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Author Topic: Discussion re: "Is BitCoin a Ponzi or pyramid scheme? (Newbie-Friendly)"  (Read 2432 times)
steelhouse
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May 10, 2011, 06:33:52 PM
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It might be.  It is designed to have only 21 million coins.  But who knows if there is a flaw in the system.  Also, if the government takes it down, then yes it is a ponzi scheme.
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rezin777
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May 10, 2011, 06:41:23 PM
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It might be.  It is designed to have only 21 million coins.  But who knows if there is a flaw in the system.  Also, if the government takes it down, then yes it is a ponzi scheme.

No. It is impossible for bitcoin to be a ponzi scheme. A ponzi scheme by definition involves fraud. There is no fraud in investing in bitcoin. No one is promising a return.

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May 10, 2011, 06:44:45 PM
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It might be.  It is designed to have only 21 million coins.  But who knows if there is a flaw in the system.  Also, if the government takes it down, then yes it is a ponzi scheme.
No, then it's a failed currency, not a ponzi scheme.

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barbarousrelic
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May 10, 2011, 06:50:02 PM
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From Wikipedia's article on Ponzi Scheme:

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A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors . . . The system is destined to collapse because the earnings, if any, are less than the payments to investors.

Bitcoin does not, never has, and never will pay returns, therefore it cannot be a Ponzi scheme. It may be a bubble, but that is completely different.

From the same article:

Quote
A bubble is similar to a Ponzi scheme in that one participant gets paid by contributions from a subsequent participant (until inevitable collapse), but it is not the same as a Ponzi scheme. A bubble involves ever-rising prices in an open market (for example stock, housing, or tulip bulbs) where prices rise because buyers bid more because prices are rising. Bubbles are often said to be based on the "greater fool" theory. As with the Ponzi scheme, the price exceeds the intrinsic value of the item, but unlike the Ponzi scheme, there is no person misrepresenting the intrinsic value. With the greater fool theory in mind, some may invest even though they believe the securities are overpriced due to a bubble.

Do not waste your time debating whether Bitcoin can work. It does work.

"Early adopters will profit" is not a sufficient condition to classify something as a pyramid or Ponzi scheme. If it was, Apple and Microsoft stock are Ponzi schemes.

There is no such thing as "market manipulation." There is only buying and selling.
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May 10, 2011, 06:53:28 PM
 #5

It might be.  It is designed to have only 21 million coins.  But who knows if there is a flaw in the system.  Also, if the government takes it down, then yes it is a ponzi scheme.

Erm, when the g-men took down Osama did he turn into a ponzi?

Also Bitcoin never has more than 21M coins if a system you are in ever has more you aren't using Bitcoin. It's like saying a circle might have a flat part. It just doesn't, if the shape you've got has a flat part, it isn't a circle.

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kgo
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May 10, 2011, 06:56:26 PM
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Yes, it's a VERY high risk investment at this point in time.  Bitcoins might be worth less than Confederate Currency a year from now.  They might settle down on some real value that is much less than the current value of $5 per coin.  As Yogi Berra said, "Predicting is hard, especially the future."  You need to keep this in mind when considering any high risk investment.

But it's not a Ponzi scheme or a pyramid scheme.
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May 10, 2011, 07:08:41 PM
 #7

This is a newbie question and answer thread, not an opinion and commentary thread.  If you want to discuss this topic, start your own thread.  Will a mod please move/delete these posts?  Guidelines for posting were clearly labelled in the OP.

Suggestions for modification of the OP are also welcome, but they need to occur in another thread:  preferably on meta if they are serious considerations and/or analysis.


Edit:  Split this into its own discussion.  Carry on, all!

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May 10, 2011, 07:58:26 PM
 #8

Unlike either of these situations, BitCoin has no person "at the top" who collects money paid for bitcoins
That's true. But there are people who stand to gain a huge profit if Bitcoin succeeds, namely those who got in early and hoarded a nice sum of bitcoins when they were cheap. This fact might reinforce the impression that Bitcoin is some sort of Ponzi/Pyramid. I think the OP should address this point and explain why this is ok.

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Iceredwing
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May 22, 2011, 01:16:49 PM
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Unlike either of these situations, BitCoin has no person "at the top" who collects money paid for bitcoins
That's true. But there are people who stand to gain a huge profit if Bitcoin succeeds, namely those who got in early and hoarded a nice sum of bitcoins when they were cheap. This fact might reinforce the impression that Bitcoin is some sort of Pozni/Pyramid. I think the OP should address this point and explain why this is ok.

It's just a nature of getting involved early giving higher return in investment. If their success comes from directly the pockets of the newly involved individuals then it would be wrong and be considered a Ponzi. If you know what a Ponzi is, you know that this is the defining difference. Although I guess there is nothing wrong with defining Ponzi a bit if that needs more clarification.
barbarousrelic
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May 22, 2011, 01:28:14 PM
 #10

Unlike either of these situations, BitCoin has no person "at the top" who collects money paid for bitcoins
That's true. But there are people who stand to gain a huge profit if Bitcoin succeeds, namely those who got in early and hoarded a nice sum of bitcoins when they were cheap. This fact might reinforce the impression that Bitcoin is some sort of Pozni/Pyramid. I think the OP should address this point and explain why this is ok.

"Someone profits" is not a sufficient condition to classify something as a pyramid scheme or a Ponzi scheme. For example, every company ever made operates with the intent to make profit for shareholders.

Do not waste your time debating whether Bitcoin can work. It does work.

"Early adopters will profit" is not a sufficient condition to classify something as a pyramid or Ponzi scheme. If it was, Apple and Microsoft stock are Ponzi schemes.

There is no such thing as "market manipulation." There is only buying and selling.
benjamindees
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May 22, 2011, 06:46:29 PM
 #11

http://www.youtube.com/watch?v=WAyHIOg5aHk#t=0m45s

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jm
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May 23, 2011, 03:45:00 AM
 #12

Total scam! Big sophistciated operation to lure people in with talk of oversized gains. Yeah, right, $2.6 million/bit coin. Good luck, suckers. More like 2.6 cents as soon as everyone sells.
rezin777
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May 23, 2011, 03:53:14 AM
 #13

Total scam! Big sophistciated operation to lure people in with talk of oversized gains. Yeah, right, $2.6 million/bit coin. Good luck, suckers. More like 2.6 cents as soon as everyone sells.

I'll give you triple (7.8 cents per Bitcoin) what you think they are worth, if you have any to sell. After all, I don't want you to get scammed.
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