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Current bitcoin holders can only see gain if new "investment" (I find that term funny since it's a "security" with no fundamentals) comes in. That's pretty much

Current bitcoin holders can only see gain if new "investment" (I find that term funny since it's a "security" with no fundamentals) comes in. That's pretty much the definition of a Ponzi scheme. Perhaps somewhere someone's even running an actual Ponzi scheme using BitCoin. Sure, but that's a different question. I'm talking about new investment in a security being the only source of increased value in that security. Which is what a Ponzi scheme is.

Phil987 9y ago
Bitcoin is an alternative currency, really the only thing going up is the exchange rate.
- wickawic 9y ago
  But what makes something a currency? If in an alternate universe Bernie Madoff printed MadoffBucks and made agreements that you could use these as currency in some online stores and Pizza Hut, does that make it a real currency? Unfortunately I think the only way something becomes a currency is when a government calls it one.
  - nicky0 9y ago
    It may not be a currency, depending how you choose to define that word, but it is certainly a fungible asset and a means of exchange. It acts both as a store of value and as method of transferring value from one party to another.
- canoebuilder 9y ago
  I've not done a quantitative analysis, but it seems to have been more frequently ruled as some sort of asset or commodity https://www.google.com/search?q=bitcoin+ruled https://www.google.com/search?q=bitcoin+ruled Exchange rate, also known as 'cost,' is a form of value.
ianferrel 9y ago
>Current bitcoin holders can only see gain if new "investment" (I find that term funny since it's a "security" with no fundamentals) comes in. That's pretty much the definition of a Ponzi scheme. Equally true of most other commodities and currencies, right? If you have a gold bar, or a stack of 10 Euro notes, the only way you make money off of it is if enough more people want to buy gold/Euros that the price goes up. Neither asset does anything on its own. A critical ingredient of a Ponzi scheme is fraud.
- bandrami 9y ago
  Equally true of most other commodities and currencies, right? No; if I hold a stock I receive a dividend from the company and a vote in their governance; if I hold a bond I receive interest payments; if I hold bauxite I can use it to make whatever you make with bauxite.
  - kobeya 9y ago
    A stock or bond is neither a commodity nor a currency.
- pbh101 9y ago
  The price of a traded item can go up, even with no investment: people do not have to trade for the price to increase or decrease. Sometimes price movements coincide with lots of actual trades occurring, and sometimes they coincide with very few/no trades occurring. The latter happens once in awhile. Taken to the extreme to illustrate: if everyone together today instantly decided each bitcoin was worth $1b, then in that first instant, nobody would sell and no trades would occur, but the price would be very different.
  - muti 9y ago
    If the price is determined by how much someone is willing to buy or sell for, how do you determine the price when there are no trades being made? How does simply deciding 1 bitcoin is worth $1b effect the value of bitcoin if no one is willing to buy at that price?
kaffeemitsahne 9y ago
The definition of ponzi scheme is a scheme where dividends to early investors are paid using the investments of later investors. That's a significant difference from simply an appreciation in value. By your logic, precious metals could also be ponzi schemes.
- bandrami 9y ago
  Precious metals have absolutely been operated as Ponzi schemes before (remember the dude who pump & dumped the silver market in the 70s?)
  - guardiangod 9y ago
    Are you saying the silver market behaved as a Ponzi scheme? No. A person was using the silver market as a ponzi scheme vehicle, it doesn't mean the silver market itself was a ponzi scheme. Same as Bitcoin here. A devious actor could use Bitcoin as the product for a ponzi scheme, that doesn't mean bitcoin is a ponzi scheme as much as the tulip bulb market itself is a ponzi scheme.
tetrep 9y ago
> Current bitcoin holders can only see gain if new "investment" (I find that term funny since it's a "security" with no fundamentals) comes in. That's pretty much the definition of a Ponzi scheme. That's 1/2 a Ponzi scheme, the other 1/2 is an entity promising you a return. I think you'd need to commit some fraud along the way too. If someone said "For every 5 dollars given to me, I will provide a share, and dispense 1/(2*N) dollars to all other shareholders, where N is the number of other shareholders (N=0 for the first donation, 1 for the second, etc)." Would that be a Ponzi scheme? There's no fraud, so I don't think it would be, despite having identical mechanics.
jerf 9y ago
"I'm talking about new investment in a security being the only source of increased value in that security. Which is what a Ponzi scheme is." That is not a Ponzi scheme. A Ponzi scheme is giving someone payouts on their investment funded solely from people putting the money in, while fraudulently telling them that the money is coming from real investment. You can't have a Ponzi scheme when on average both sides of the transaction are (generally) aware of the situation and aware of how the value is flowing, because you lack the fraudulent aspect. Also, for any given transaction, value is flowing instantaneously; when someone sells their bitcoin, they aren't getting paid in funds being fraudulently kept aside from somebody else's previous purchases. It's an instant commodity exchange. Again, in a nutshell, the reason why this doesn't fall afoul of laws against Ponzi schemes is that it simply isn't one.

