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What is a ‘Ponzi Scheme’, you ask?

“A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers. For both Ponzi schemes and pyramid schemes, eventually there isn’t enough money to go around, and the schemes unravel.” — Investopedia

Other than using the Tulip analogy, if you want to let the world know that you are completely ignorant about Bitcoin Technology, saying “Bitcoin is a ponzi!” is your best bet. It shows a fundamental lack of ability to do basic research into something you don’t understand, before making any broad assertions about it.

When you understand the technology behind Bitcoin and the reason it was invented, you will see that it is actually the total opposite of a Ponzi scheme.

Let’s break it down:

“A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors.”

If you have not read the original proposal paper of Satoshi Nakamoto published in late 2008, you should. It’s eight pages long, quite technical, but is not too hard to digest. You’ll notice that never in that paper does it mention any kind of return on an “Investment” in Bitcoin. It never even mentions a price for one Bitcoin. It simply practically solved one of the oldest problems in computer science, the byzantine general’s problem, and thus established its value in the process. Bitcoin’s value proposition was never profit-driven, and holding Bitcoins in the early years was seen as “just for geeks” or “magic internet money”, sarcasm included.

Absolutely nothing about Bitcoin is a secret. It is one of the most open technologies in the world. It’s open source, anyone can review the code, anyone can contribute to the code, anyone can run the software voluntarily and participate in the network, and anyone can use the network without permission. The entire history of all Bitcoin transactions is visible to anyone in the world too.

It’s a total paradigm shift from any kind of financial system in the history of mankind. It’s the total opposite of a fraudulent investing scam, which is shrouded in vague promises of high returns with capital inflows and outflows that are kept in a secret ledger.

“The Ponzi scheme generates returns for older investors by acquiring new investors. This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers.”


Image from HYIP.COM
Bitcoin doesn’t generate returns. It’s just software. The price of Bitcoin is directly correlated to its scarcity and demand. The demand is not forced on others, nor do Bitcoin’s biggest proponents go around asking people for money and telling them to invest more into Bitcoin. New users that join the Bitcoin network don’t fund the older users with new money. Not at all. It’s just plain lazy to make this assertion.

In typical pyramid scheme, the founders will be the richest ones, guaranteed. The more people join, the bigger they’ll earn, as all the money flows to the top. They give their initial investment, and then they entice others to invest as well, funneling these funds into their pockets. This is the only way they can make money. In a ponzi scheme, the value for early investors rely solely on new entrants coming in with fresh capital, and their earnings come directly from this capital.

With Bitcoin, the opposite is true. A lot of people who got in early on Bitcoin are not around today to enjoy their 50,000 % returns on their investments. I know many people who bought thousands of Bitcoins and spent them on things like Pizza, mining rigs, gambling sites, video games, and even weed or other drugs. Hell, I lost several dozen Bitcoins back in 2014 playing Blackjack on stupid gambling sites and Satoshi Dice! I also gave away a lot of Bitcoins to people whenever I did talks in universities and the like, just small amounts that today would be worth 50 to 60 times its value.

Old Bitcoin “Hodlers”,......................                   


read more   at     https://decentralize.today/bitcoin-is-the-total-opposite-of-a-ponzi-scheme-heres-why-4d795f0ed