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Well it is not a ponzi in the sense that there is no organiser and no promise of an underlying profitable enterprise. It has become, functionally, a decentrali

Well it is not a ponzi in the sense that there is no organiser and no promise of an underlying profitable enterprise. It has become, functionally, a decentralized pyramid scheme. Let's look at some of the criteria reviewed in the article. - Investment Returns: Not Promised The promise is peer to peer: players convince each other of investment returns and almost all players (that remain) are there because they believe in that promise. Once the last dude who wanted to buy pizza without giving Visa or Mastercard a cut has left the room... - Open Source: The Opposite of Secrecy Yes but that the mechanism of redistribution is (partially) in the open does not invalidate that something is a ponzi or a pyramid scheme. The openness is also partial, Bitcoin is still pseudonymous enough that we know what moves but not always who and why. - No Pre-Mine Early mining with exponential reduction in block reward is functionally equivalent to a pre-mine: the founder(s) have a considerable advantage. A bit more open but then one can also usually do well by buying early on the secondary market an explicitly premined coin that later becomes successful (e.g. ethereum). It's effectively a more elegant way to do a premine with nice deniability (harder to get caught for doing a security offering). - Leaderless Growth Yes it's decentralized. A decentralized pyramid scheme remains a pyramid scheme. It's not an intrinsic property of the tech but of the social happenings around it. (Many altcoins that are other instances of the same code have failed to get traction and become pyramid schemes.)

wmanley 5y ago
I don't know why you're being downvoted: You've hit the nail on the head - Bitcoin is a Pyramid scheme, not a Ponzi scheme. I've been seeing comparisons to Ponzi schemes a lot in the last few weeks. AFAICS "Bitcoin as Ponzi scheme" is a useful strawman for pro-bitcoin arguments because it's so easily defeated. Bitcoin as Pyramid scheme is a much stronger argument, with far fewer articles dedicated to it.
mattwilsonn888 5y ago
What you're saying is kind of true, but it lacks a fundamental understanding how what makes the Bitcoin network valuable. The first and foremost is security. Security in Bitcoin is a direct function of hashpower: the higher the hashpower, the more expensive a re-organization attack is and the sooner you can 'trust' newly appended blocks. The longer one has to wait to be sure a 51% attack hasn't occurred the less valuable the network is. Secondly is scarcity. Bitcoin has a set number of coins which will exist and one of the strongest promises in the world that it will not change. This gives rational reason to hold on to Bitcoin in favor of 'objects of value' which are inflating or have the possibility of inflating. You can always bring up the fact that traders want to sell higher than they bought and will communicate nefariously if it helps them achieve that goal. That is true for any asset. The misconception in your reading is that Bitcoin only derives value expected future returns, which as I have demonstrated is not true. What can often be confusing to wrap one's head around is that the more Bitcoin is worth in terms of mining cost (dollars currently), the more security it will have; the value goes up with the price, which for many doesn't pass a certain, unsophisticated smell test regarding scams. If it sets off your alarms, refer back to where the value is coming from. You may not believe what gives Bitcoin its value is actually valuable, but, that's, just like, your opinion, man.

wmanley 5y ago

I don't know why you're being downvoted: You've hit the nail on the head - Bitcoin is a Pyramid scheme, not a Ponzi scheme. I've been seeing comparisons to Ponzi schemes a lot in the last few weeks. AFAICS "Bitcoin as Ponzi scheme" is a useful strawman for pro-bitcoin arguments because it's so easily defeated. Bitcoin as Pyramid scheme is a much stronger argument, with far fewer articles dedicated to it.

mattwilsonn888 5y ago

What you're saying is kind of true, but it lacks a fundamental understanding how what makes the Bitcoin network valuable. The first and foremost is security. Security in Bitcoin is a direct function of hashpower: the higher the hashpower, the more expensive a re-organization attack is and the sooner you can 'trust' newly appended blocks. The longer one has to wait to be sure a 51% attack hasn't occurred the less valuable the network is. Secondly is scarcity. Bitcoin has a set number of coins which will exist and one of the strongest promises in the world that it will not change. This gives rational reason to hold on to Bitcoin in favor of 'objects of value' which are inflating or have the possibility of inflating. You can always bring up the fact that traders want to sell higher than they bought and will communicate nefariously if it helps them achieve that goal. That is true for any asset. The misconception in your reading is that Bitcoin only derives value expected future returns, which as I have demonstrated is not true. What can often be confusing to wrap one's head around is that the more Bitcoin is worth in terms of mining cost (dollars currently), the more security it will have; the value goes up with the price, which for many doesn't pass a certain, unsophisticated smell test regarding scams. If it sets off your alarms, refer back to where the value is coming from. You may not believe what gives Bitcoin its value is actually valuable, but, that's, just like, your opinion, man.