Phil987 9y ago

Bitcoin is an alternative currency, really the only thing going up is the exchange rate.

wickawic 9y ago
But what makes something a currency? If in an alternate universe Bernie Madoff printed MadoffBucks and made agreements that you could use these as currency in some online stores and Pizza Hut, does that make it a real currency? Unfortunately I think the only way something becomes a currency is when a government calls it one.
- nicky0 9y ago
  It may not be a currency, depending how you choose to define that word, but it is certainly a fungible asset and a means of exchange. It acts both as a store of value and as method of transferring value from one party to another.
canoebuilder 9y ago
I've not done a quantitative analysis, but it seems to have been more frequently ruled as some sort of asset or commodity https://www.google.com/search?q=bitcoin+ruled https://www.google.com/search?q=bitcoin+ruled Exchange rate, also known as 'cost,' is a form of value.

ianferrel 9y ago

>Current bitcoin holders can only see gain if new "investment" (I find that term funny since it's a "security" with no fundamentals) comes in. That's pretty much the definition of a Ponzi scheme. Equally true of most other commodities and currencies, right? If you have a gold bar, or a stack of 10 Euro notes, the only way you make money off of it is if enough more people want to buy gold/Euros that the price goes up. Neither asset does anything on its own. A critical ingredient of a Ponzi scheme is fraud.

bandrami 9y ago
Equally true of most other commodities and currencies, right? No; if I hold a stock I receive a dividend from the company and a vote in their governance; if I hold a bond I receive interest payments; if I hold bauxite I can use it to make whatever you make with bauxite.
- kobeya 9y ago
  A stock or bond is neither a commodity nor a currency.
pbh101 9y ago
The price of a traded item can go up, even with no investment: people do not have to trade for the price to increase or decrease. Sometimes price movements coincide with lots of actual trades occurring, and sometimes they coincide with very few/no trades occurring. The latter happens once in awhile. Taken to the extreme to illustrate: if everyone together today instantly decided each bitcoin was worth $1b, then in that first instant, nobody would sell and no trades would occur, but the price would be very different.
- muti 9y ago
  If the price is determined by how much someone is willing to buy or sell for, how do you determine the price when there are no trades being made? How does simply deciding 1 bitcoin is worth $1b effect the value of bitcoin if no one is willing to buy at that price?

kaffeemitsahne 9y ago

The definition of ponzi scheme is a scheme where dividends to early investors are paid using the investments of later investors. That's a significant difference from simply an appreciation in value. By your logic, precious metals could also be ponzi schemes.

bandrami 9y ago
Precious metals have absolutely been operated as Ponzi schemes before (remember the dude who pump & dumped the silver market in the 70s?)
- guardiangod 9y ago
  Are you saying the silver market behaved as a Ponzi scheme? No. A person was using the silver market as a ponzi scheme vehicle, it doesn't mean the silver market itself was a ponzi scheme. Same as Bitcoin here. A devious actor could use Bitcoin as the product for a ponzi scheme, that doesn't mean bitcoin is a ponzi scheme as much as the tulip bulb market itself is a ponzi scheme.

tetrep 9y ago

> Current bitcoin holders can only see gain if new "investment" (I find that term funny since it's a "security" with no fundamentals) comes in. That's pretty much the definition of a Ponzi scheme. That's 1/2 a Ponzi scheme, the other 1/2 is an entity promising you a return. I think you'd need to commit some fraud along the way too. If someone said "For every 5 dollars given to me, I will provide a share, and dispense 1/(2*N) dollars to all other shareholders, where N is the number of other shareholders (N=0 for the first donation, 1 for the second, etc)." Would that be a Ponzi scheme? There's no fraud, so I don't think it would be, despite having identical mechanics.

jerf 9y ago

"I'm talking about new investment in a security being the only source of increased value in that security. Which is what a Ponzi scheme is." That is not a Ponzi scheme. A Ponzi scheme is giving someone payouts on their investment funded solely from people putting the money in, while fraudulently telling them that the money is coming from real investment. You can't have a Ponzi scheme when on average both sides of the transaction are (generally) aware of the situation and aware of how the value is flowing, because you lack the fraudulent aspect. Also, for any given transaction, value is flowing instantaneously; when someone sells their bitcoin, they aren't getting paid in funds being fraudulently kept aside from somebody else's previous purchases. It's an instant commodity exchange. Again, in a nutshell, the reason why this doesn't fall afoul of laws against Ponzi schemes is that it simply isn't one.