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I’ll give you similarities of the Bitcoin with a Ponzi scheme: From wikipedia: "A Ponzi scheme (/ˈpɒn.zi/; also a Ponzi game)[1] is a fraudulent investment ope

I’ll give you similarities of the Bitcoin with a Ponzi scheme: From wikipedia: "A Ponzi scheme (/ˈpɒn.zi/; also a Ponzi game)[1] is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading." Bitcoin's only real value is that of the chance of being adopted as currency. For it to become a currency people have to start buying bitcoins, as it is the only realistic way to get hold of them. So the only way to make value for the current holders(older invenstors) is more people buying into it(revenue paid by new investors).

alexeldeib 9y ago
It's funny, I frequently come across two views on bitcoin: the parallel you presented, and that it's not a currency but a store of wealth or other generic asset (comparable to gold). I must say I find the Ponzi framing more compelling, although I have some hope yet for Lightning/insert hot scaling idea here to improve the viability as a currency at least incrementally. As a currency, I have little hope for bitcoin in its current form. This is an area where it remains possible in my mind for an upstart coin to displace it. Some people seem to care about this; I've looked at a few niche coins that seem to care about this concept and focus on transaction speed, but none have made great progress yet.
- another-one-off 9y ago
  The gold analogy makes me so nervous. Gold has specific and permanent properties (eg, high density, an entry in the periodic table :P). Many detractors of gold claim those properties are not valuable, but it still has them and is specific and unique. Bitcoin has mathematical properties that can be 100% cloned. The only thing that makes bitcoin unique from some random bitcoin clone is that it has the backing of a big mining networks. I firmly believe that whatever value bitcoin has is tied to the size of the mining network, and by extension to the energy burned to transact bitcoins. This simply isn't close to being permanent in the same way gold is. It could potentially work like a social thing, and go the way of, eg, MySpace. I don't see how that can hold its value for a generation; the risk of current prices being a blip is still very high.
  - coralreef 9y ago
    Bitcoin can be cloned the same way Facebook can be cloned. You could spend a billion dollars copying Facebook's features and spend a billion marketing it, and you'd still fail. The mining network behind it, the developer ecosystem working on wallets/libraries/services, etc. is the hard part to copy. It's worth the most, therefore it attracts the most time and attention, which helps to maintain its value. It may not be the best from a technical standpoint, but the size of it ensures a healthy financial incentive to improve upon it, which we're seeing now with layered scaling efforts (lightning network).
derefr 9y ago
You mean a pump-and-dump scheme. A Ponzi scheme is centralized to a money-manager, with the rest of the investors remaining unaware of the scheme’s nature; a pump-and-dump scheme, meanwhile, is a distributed action by anybody and everybody who can see what’s going on and wants to join in on bilking some greater fools. Ponzi schemes are a charade behind a curtain; pump-and-dump schemes are out in the open, but illegible unless you’re looking with a cynical eye to find them.
colordrops 9y ago
Someone always makes a statement like this in every thread about bitcoin, without any evidence or reasoning to back it up. The benefits and unique aspects of cryptocurrencies have been enumerated ad infinitum, and to continue to claim that it's all a scam at this point is analogous to claiming the internet was just a scam in 1999, after it was obvious to many people that it was not. This labeling is only evidence of abject ignorance.
- noncoml 9y ago
  What do you mean without any reasoning? I gave a very precise argument on why and how I think they are similar. Why don’t you try to debunk my argument instead of a generic reply?
  - colordrops 9y ago
    Cryptocurrency has many positive values that are not replicated by any other financial instrument when taken together as a whole: * No middle man * Nearly instant transfer at low cost * Non-geographically bound * Non-governmentally bound * Potentially untraceable depending on how you use it * Incorruptible * Uncensorable * No central point of failure * Transparent and open (as in source and freedom) * Programmable and automatable * It is the first system to solve the byzantine generals problem. My point though is that anyone who has been paying at least even slight attention would know that there is a purpose and value to the design of and usage of bitcoin and other cryptocurrencies and to claim otherwise is an embarrassing display of ignorance.
    - noncoml 9y ago
      My argument was specific to Bitcoin, not against cryptocurrency as a technology.
      - colordrops 9y ago
        Everything I said applies to Bitcoin, which is arguably the most legitimate instance of cryptocurrency.
nercht12 9y ago
Similar indeed, although you could sell something for Bitcoin and thus get ahold of it. What you sell in comparison with its value against other currencies influences the value of the Bitcoin. I suspect the creators of Bitcoin expected Bitcoin value to come from people selling for Bitcoin. After all, it would be useless without that.
tlrobinson 9y ago
But where is the fraud? Anyone can do their own research and come to conclusions about the future valuation of Bitcoin.
- Someone1234 9y ago
  "Victims should research before they're taken advantage of" isn't a very moral argument. I prefer to think of Bitcoin as a pyramid scheme, if we look at the definition of that: "A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services." That's all Bitcoin has become, you buy in, then spend your time convincing others to do the same to increase your investment. If a technical flaw is found in Bitcoin the whole thing will collapse like a house of cards (or just collapse from the weight of ever increasing transaction fees).
  - tlrobinson 9y ago
    I'm arguing that Bitcoin is not a "Ponzi scheme", which has a specific meaning, not that it's not a bad investment.
tmh88j 9y ago
>I’ll give you similarities of the Bitcoin with a Ponzi scheme: A ponzi scheme implies the underlying "business" doesn't have value, or at least not worth the value which it claims to generate. Just to pick the low hanging fruit to keep things simple, Bitcoin proved it has value on the dark web. That alone doesn't show it has mainstream value, but it contradicts your definition of it being a ponzi scheme. Just to throw some mainstream value in the mix, what do you think of blockchain smart contracts and their position relative to mainstream financial institutions for escrow services?
- laci27 9y ago
  The underlying "business" = technology of bitcoin DOES NOT HAVE VALUE. The blockchain is good in theory, not in practice. Smart contracts?? look behind the buzz and please tell me what business uses it? If I have to make a shipment of goods somewhere, what company does do you think will pay in advance ..cause you know.. we have a smart contract that releases the funds when the merchandise arrives at the destination..I don't know what you do for a living, but for sure you are not in business, as 'prepaid' contracts are not how the world works.. As escrow service, it does work, I'll give that to you, but when you consider how many ETH contracts were hacked just this year. .. I would rather pay the fee to an offline escrow than risk losing everything to North Korean hackers....
  - tmh88j 9y ago
    JPMorgan recently launched Quorom, which is a smart contract payment network built on Ethereum. Blockchain as a functioning technology is still brand new and in its infancy, no kidding it doesn’t have widespread use yet. It’s not just an upgrade to an existing system, like dynamic webpages, it’s an entirely new industry. It’s not going to be a rapid overnight adoption by mainstream businesses.
avenoir 9y ago
I don't think it's a ponzi scheme, but some projects built on it, such as BitConnect, most likely are. I think Bitcoin is the 1st generation of cryptocurrency which should've either died a long time ago and replaced with the 2nd generation like Ethereum or evolved to Bitcoin v2. Instead, perhaps due to lack of competition for a period of time, it became a massive speculative bubble and amassed enough money that it's now too big to fail. So it just keeps on growing, mostly on hype and irrational investments from the influx of new people, and it's doing it so fast that its effectiveness and usability have become largely irrelevant for most general use cases.

