Topic: Why people think Bitcoin is a ponzi scheme? (Read 5153 times)

Since you seem awfully sure of yourself in this thread, explain [in detail] the arguments behind your latest statement. This should help to show us your thinking processes when developing an argument...and also shouldn't be a problem if you know what you're talking about

You are right that a similar method was proposed. But AFAIK, it was never implemented because it was such an obvious failure.
Here is the best analysis I can find: "'Proof-of-Work' Proves Not to Work"

http://www.google.com.sg/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&ved=0CDEQFjAA&url=http%3A%2F%2Foinvite.googlecode.com%2Ffiles%2FProofofWorkNoWork.pdf&ei=bJetUIOuDcymrAeb-YAw&usg=AFQjCNE4hSD2PG6bUyBxyPrEkIthG0_a4w&sig2=D1LrCspXcoK3Nv3ACwueRQ


Analagous criticisms apply to bitcoin. Any system generating enough fees to deter attackers would also deter legitimate users, i.e. the only way to adequately protect bitcoin is to destroy it.

Isn't a similar method used to filter spam in emails?  I may be incorrect on this, so please correct me if I am.
But if this is the case, then wouldn't PoW have been just as much of a "marketing scheme" in the "campaign" which brought email to the masses?

See thread topic.


And yet the question postulated was why some people may equate bitcoin with some type of sketchy investment scheme. For the sake of this discussion, you can take one of three valid positions:

a) You agree that bitcoin is a ponzi scheme or something along those lines and you can tell us why you think so.

b) You disagree that bitcoin is a ponzi scheme and can explain why you believe it is not.

c) You have an insight as to why some people may elect to believe bitcoin is a ponzi scheme.

How is that relevant? No one in the thread said that Bitcoin is a Ponzi scheme or even that they think Bitcoin may be a Ponzi scheme.

You are simple-minded and cannot grok ambiguity.

Ah, I see why your "ignore" button is so darkly colored now. Instead of making insightful posts to show why I am mistaken, you've resorted to "durr, you don't understand me".

You've been presented with factual statements and definitions as to why Bitcoin cannot be a Ponzi Scheme, yet you're still arguing. Why? Obviously I must be missing something in this thread...

No, the whole PoW thing is not a marketing scheme. No, not at all. 

Ponzi Scheme = promising an interest rate to investors and paying it with new investors money.

Pyramid Scheme = paying someone higher up for the right to join a scheme and inviting people below you to pay up to you.

Bitcoin Scheme = converting electricity into a digital currency.

Like mining in the real world, the value of a commodity, comes from the effort/cost to obtain it and the demand for it.

People who say bitcoin is a ponzi scheme have never tried to make one and so don't understand it's value.

I'm a miner.  I wish I were paid to understand your statements.  I'm glad I'm not paid to agree with them.

to further confuse things it MUST be said that the global fiat reserve currency credit bubble is a ponzi scheme! and not all ponzi schemes end up with the creator escaping and living happily ever after, I would guess that never happened once? everything is "energy to do work" at the end of the day, be it USD or BTC!

Hmm... Korb Investments... Member of the mining cabal I see ↑. I understand why my statements may not have "made much sense." As a miner, you are paid to not understand them.

Sorry Cunicula...having just read this entire thread, I must say I agree with BTC-Joe. His statements are right on point when describing a "Ponzi Scheme" and how most members react to the phrase. After that, your posts haven't made much sense and have instead resulted in insults instead of thought out and flowing statements.

I wonder if the main reason is because they have heard about ponzi schemes but don't know what that is. Because it sounds cool to say, they are looking for a place to use the term.

Nah bro, I'm not the one missing anything here. Let's examine:

The OP said he doesn't think of bitcoin as a ponzi scheme - nothing suggests that he has a clear understanding of what a ponzi scheme is or is not (that is your assumption)...and since this is a public forum and not a 1 to 1 discussion between myself and the OP, other readers may not be clear on what constitutes a ponzi scheme.

You're really hung up on me explaining what a ponzi scheme is rather than addressing the real issue - that is the actual faults of bitcoin and similar 'e currencies'. You don't need to tell me that you have nothing more to say because that was quite evident from your first response. Try to stay on topic, compadre.

I don't think you've understood what I intended to say - or I'm not reading you right...

I was talking of a classic pyramid or MLM model where there is a direct benefit to be gained from people who are sold to or 'recruited' by those who recruited them and by those who recruited them etc.

