Finance system.  By 2017 Fiat Currency will be gone.

The only real worst case is if the Fork goes so badly that it results in Mutual Destruction and the Powers That Be start their own Fiat Coin.  That would indeed suck and is my greatest concern - but I think it is highly unlikey.  However, one way for that to happen would be to use a Massive Global Financial Crisis to scare the masses into a suddenly new solution.  And it is possible, and it is why I wish this Fork crap would resolve quickly - in order to avoid that - because I do think the Powers that be actually want to just use Bitcoin as this transitional vehicle.
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August 21, 2015, 07:54:16 PM
 #52

Thank you for the good explanation!

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October 02, 2015, 02:00:26 AM
 #53

Thank u
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October 02, 2015, 11:40:42 PM
 #54

thanks
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October 03, 2015, 05:14:07 AM
 #55

Yes i also think bitcoin has lots of potential. Thanks for this well written review.

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October 03, 2015, 05:59:29 AM
 #56

I can't fathom how someone comes to that conclusion, Bitcoin and Ponzi schemes don't have anything in common.

Well, If you are a Bitcoin shill {Someone paid to bad mouth Bitcoin} you would make any connection, even if it has a 10% chance. Most of these shills wants to come from a angle

to say that the early adopters of the technology have the advantage over the late adopters of Bitcoin. So they are hyping up the price to get more people to buy Bitcoin and then

they offload for maximum profits. That is not how Ponzi schemes work... as explained in the OP's great post.  Wink

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October 03, 2015, 08:06:53 AM
 #57

I highlighted a couple parallel perspectives to help the newbies visualize the dynamics of how bitcoin miners create and distribute the currency first (like the central banks do with fiat), and how a forever increasing price value of the distributed currency is required to keep the system from collapsing into deflation (in bitcoin's case, collapsing into "unprofitably for miners" who leave the system because they cannot turn a profit).

A Ponzi scheme is a type of confidence scam where people who get a hold of the debt based currency first or were early bitcoin adopters who bought it cheap, earn unusually high returns on their investment because they are actually being paid from later investors.   If investors try and withdraw their original investment from the Ponzi operator cash out of their bitcoin and get back into the fiat realm, or in the case of debt based currency, go bankrupt (don't pay the debt money back), the scheme the bitcoin price (asset prices in the debt fiat parallel)collapses because no actual profits exist (for the bitcoin miners)and there is not enough money to return the deposited amounts purchase/maintain/power their mining equipment in the bitcoin parallel, or keep asset prices supported in the debt money example.  

Similarly, a pyramid scheme is a type of confidence scam where people who "enroll" by paying a certain amount of money are made to believe they can make a large return on their investment by recruiting other people and receiving some portion of their enrollment fee.  The scheme collapses because it requires exponential growth, so it quickly runs out of new people to enroll.  The person starting the pyramid scam, who didn't have to pay an enrollment feetoday's higher bitcoin prices (or in the debt money example got to borrow it into existence at 0% and charge the next guy actual interest), makes money off of all their referrals the price appreciation of bitcoin (an aggregate increase in total debt in the debt money parallel) ; while the people at the bottom parts of the pyramid (late adopters, or those with low credit scores paying the highest rates of interest in the debt currency parallel), who cannot find anyone new to refer(cannot find an investment for borrowed funds with a rate of return higher than they borrowed it at in the debt money parallel), are left with no return on their investment compared to the earlier bitcoin adopters (or those who got to borrow debt money at 0% in the debt currency parallel).

BitCoin has no person several individuals "at the top" who collects money paid for bitcoinssell the vast majority of all newly mined bitcoins on the open market (hopefully at a profit like the profits the central bankers lock in immediately by charging you a higher interest rate than the low one they borrowed it for).  These, bitcoins are bought and sold on public exchanges amongst members of the general public.

BitCoin works just like cash(which is debt based currency).  

Sorry if I paraphrased a bit, but the "parallel concept in reference to a phenomenon" is not a simple method of explanation.  But in this case, since increasing demand for most things affects its price upwards, then there are always those who are able to capitalize first when the price is low.  In our cases, the capitalists are early bitcoin adopters getting cheap BTC and central bankers getting debt currency loans at 0%.

Commodity distribution often comes with varying pricing patterns often associated with ponzi dynamics especially in the growth phase its life cycle.  This is why bitcoin has been loosely referred to as a ponzi, and why people say "you can't taper a ponzi scheme"(why the central bank can't raise interest rates without triggering thousands of bankruptcies), etc..
 
ELI5 - Nowadays, the term: "Ponzi" is used loosely, almost as slang to describe certain extreme supply/demand/pricing conditions (where the growth phase is viewed more romantically than any decline phase) that we associate with simple chain letters, pyramid schemes, and how Bernie made off with your money.  All systems are dynamic, and endless growth is impossible, which is why a system that cannot withstand a contraction phase is simply referred to as a ponzi nowadays.  Bitcoin is surviving its de-growth phase, therefore, it is not a ponzi. It will be interesting to see if our debt currency system can survive a de-growth phase (rising central bank interest rates) without the world running to bitcoin, because gold is cumbersome. Thanks for bearing with my lack of grammatical perfection.
jcg414
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October 09, 2015, 08:20:44 PM
 #58

You want the one fact I've learned that had me convinced? That at least 3 of your largest Bitcoin partners have stolen from you recently and Bitcoin is still here and in court. The high ups could've cut and run.

Signed, Jeffrey Geller
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October 09, 2015, 08:38:29 PM
 #59

Today almost all things seem like ponzis. It is more or less true that to profit from Bitcoin, one depends on more people putting money into it. But it is used as money too.

If we define ponzi as "you get paid only if more people buy into it", even fiat is a ponzi: you sell your goods for fiat, and you will only profit if more people decide to trust fiat. If not, you just have useless paper.


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October 10, 2015, 10:39:13 AM
 #60

Today almost all things seem like ponzis. It is more or less true that to profit from Bitcoin, one depends on more people putting money into it. But it is used as money too.

If we define ponzi as "you get paid only if more people buy into it", even fiat is a ponzi: you sell your goods for fiat, and you will only profit if more people decide to trust fiat. If not, you just have useless paper.

You forget about supply and demand.

Ponzi is investment come from nowhere, fake investment.

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