alexeldeib 9y ago

It's funny, I frequently come across two views on bitcoin: the parallel you presented, and that it's not a currency but a store of wealth or other generic asset (comparable to gold). I must say I find the Ponzi framing more compelling, although I have some hope yet for Lightning/insert hot scaling idea here to improve the viability as a currency at least incrementally. As a currency, I have little hope for bitcoin in its current form. This is an area where it remains possible in my mind for an upstart coin to displace it. Some people seem to care about this; I've looked at a few niche coins that seem to care about this concept and focus on transaction speed, but none have made great progress yet.

another-one-off 9y ago
The gold analogy makes me so nervous. Gold has specific and permanent properties (eg, high density, an entry in the periodic table :P). Many detractors of gold claim those properties are not valuable, but it still has them and is specific and unique. Bitcoin has mathematical properties that can be 100% cloned. The only thing that makes bitcoin unique from some random bitcoin clone is that it has the backing of a big mining networks. I firmly believe that whatever value bitcoin has is tied to the size of the mining network, and by extension to the energy burned to transact bitcoins. This simply isn't close to being permanent in the same way gold is. It could potentially work like a social thing, and go the way of, eg, MySpace. I don't see how that can hold its value for a generation; the risk of current prices being a blip is still very high.
- coralreef 9y ago
  Bitcoin can be cloned the same way Facebook can be cloned. You could spend a billion dollars copying Facebook's features and spend a billion marketing it, and you'd still fail. The mining network behind it, the developer ecosystem working on wallets/libraries/services, etc. is the hard part to copy. It's worth the most, therefore it attracts the most time and attention, which helps to maintain its value. It may not be the best from a technical standpoint, but the size of it ensures a healthy financial incentive to improve upon it, which we're seeing now with layered scaling efforts (lightning network).

derefr 9y ago

You mean a pump-and-dump scheme. A Ponzi scheme is centralized to a money-manager, with the rest of the investors remaining unaware of the scheme’s nature; a pump-and-dump scheme, meanwhile, is a distributed action by anybody and everybody who can see what’s going on and wants to join in on bilking some greater fools. Ponzi schemes are a charade behind a curtain; pump-and-dump schemes are out in the open, but illegible unless you’re looking with a cynical eye to find them.

