Topic: Is Bitcoin a Pyramid or Ponzi scheme & what are the ramifications? - page 2. (Read 16948 times)

I'm not sure you quite understand investments. There is not $1100 invested in BTC in this scenario, there is only BTC invested in BTC. As soon as Joe pays Satoshi $100 for some BTC all that happens is Satoshi has $100. That money no longer has anything to do with bitcoin. And neither does Sally's.

If I'm trying to raise capital and issue new shares which can be bought directly from me to be used for whatever purpose I'm raising capital from, then and only then can you really say the amount paid is "invested in" something.

So my little economic knowledge makes me think you confuse an over over valuation ( bubble ) with pyramid scheme one is a scam from the beggining ( operators according to sec ) the other is a bunch of fool fooling themself and other but at least didn t start as a scam.
Is bitcoin in the later stage? That may be hard to tell ofc ...

Bitcoin is a technology. It is a blockchain-based transaction ledger. There is a limited number of claims to this ledger. These are called satoshis, or bitcoins (10^8 satoshi). We are here to deduce if Bitcoin is a Ponzi scheme, a Pyramid scheme, a Greater-Fool's-game or just a freely-traded something, subject to markets' whims, resulting in booms, busts, bubbles and crashes.


A) I start with assuming that "Ponzi scheme" option is already refuted beyond doubt.


B) As for "Pyramid scheme", after much deliberation I fail to see the logic, how Bitcoin would qualify. I wonder if we even read the same definitions for a Pyramid scheme:
- Wikipedia
- Investopedia.

The essential qualifications for a pyramid are not met.


C) What has been discussed upthread under the name Pyramid scheme, should more precisely be called Greater-Fool's-game. The essence in this would be that people buy in anticipation of a price rise, without regard of the intrinsic value. If the price is indeed rising, this may suck quite many people in, resulting in a spectacular collapse if the intrinsic value fails to meet the expectations.

It does not matter whether we are talking about Internet stocks with currently negative earnings, tulip bulbs, shares of the Blockchain pie, or something "completely useless" such as modern art. The fact is that people are (in most jurisdictions) free to invent, produce and sell things for whatever price they can gouge in a voluntary market. Also buying at inflated prices is not criminalized.

At most, Bitcoin could be classified in this category.

It has to be noted that this kind of speculative bubbles are almost completely harmless. If the product does not have intrinsic value, its production does not burden the real economy. Every time someone buys the bag at a higher price, another one receives the money. The only way to become bankrupt is to take excessive risk or leverage, which are always very stupid actions and people prone to them cannot be helped unless all banks and casinos are closed.

Unlike Ponzis and Pyramid schemes, which revert to zero when unfolding, speculative bubbles revert to their intrinsic value. There are many Internet stocks that are doing good in Nasdaq, tulip bulbs have a certain price, bitcoins will always have a price and art has its valuation. The real economy lives on quite unaffected of the speculative valuation.


D) It seems that the crux of the matter is, whether Bitcoin/bitcoins have intrinsic value as a currency/money or not. If not, it has been a recurring fad over several years and numerous bubbles, which have repeatedly risen higher and higher. In fact, the numbers we are seeing in the exchanges testify that every day until this week has been a bear trap.

It is hardly possible that Bitcoin would have survived the 2011 bubble if there was not a promise of significant utility. The word promise is important, because money is a high network-effect thing. If I have all the money in the world, it is most likely worth less than half of it. Money tends to be worth the most when it is distributed in a Pareto way.

If all money belongs to a few and others are uniformly poor, the rich cannot employ their money to buy goods and services because the poor are not capitalized to produce them. Similarly the poor cannot buy from the rich because they don't have the money. The (hypothetical and unachievable) situation that everyone has the same amount of money, quickly leads to Pareto distribution (or "worse" top-heaviness, unless the rule of law is present).

