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In a ponzi scheme, there is a fictitious business model that's purported to be turning a profit, and its lack of profit is hidden by secretly using new inflows

In a ponzi scheme, there is a fictitious business model that's purported to be turning a profit, and its lack of profit is hidden by secretly using new inflows to pay off old investors. In crypto, none of that is hidden. It's widely known that dollars cashed out by earlier investors come from the coffers of later investors. Since e.g. Bitcoin doesn't deceive people about being a profitable company, it's by definition not a ponzi scheme. It's important to use this terminology correctly.

lamontcg 4y ago
"It can't be a Ponzi because they're honest about it being a scam right up front"
- everfree 4y ago
  That's how the definition works, yes. By the way, who is the "they" that your sentence refers to?
- JamesianP 4y ago
  well you have to draw a line somewhere. Call it something else if you want to criticize it. Like a bunch of fools racing towards a cliff. But if they're honest about something being a scam how can it be a scam? Seems like a paradox.
  - lamontcg 4y ago
    Literally only a paradox in places like Hacker News by people who are motivated to question calling crypto a Ponzi. I've got bad news. It is still a Ponzi if people are "honest" about it being a Ponzi, it is still a Ponzi if it started out as an investment idea and it went Ponzi as losses added up. Arguing that clear Ponzis aren't really Ponzis due to some kind of semantic rules is a gigantic display of "copium". The only real difference is the distributed and decentralized nature of the scams. And the CEO of JPMorgan has described crypto coins exactly as a "distributed Ponzi scheme" before Congress. If you wind up paying out redemptions with new deposits as fast as you can, right before you fail hard, then it was a Ponzi all along. That's it. That's the definition.
    - JamesianP 4y ago
      Do you consider social security, or for that matter all government tax and welfare systems which depend on growth via immigration to be ponzi schemes too? Why do you believe it is bad news to me? It's just semantics.
    - everfree 4y ago
      > It is still a Ponzi if people are "honest" about it being a Ponzi It literally isn't. Please go back to the definition, which requires a specific type of deception. If you wished, perhaps you could call crypto some kind of gamble, confidence game, or other category of scam. > Arguing that clear Ponzis aren't really Ponzis due to some kind of semantic rules is a gigantic display of "copium". From your tone it seems like you think I'm trying to defend crypto in this thread. I'm not. I'm trying to defend the meaning of a precise and descriptive term so that it doesn't get watered down to the point of being synonymous with "scam". Because if that were to happen, we would lose a useful phrase in the English language. It really ticks me off when people knowingly use terminology incorrectly like this out of anger. Just call crypto a scam or a con if you want. There's no need to let your anger leave a mark on the English language itself. > And the CEO of JPMorgan has described crypto coins exactly as a "distributed Ponzi scheme" before Congress. Well he was using the term "ponzi scheme" incorrectly then, and should have used a more general term like "scam". Really, this isn't hard. Just read the definition. It's also worth noting that JPMorgan executed their first trade on a public ("crypto coin") blockchain last week, so maybe he ended up changing his mind? Or maybe there's some internal consistency with JPMorgan investing effort in things they believe to be ponzi schemes - I'm not one to try to make that distinction. > If you wind up paying out redemptions with new deposits as fast as you can, right before you fail hard, then it was a Ponzi all along. That's it. That's the definition. That's not even how cryptocurrency works. Not even beanie babies or tulips worked like that.
      - lamontcg 4y ago
        Cite that definition. And that is how cryptocurrencies work. There's net inflows of currency, and net outflows of currency and there is a systemic bank balance at any one time of currency. If outflows exceed inflows for long enough then the balance is drained to zero and the music stops. That is a Ponzi. Madoff's Ponzi worked up until the 2008 recession hit him with redemptions and outflows and his bank balance got drained.
- paulgb 4y ago
  Saying it’s not a Ponzi doesn’t mean everfree is defending it, it’s just useful to have precise definitions about these things.

lamontcg 4y ago

"It can't be a Ponzi because they're honest about it being a scam right up front"

everfree 4y ago
That's how the definition works, yes. By the way, who is the "they" that your sentence refers to?
JamesianP 4y ago
well you have to draw a line somewhere. Call it something else if you want to criticize it. Like a bunch of fools racing towards a cliff. But if they're honest about something being a scam how can it be a scam? Seems like a paradox.
- lamontcg 4y ago
  Literally only a paradox in places like Hacker News by people who are motivated to question calling crypto a Ponzi. I've got bad news. It is still a Ponzi if people are "honest" about it being a Ponzi, it is still a Ponzi if it started out as an investment idea and it went Ponzi as losses added up. Arguing that clear Ponzis aren't really Ponzis due to some kind of semantic rules is a gigantic display of "copium". The only real difference is the distributed and decentralized nature of the scams. And the CEO of JPMorgan has described crypto coins exactly as a "distributed Ponzi scheme" before Congress. If you wind up paying out redemptions with new deposits as fast as you can, right before you fail hard, then it was a Ponzi all along. That's it. That's the definition.
  - JamesianP 4y ago
    Do you consider social security, or for that matter all government tax and welfare systems which depend on growth via immigration to be ponzi schemes too? Why do you believe it is bad news to me? It's just semantics.
  - everfree 4y ago
    > It is still a Ponzi if people are "honest" about it being a Ponzi It literally isn't. Please go back to the definition, which requires a specific type of deception. If you wished, perhaps you could call crypto some kind of gamble, confidence game, or other category of scam. > Arguing that clear Ponzis aren't really Ponzis due to some kind of semantic rules is a gigantic display of "copium". From your tone it seems like you think I'm trying to defend crypto in this thread. I'm not. I'm trying to defend the meaning of a precise and descriptive term so that it doesn't get watered down to the point of being synonymous with "scam". Because if that were to happen, we would lose a useful phrase in the English language. It really ticks me off when people knowingly use terminology incorrectly like this out of anger. Just call crypto a scam or a con if you want. There's no need to let your anger leave a mark on the English language itself. > And the CEO of JPMorgan has described crypto coins exactly as a "distributed Ponzi scheme" before Congress. Well he was using the term "ponzi scheme" incorrectly then, and should have used a more general term like "scam". Really, this isn't hard. Just read the definition. It's also worth noting that JPMorgan executed their first trade on a public ("crypto coin") blockchain last week, so maybe he ended up changing his mind? Or maybe there's some internal consistency with JPMorgan investing effort in things they believe to be ponzi schemes - I'm not one to try to make that distinction. > If you wind up paying out redemptions with new deposits as fast as you can, right before you fail hard, then it was a Ponzi all along. That's it. That's the definition. That's not even how cryptocurrency works. Not even beanie babies or tulips worked like that.
    - lamontcg 4y ago
      Cite that definition. And that is how cryptocurrencies work. There's net inflows of currency, and net outflows of currency and there is a systemic bank balance at any one time of currency. If outflows exceed inflows for long enough then the balance is drained to zero and the music stops. That is a Ponzi. Madoff's Ponzi worked up until the 2008 recession hit him with redemptions and outflows and his bank balance got drained.
paulgb 4y ago
Saying it’s not a Ponzi doesn’t mean everfree is defending it, it’s just useful to have precise definitions about these things.