The difference in my eyes between a marketing scheme that is doomed to fail and one that I'd count as constructive commerce is whether the which the vast majority of participants (including and especially the 'bottom layer') have derived value from the initial transaction irrespective of any further profits.

Where this is the case, say if I bought a plastic sandwich box and was happy that the combination of quality/price meant I got good value then it makes no odds whether it was bought from a shop or from an MLM scheme.  The only difference is how the profits are split - and that's only of interest if the buyer, in additional to being content with initial purchase value, is interested in further participation by marketing him/herself.

I'm afraid I don't understand what you're saying about what I said that is like 'every company that is running today'.  I'd be happy to elaborate or does my further explanation clear it up for you?

Note I've not yet brought Bitcoin into the equation.  I wanted to try and separate out detrimental and positive aspects of schemes generally classified as 'ponzi' first.  Mushing up concepts like greed and fraud and bound-to-fail and profiteering and small numbers making massive money etc. in one emotive word then jumping in on the 'Oh yes it is, Oh no it isn't' pantomime virtually guarantees the discussion can not move forward.

I don't understand this sorry.  Are you talking about a normal business, a marketing scheme of some sort or something to do with Bitcoin?  I don't know of the 'hostess and the executive' example you gave nor what it is meant to illustrate.

Let's review, since you missed it the last time

The question is: 'why do people make a mental association between A and B (even though A and B are not the same)'

You responded by saying that A and B are not the same. This indicates that you have trouble differentiating between logical reasoning and reasoning via analogies and symbols.

On reviewing your writing, I believe you suffer from cognitive limitations. (e.g. Asperger's)

I don't have anything more to say to you, other than a suggestion that you seek help for your condition.

You've yet to make any points.


Oh, am I trying to reassure people about bitcoin by explaining what a ponzi scheme is? This isn't about bitcoin so much as it is a failure to properly utilize the English language. We're not going to redefine words to suit your opinions.

The proper response, which has eluded you, is that bitcoins do have fundamental flaws that will prevent them from gaining mainstream adoption as they are now...but in no way are they comparable to a ponzi scheme. Do I personally "believe" in bitcoins as a currency (or a replacement for any national currency)? No, but I do see opportunity here in the context of bitcoins being more of an virtual item than a currency.


And people who lack the intellectual capacity to support their arguments with logic will quickly resort to misdirection and eventually trolling in an attempt to mask their shortcomings.

You are using the "collapse" word again.   I'm kind of perplexed as to why.

Miners either hold what they mine, sell it at an exchange, or to some degree, spend their mining proceeds within the bitcoin economy.  But that happens once.  After the miner spends those funds the funds are then spent.  Those coins are ultimately either bought by someone investing/speculating or they continue to circulate in the bitcoin economy.

Starting later this month, the currency issuance rate drops to a 12.5% level (at an annual rate).

So in the year that follows miners will either save, cash out or spend those 1.3 million coins that they earn.

 - If 100% of those funds are saved ("hoarded") by the miners then, of course, that will not cause "collapse".
 - If 100% of those funds are spent in the bitcoin economy, that will be fantastic, and will not cause a "collapse".
 - If 100% of those funds are cashed out immediately upon being earned by miners, that might keep the exchange rate subdued, but I can't think that is anywhere enough to cause "collapse".
 - And thus, if there is any combination of the above, there is nothing there that would cause a "collapse".

So where do you see low profits (or losses) to miners as being something that will cause Bitcoin's collapse?

So does every company that is running today, so how do you differentiate a valid business vs a ponzi. What does one use as proof? If particular one like our's with no tangible product or place of business. Every company eventually collapses.

Which brings me back to my original idea, when the select few profit too much, that will increase the chance of collapse. Just take a look at hostess they gave the executives 300% raises and lowered the workers pay.

The fact is if mining rewards stopped tomorrow, one of two things would happen. (a) Bitcoin would just about die except for extremists who will mine without a profit, or (b) miners would only accept transactions with high transaction fees. There goes transferring money for almost free across the world. Whether miner income is from transaction fees or inflation the end outcome is no different, just a different way of marketing it (similar to buy 3 get 1 free vs 25% off only reversed) Miners have already decided on what they are willing to work for regardless of technology.

What I'm looking for is a way to reach out to people who think bitcoin is a scam. Not try to convince myself it is not. A large amount of the tech community thinks bitcoin is still a scam/ponzi and I think they are possible the best place to reach out and start increasing our user base.