Let's think the valuation of Facebook from the user perspective. When Facebook had one user, it was worthless. I would say the value per user grew rather quickly when the earliest users came. Just out of my hat, let's say they valued it at $100 on average. As new users were added, the value for them was initially just above zero (the threshold of joining in is to receive positive value), but the old users' value was increased due to network effects. The more Facebook grew, the more value for everyone. From systems perspective, it should have been obvious that the supermajority of the target segment globally would become users.

The valuation of Facebook in the stock market is $112 billion, which is $95 per monthly active user. If the ownership of the system were possible for everyone in every stage of the adoption process, we would have an ownership distribution curve similar to Bitcoin's. (Now there is some 29-year old geek that owns 24% of all, talk about inequality   ) In both cases, the value is roughly proportional to the number of users, but the issuance is fixed.

Facebook would not have become so valuable if it had not become widespread. Then the investors would have lost their stake. If Bitcoin fails, investors lose likewise. If someone sees the failure before the others and sells out, good for him. It is not a reason to be jailed. This is the basic free stock market operation, nothing new to see there.


The Russians tried to privatize the communist state wealth directly to the people. The result was 50 million people who owned their share of huge enterprises for a few minutes, until somebody bought it from them at a price of a small bottle of vodka, or a cup of coffee. The companies ended back in oligarch control. It is not optimal, workable or possible for everybody to own a little. It invariably ends in somebody owning it all, and the masses do not get much of a benefit for selling their share. As much as we both would like it, faucets don't work.

In a more theoretical vein, if we assume that the altcoin system is worth $1,000 per user, and the users generate the value for themselves by CPU mining, and the inflation rate mimics gold's 2% APR, then the mining reward is $20 per user per year, and it is indeed a perfect analogy to exchange your monthly reward for a cup of coffee. Hardly a recipe for a stealth mass-adoption.

You need to provide an argument, otherwise this is just a temper tantrum.

You may be correct. Many dot.com stocks were clearly ponzi-pyramid schemes as there was nothing there (no intrinsic value) at all and they went poof and they collapsed and died forever. It was all smoke and mirrors. Ditto many junior mining companies. Perhaps ditto most PinkShits stocks (pink sheets, hehe).

Yeah then i guess you over estimate the revenue you can get from advertising. I personnally think tweeter fits very well all your definition as the advertising stuff really look far over estimated to me. Now both tweeter stock and bitcoin have this speculative value in it. It s all about what it may do in the futur not what it does right now and this is very hard to estimate. May be that bitcoin will be used for some very surprising things later on...
So if one day investor realise that ads will never pay back tweeter will be in the position you think bitcoin will be when nobody will want to protect there monney/speculate/make cheap transaction anymore. To me one will happen and to you looks like it ll be the other one. Maybe none will and every body ll be happy.

Well boys you've pushed it down to 11%,

11% of 7 billion = 770 million people.

That is still about 750 million more than I need. So just keep voting on the socialist choice. It thrills me to no end.

Dodgers there was one more motivation. I wanted to see if I could learn anything or be rebuked. I did learn several new things in this thread.

Probably also subconsciously to demonstrate I am the alpha/sigma-male here amongst mostly betas, and I suspect Impaler is a sigma.  

Thank you. So you must also not be.


12% say they don't.


Agreed.

So they won't be early adopters. They will miss the gains from 0.0001 to $1 or $10. But still they won't buy, because their pride as they will remember me telling them here that they would be forced to buy.

So the goal is to make sure they won't buy until it is $100 or $1000. So they don't run the new economy. Because I think they are the socialists and not the wise ones that we need running the new economy.

You might wise up at around $1, because you are apparently not stupid.


My advice to you is don't be greedy. Sell early, maybe at sometime next year or 2015. Take your triple or 10X gains and run like hell from Bitcoin and hold your nose that you are losing more gains.

You will be very grateful you did that.

Maybe let a small portion ride, just for the thrill and just for a what if experiment.


This is a time where men will be separated from boys and (most) women.

I need a few good men.

I am not.

I will buy the right altcoin if it comes. I will sit on the ask always in the early days and weeks, if it has the correct design.

Well maybe it's best if you don't buy any bitcoins then - you've done your risk assessment and I've done mine.

