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Eh, I'm comfortable calling Bitcoin a Ponzi scheme because all profits extracted by early investors come from later investors. That's, like, a very specific an
by saalweachter 6y ago
Eh, I'm comfortable calling Bitcoin a Ponzi scheme because all profits extracted by early investors come from later investors.
That's, like, a very specific and applicable definition.
- kolinko 6y agoSo you just redefined a the name „Ponzi” to mean something else than the commonly accepted definition.
- saalweachter 6y agoHere, let me google that for you: https://www.google.com/search?q=ponzi+scheme+definition https://www.google.com/search?q=ponzi+scheme+definition Pon·zi scheme /ˈpänzē ˌskēm/ noun a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
- 8fGTBjZxBcHq 6y agoWell you used to be able to buy drugs and child porn with it so it's not a nonexistent enterprise. /s
- quchen 6y agoPonzi is also derogatory. You should not dismiss the fact that Bitcoin kicked off blockchain as a technology, got a lot of people into a sort of financial playground, had questionable value and utility initially, and all that. All that considered, you might still call it a Ponzi scheme if you really wanted to, but it certainly isn’t only a Ponzi scheme.
- diarrhea 6y ago> Bitcoin kicked off blockchain as a technology "Started at the bottom, now we a little bit above the bottom"
- karpour 6y agoPretty spot-on! I think it's fair to call Bitcoin a ponzi scheme, it is not and will not be a stable currency, it's value isn't backed by anything and it needs constant new investment to work at all.
- shawnz 6y agoThere is no nonexistent enterprise in this case. Nobody is claiming that the returns of cryptocurrency speculators are coming from a business venture.
- hctaw 6y agothe nonexistent enterprise is the use of bitcoin as a medium of exchange
- shawnz 6y agoBitcoin actually functions as a medium of exchange and that's not an enterprise anyway. Is there an expectation that by buying Bitcoins, you are funding the growth of a business which creates profits by using your investment, and those profits are where your investment return is coming from? If that's not the case, then it isn't a Ponzi scheme.
- saalweachter 6y agoYeah, but ... I am constantly told that Bitcoin (et al) is the future, that it is revolutionary, that it is going to be big in some way -- that it will replace "fiat" currencies, for instance, although the exact way it is going to be big has changed over time. That some people are making money hand over fist by investing is then used as proof that it is a good investment. That the fake enterprise is just lazy meta-financial-jargon rather than a more effort-full fake building project or an imaginary hedge fund with fake books and blueprints and a fancy office and whatnot isn't enough to make the definition inaccurate IMO. Quacks like a duck, etc.
- shawnz 6y agoMisleading people about the power of a technology doesn't make something a Ponzi scheme. You need to mislead investors about the origin of their returns. Purposeful speculation isn't a Ponzi scheme even if the speculators were misled about the thing they are speculating on.
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- tim333 6y agoThat's not really a good definition, dragged up by the Google bot without a link to the source. It says "Definitions from Oxford Languages" but I'm having a job finding where that was from. https://www.oxfordlearnersdictionaries.com/definition/english/ponzi-scheme https://www.oxfordlearnersdictionaries.com/definition/englis... was kind of similar and has " a plan for making money that involves encouraging people to invest by offering them a high rate of interest and using their money to pay earlier investors. When there are not enough new investors, people who have recently invested lose their money." which I think is what is usually meant by a ponzi scheme and is different from bitcoin. Even with your definition bitcoin doesn't really fit: "form of fraud" - bitcoin was completely open about what you were getting from the start "nonexistent enterprise" - the first and largest decentralized digital payments system. The more legit complaint is the enterprise is wrecking the environment more than it doesn't exist.
- saalweachter 6y agoI'll admit, Ponzi schemes could be considered centralized by definition. It might be more accurate to describe it as a pyramid scheme -- because investors become a part of the scheme, actively seeking more investors from whom they hope to recoup their investment -- or a pump-and-dump, focusing on the market component. Re: Bitcoin as a digital payments, my complaint there would be that Bitcoin is not structured to return transaction fees to people buying Bitcoin as an investment.
- Ekaros 6y agoI don't think Bitcoin is any type of scheme. It's just a typical bubble. As a new asset class. Nothing special or schemis about it.
- Hallucinaut 6y agoPossibly fair to exclude Bitcoin from that definition, being the first and essentially a research project let loose... but what about 1000+ dead coins?
- JMTQp8lwXL 6y agoThat's how the stock market works as well.
- saalweachter 6y agoThere is certainly zero-sum speculation within the stock market, dwarfing that in Bitcoin, sure, but the S&P 500 also pays out half a trillion dollars in dividends a year, and buys back a similar amount of stock from the profits of the actual businesses being invested in through the stock market. A trillion dollars a year funneling from business profits to investors is the difference between the S&P 500 and Bitcoin.
- minwcnt5 6y agoGold might be a better example then.
- saalweachter 6y agoEh, gold is probably more analogous to houses. The current price is largely a product of the speculation in the market, but at the same time ... a lot of people buy houses just because they want to live in them. So you have people buying houses at two, three times the price they'd be paying without the pure real estate investors speculating up the price, but at the same time, they're just buying them because they want a house and will pay the absurd price. Likewise, there's a huge amount of speculation in the gold market, and that's probably what defines the price of gold, but at the same time, something like 50% of newly-mined gold goes to make jewelry, and most people buy it because they want it, even though [or because] it is over-priced, and they aren't buying it as an investment, just a pretty thing to have. That doesn't mean that gold or houses are good investments, or that the markets aren't going to crash to a tenth of their current valuations next month or ten years from now, but it does mean there is a second component to the market -- you have speculators interacting with consumers, and the speculators can extract money from consumers who will buy the underlying good even at a bad price. (Oddly, I'd say house buyers are more-expecting to get the money they invested back at some time in the future, compared to gold jewelry buyers.) [But what do I know, I'm just a jerk on the internet saying things.]
- paulgb 6y agoIn the book Lying for Money (which I recommend to anyone), Dan Davies makes the point that “paying off early investors with later investor’s money” isn’t sufficient to make something a Ponzi because that’s really the nature of nearly all financial fraud (cheque kiting, for example). I think we agree on the mechanism at play though, it’s just a semantic distinction.
- loceng 6y agoDoes he discuss MLM schemes?
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- jaredtn 6y agoThis is how literally every financial asset works. If you want to make a customer cash-flow argument, Ethereum has $9B of ARR. Same story.