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Bitcoin is almost exactly the opposite of a ponzi scheme: http://en.wikipedia.org/wiki/Ponzi_scheme http://en.wikipedia.org/wiki/Ponzi_scheme "A Ponzi scheme

Bitcoin is almost exactly the opposite of a ponzi scheme: http://en.wikipedia.org/wiki/Ponzi_scheme http://en.wikipedia.org/wiki/Ponzi_scheme "A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the individual or organization running the operation. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent." There is no controlling operator paying out investors and there is no claim that a bit coin is going to generate any sort of profits in the form of interest or capital appreciation. The short term returns have been unusually inconsistent. You can say that bitcoin is in a bubble, you can criticize it as a currency, you can criticize its social goals, you can criticize its technical implementation, but to call it a ponzi scheme is blatantly incorrect. That Roubini, one of the very few mainstream economists to predict the 2008 collapse, is so imprecise with his language gives some indication of the state of todays economics profession.

splintercell 13y ago
Any rising investment, if seen in a proper timeframe(with proper rationale) could appear to be a Ponzi scheme. For example between Feb 2009 to Sept 2012 the price of Apple stock went from $100 to $700. Did the profits of Apple go to 7 times in this time? Not really. But if you were to only see Apple's stock in this timeframe, AND don't understand Apple's business model, but merely heard that Apple's stock is rising and you should invest in it, then it would appear that older investors are being paid off at the expense of the newer investors. Noriel Roubini could also very specifically perceive the question about bitcoin as "I heard a lot of my friends are getting rich through bitcoin, should I invest in bitcoin to profit from it?", and then he gives the answer that he gave.
- andrewla 13y ago
  > Any rising investment, if seen in a proper timeframe(with proper rationale) could appear to be a Ponzi scheme. I know you're not disagreeing with the grandparent post here, fundamentally, but this really irks me. A Ponzi scheme is a particular type of scam that is pretty well defined. > ... it would appear that older investors are being paid off at the expense of the newer investors I guess this is the core of it; the definition uses the passive voice and thus is open to this interpretation. I think it's clear, both historically and looking at examples, that the definition would be more clear as: A Ponzi scheme is a fraudulent investment operation, where the operator pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the operator. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Here I've modified the language slightly (and I've edited the wikipedia page as well, but we'll see if that holds up). In the Apple example, there is no operator, so there's really no chance that it is a Ponzi scheme. Similarly for the Bitcoin case. You can make the argument that Bitcoin (or Apple stock) is a scam of some sort; a "pump and dump" seems the most apt analogue. Calling it a Ponzi scheme seems an invitation to this exact kind of semantic tomfoolery that I'm posting here.

splintercell 13y ago

Any rising investment, if seen in a proper timeframe(with proper rationale) could appear to be a Ponzi scheme. For example between Feb 2009 to Sept 2012 the price of Apple stock went from $100 to $700. Did the profits of Apple go to 7 times in this time? Not really. But if you were to only see Apple's stock in this timeframe, AND don't understand Apple's business model, but merely heard that Apple's stock is rising and you should invest in it, then it would appear that older investors are being paid off at the expense of the newer investors. Noriel Roubini could also very specifically perceive the question about bitcoin as "I heard a lot of my friends are getting rich through bitcoin, should I invest in bitcoin to profit from it?", and then he gives the answer that he gave.

andrewla 13y ago
> Any rising investment, if seen in a proper timeframe(with proper rationale) could appear to be a Ponzi scheme. I know you're not disagreeing with the grandparent post here, fundamentally, but this really irks me. A Ponzi scheme is a particular type of scam that is pretty well defined. > ... it would appear that older investors are being paid off at the expense of the newer investors I guess this is the core of it; the definition uses the passive voice and thus is open to this interpretation. I think it's clear, both historically and looking at examples, that the definition would be more clear as: A Ponzi scheme is a fraudulent investment operation, where the operator pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the operator. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Here I've modified the language slightly (and I've edited the wikipedia page as well, but we'll see if that holds up). In the Apple example, there is no operator, so there's really no chance that it is a Ponzi scheme. Similarly for the Bitcoin case. You can make the argument that Bitcoin (or Apple stock) is a scam of some sort; a "pump and dump" seems the most apt analogue. Calling it a Ponzi scheme seems an invitation to this exact kind of semantic tomfoolery that I'm posting here.