You apparently missed the post upthread about this. I will repeat the logic in case it got buried.

Assuming Bitcoin makes it to saturation, meaning everyone that will buy has bought, then it collapses because price can't move up, thus investors want to exit to go get gains else where.

Then only a few investors can cash out. The vast majority will be stuck with the crashed value. This is math at the top of the OP.

So then you've ended up with a very few who cashed out with huge gains (probably the early adopters who were selling all the way up slowly), and everyone else bankrupt.

So who buys your coin now? No one left to buy it.

End of story. End of world (if Bitcoin makes it to $trillions market cap).

I appreciate that, but your clearly not stupid.
Everyone on this forum is here because a vested interest in BTC.
"no one wants to be told there child is ugly"  and in a similar vein, no one here will agree with your every word…. because it goes against the reason that they frequent this forum in the first place… It's like going on a Ford forum and telling everyone that Honda is better….no one will listen regardless of if you are right.

Even if you provide a valid argument, no one is going to become enlightened as they have blickered vision.


I personally have a reasonable position in BTC… enough to make me what to fight it's corner, champion it's cause and hope it achieves half of what the optimists promise.
I am a realist, as most people are… many people post their desires here (even if they won't reach fruition) but continuing to try to push your point is a fool's errand and you will get no-where.

As much as I agree with much of what you say, the dreamer in me wants this to go to the moon, and no amount of analysis or speculation will change other peoples view… you will achieve nothing except frustrating yourself.

Surely your time may be better spent on another alt-coin forum so you can tell everyone how naive we are??
This way you will acheive praise, recognition and support…. rather than resistance.

Yep I know all this - Bitcoin could collapse. It could fail (like MySpace) - but that's my problem. I can sell or buy freely knowing this. Everyone already knows this.

When these coins are dumped, won't the new owners just continue the same game?
Aren't these the new investors? - all these people with cheaper coins? A new mass of people willing to hold or sell or start buying more?

I am preparing those who want something better to understand why it would be better, then hoping those who can develop it will see the opportunity.

In short, trying to fix the problem I see.

The con is you got several facts wrong.

When the number of new investors can't increase fast enough, it collapses. We don't need Satoshi to sell, that was a strawman invented to make it sound less likely.

Even only tiny stashes sell it will collapse at that point.

This is the nature of pyramid-ponzi schemes.

I explained that in great detail upthread. Once you bankrupt the later investors on that end-game collapse, you don't have any more investors to do it again.

This is assuming Bitcoin makes it to ponzi saturation point. It might be stopped before that by government action or an altcoin.

Anonymint, I do enjoy your posts, and you do present interesting arguments, However I must ask as to your end-game?.
Is it purely educational
Is it a righteous ego trip where you get to flex your intellectual prowess… are you just looking for "i told you so"  moments??
Are you try to save ourselves from wasting time/effort/money?
Your agenda is quite telling, but your motives are not…. please explain.

Bitcoins are just worth whatever people are willing to pay for them - the market cap is irrelevant.

If Satoshi suddenly sells 1 million BTC then there will be massive slippage and the price will tank - but there's no con or scheme - everyone knows this.

We all know of the big stashes of bitcoins and what would happen if they were sold all at once (initially anyway)
We all know all the facts and we choose to buy/sell based on this reality.

Where's the con? How have we been tricked?

That doesn't make any sense. Read the thread.

The transparency point was refuted on page 1.

The "majority of transactions" has been refuted in the recent page.

You would need to refute those prior refutations. I almost deleted your post because it violates the warning I put saying you must read the thread. But I decided to give this warning one last time.

You haven't thought this out grasshopper.

Bitcoin supply is limited, the amount set is known from source code.

If for ponzi scheme, then the flow will be very oddly than bitcoin as a typical ponzi scheme obscures more information  than bitcoin, also there is only one node for the game. Bitcoin is, just like DSP, so if more people join, then the system will be better as the system will replace majority of transaction systems very soon as all people can monitor the flow.