colordrops 9y ago

Someone always makes a statement like this in every thread about bitcoin, without any evidence or reasoning to back it up. The benefits and unique aspects of cryptocurrencies have been enumerated ad infinitum, and to continue to claim that it's all a scam at this point is analogous to claiming the internet was just a scam in 1999, after it was obvious to many people that it was not. This labeling is only evidence of abject ignorance.

noncoml 9y ago
What do you mean without any reasoning? I gave a very precise argument on why and how I think they are similar. Why don’t you try to debunk my argument instead of a generic reply?
- colordrops 9y ago
  Cryptocurrency has many positive values that are not replicated by any other financial instrument when taken together as a whole: * No middle man * Nearly instant transfer at low cost * Non-geographically bound * Non-governmentally bound * Potentially untraceable depending on how you use it * Incorruptible * Uncensorable * No central point of failure * Transparent and open (as in source and freedom) * Programmable and automatable * It is the first system to solve the byzantine generals problem. My point though is that anyone who has been paying at least even slight attention would know that there is a purpose and value to the design of and usage of bitcoin and other cryptocurrencies and to claim otherwise is an embarrassing display of ignorance.
  - noncoml 9y ago
    My argument was specific to Bitcoin, not against cryptocurrency as a technology.
    - colordrops 9y ago
      Everything I said applies to Bitcoin, which is arguably the most legitimate instance of cryptocurrency.

nercht12 9y ago

Similar indeed, although you could sell something for Bitcoin and thus get ahold of it. What you sell in comparison with its value against other currencies influences the value of the Bitcoin. I suspect the creators of Bitcoin expected Bitcoin value to come from people selling for Bitcoin. After all, it would be useless without that.

tlrobinson 9y ago

But where is the fraud? Anyone can do their own research and come to conclusions about the future valuation of Bitcoin.

Someone1234 9y ago
"Victims should research before they're taken advantage of" isn't a very moral argument. I prefer to think of Bitcoin as a pyramid scheme, if we look at the definition of that: "A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services." That's all Bitcoin has become, you buy in, then spend your time convincing others to do the same to increase your investment. If a technical flaw is found in Bitcoin the whole thing will collapse like a house of cards (or just collapse from the weight of ever increasing transaction fees).
- tlrobinson 9y ago
  I'm arguing that Bitcoin is not a "Ponzi scheme", which has a specific meaning, not that it's not a bad investment.

tmh88j 9y ago

>I’ll give you similarities of the Bitcoin with a Ponzi scheme: A ponzi scheme implies the underlying "business" doesn't have value, or at least not worth the value which it claims to generate. Just to pick the low hanging fruit to keep things simple, Bitcoin proved it has value on the dark web. That alone doesn't show it has mainstream value, but it contradicts your definition of it being a ponzi scheme. Just to throw some mainstream value in the mix, what do you think of blockchain smart contracts and their position relative to mainstream financial institutions for escrow services?

laci27 9y ago
The underlying "business" = technology of bitcoin DOES NOT HAVE VALUE. The blockchain is good in theory, not in practice. Smart contracts?? look behind the buzz and please tell me what business uses it? If I have to make a shipment of goods somewhere, what company does do you think will pay in advance ..cause you know.. we have a smart contract that releases the funds when the merchandise arrives at the destination..I don't know what you do for a living, but for sure you are not in business, as 'prepaid' contracts are not how the world works.. As escrow service, it does work, I'll give that to you, but when you consider how many ETH contracts were hacked just this year. .. I would rather pay the fee to an offline escrow than risk losing everything to North Korean hackers....
- tmh88j 9y ago
  JPMorgan recently launched Quorom, which is a smart contract payment network built on Ethereum. Blockchain as a functioning technology is still brand new and in its infancy, no kidding it doesn’t have widespread use yet. It’s not just an upgrade to an existing system, like dynamic webpages, it’s an entirely new industry. It’s not going to be a rapid overnight adoption by mainstream businesses.

avenoir 9y ago

I don't think it's a ponzi scheme, but some projects built on it, such as BitConnect, most likely are. I think Bitcoin is the 1st generation of cryptocurrency which should've either died a long time ago and replaced with the 2nd generation like Ethereum or evolved to Bitcoin v2. Instead, perhaps due to lack of competition for a period of time, it became a massive speculative bubble and amassed enough money that it's now too big to fail. So it just keeps on growing, mostly on hype and irrational investments from the influx of new people, and it's doing it so fast that its effectiveness and usability have become largely irrelevant for most general use cases.