There are frequent accusations on various blogs and bulletin boards, and in various news articles that Bitcoin is a Ponzi scheme.
scheme is a pyramid scheme in which the scheme operator uses money from
new investors to pay old investors, and needs to keep recruiting
further new investors in order to keep the money flowing. By its very
nature a Ponzi scheme will eventually collapse because either the scheme
will come to the attention of the authorities (who will shut it down),
or the stream of new investors dries up because there's aren't any more
suitable people to invest, and the money stream dries up.
Ponzi, the person this kind of fraud is named after, was promising
investors that he was buying food stamps in Italy at a low price, and
selling them in the US at a higher price, thus making a profit. In
actual fact he was doing no such thing, and the money from the
increasing numbers of investors was used to pay fantastic "profits" to
the older investors.
So how could Bitcoin be a Ponzi scheme?
there is no operator. The Bitcoin system is open - the mathematical and
economic ideas behind it are openly published, as is the block chain
containing all the transactions, and no one controls the system.
If you want to know more fully and in detail and therefore immediately visit our site is Bitcoin a Ponzi Scheme?!.
the Bitcoin system is not designed to take money from the newer
investors and hand it over to the older investors. Bitcoins are a finite
resource that are created at a steadily decreasing rate. Exchanges
exist to give people who don't want to buy mining equipment or spend
time setting it up the chance to buy them with cash. There's still a
technical and capital threshold for setting up a profitable mining
operation. It's comparable to gold - I don't want to go panning in
Lapland or buying mining equipment, land and refining equipment to get
hold of gold: it's easier for me to buy it (and I'm better at making
money by testing software - my chosen profession). Similarly, a car
mechanic or novelist or dentist who wants Bitcoins will want to buy
So claiming that because increasing prices mean early
adopters of Bitcoin are somehow profiting from a Ponzi scheme is like
claiming that gold, or even Beanie Babies are a Ponzi scheme.
doesn't mean that at some point in the future the whole system might no
crash (due to a fatal design flaw yet to be exposed, or an attack from a
hostile government, or even a large meteor strike that takes out the
internet). But the same risk exists if you buy Apple stock, or US
dollars, or collectible stamps. If for one reason or another the public
interest in any of these disappears, they collapse and people who
invested at the end lose out. But that's a "bubble" - not a Ponzi