No, mania/bubble yes... Ponzi scheme not really...

Bitcoins can be compared to commodity, or any real word objects which have increased in value. It's openly and freely traded inside the technical limitations. No dividends are paid by any authority. All the profits come from appreciating perception of market value.

For it to be ponzi I would require there to central authority  or a system which clearly moves money from new investors to old investors. This is not the case.

Logic fail.

It is not objectively correct to claim that everything in nature fits the definition of a ponzi scheme.

As far as I can see, you did not refute the definition of a ponzi scheme.

There is no tangible commodity. It has no intrinsic value if it is not a currency. The only value it has is the value from later investors following earlier investors. Thus it fits the definition of a ponzi scheme.

The definition doesn't say the operators or organizers must be centralized.

The system clearly moves value from later investors to earlier investors.

Dividends are paid the miners. Mining is somewhat monopolized by large capital somewhat due to ASICs requirement and pools. But any way this point is irrelevant, as it is not required by the definition of a ponzi scheme. I quoted two definitions in the OP.

Is the stock market a ponzi scheme then?

And by that I don't mean the dividends paid by the companies. But the notion of ever increasing value based on possible future performance. Which is often much higher than the value of companies holdings...

I can only process your posts so fast, this one takes more time because I have to watch a 23 minute long video and pause it to write down his points, because you did not.

Thanks for sharing that, because it helped me refine all the reasons why Bitcoin is undeniably a pyramid+ponzi scheme. Slam dunk!


Points made:

1. Bitcoin is not owned by anyone.
2. Not being advertised by an owner.
3. Panic crashes in price are bankruns because Bitcoin is a currency
4. Crashes are less likely to happen in future because liquidity will increase
5. Ponzi schemes require con men and secrets
6. Ponzi schemes require complete lack of transparency
7. Ponzi scheme is a zero-sum game with mostly losers
8. Those who cash-out often end up in jail
9. Direct investment not through a con man is not ponzi
10. The early investors are so excited they don't cash out soon
11. The early investors spread the word to later investors
12. Con man shows fake certificates (truth is secret) of account balances
13. Some bad news causes a stampede
14. Con man has run away with the money
15. Bitcoin is 100% transparent
16. Early adopters cashing out is not a zero-sum game, Satoshi selling would just cause temporary drop in price

If the man who produced that video owns Bitcoin then he is a con man as follows.

Follows are my rebuttals correspondingly numbered.

1. This is not a required in the definition of a ponzi scheme.
2. It is being promoted by the early adopters.

3. Bitcoin is not a currency because it is not accepted every where that currencies are. You don't say pesos are a currency in the USA. You convert to dollars because dollars are a currency, even though perhaps a few places in the USA might accept your pesos. Yet this is irrelevant, because panics have nothing to do with doubt about reserves in a bank's vault. Panics are because there is no intrinsic value and everyone is looking at everyone else to see who will be the first one to stampede. Subconsciously everyone knows the value is dependent on not many people selling and many more people buying, because if the momentum of the price gains slowdown, the reason to invest is gone. Some of the owners are misinformed and think there is way Bitcoin could become a currency, because they haven't though deeply about the concentration of the distribution of the coins as I documented in the OP. Thus the price doesn't drop to 0, because the uninformed owners believe in something that doesn't exist. But one day they will become wiser as they see that Bitcoin isn't close to being a currency even many years from now. This myopia is equivalent in effect to the secrets a con man hides from the investors.

4. As the price rises higher and higher the early adopters have more and more incentive to exit, because the larger their holdings become in fiat value, the more impossible it is for them to ever cash out. Also as I explained in #3, more and more of the investors will realize it is not becoming a currency, meaning inability to divest by investing the BTC directly in a business instead of converting to fiat. OTOH, more and more later investors will rush in, thus indeed liquidity could increase and it must else the price gains can't continue. But one day, there simply won't be enough later investors to come in, either because many have realized what the end game is, or because there aren't any more out there in the world with sufficient wealth to invest in it. In either case, then the price can't continue growing, so then the stampede must ensue. And then there will be no reason to buy low, because everyone was already in. And the masses will lose everything in this stampede to those few who cash out. And so who will buy it low? The few won't buy it low, because they know no one else can buy it, because they are all bankrupted. If Bitcoin will be owned by most investors in the world, then this will destroy the world. This is why ponzi schemes are so incredibly evil and dangerous. This is different from a stock, because a stock has intrinsic value to due earnings, profit, cash-on-hand, talent of management, talent of employees, contracts, etc..

5. It is apparent from #4 that all the destructive effects of a ponzi scheme doesn't require a centralized con man, neither do the definitions I quoted in the OP. And in effect the early adopters who are promoting this system are con men. The secrecy in Bitcoin is the myopia the gullible later investors have when they are told certain buzzwords, e.g. "decentralized", "anti-government", "better than gold because supply is limited 21M coins", etc.. These buzzwords along with the lack of aptitude among most people, cause their brains to feel good and they love the price gains, so they don't pay attention to the facts of this thread. The con man relies on the same gullibility when he gets the investors to believe certain buzzwords, e.g. "international postage stamps arbitrage" as Charles Ponzi did and the investors did not verify it is no different than spinning buzzwords at the Bitcoin investors and they don't verify the logic.

6. Transparency is not required, rather Ponzi schemes only require the investors are too lazy or gullible to check on whether there is an intrinsic value or not.

7. Bitcoin is zero-sum at the terminal velocity as explained in #4. It is important to understand that those who cash out take out more than they put in, due to the illusion of price gains. See #12 for why price gains are an illusion.

8. Indeed they do end up in jail. And Bitcoiners who cash out will also in my opinion end up in jail, because so many people will be wiped out by Bitcoin. Note this hinges on Bitcoin not becoming a currency which I explained why it can't in the OP and I reiterated in #3 why it is not a currency. But I am sure we will debate this more downthread.

9. Handing your money to an earlier adopter instead of handing to a centralized con man, does not change any of the dynamics of the ponzi outcome described in #4. I have refuted the secrecy and transparency points above. I will also address the fake accounting in #12.

10. Ditto in Bitcoin.

11. Ditto in Bitcoin.

12. Bitcoin exchanges lie about your balance. They seem to imply that you can sell for a certain price, but the float is only about 0.1% of the market cap, meaning only about 0.1% of the money in Bitcoin can get out any where near the current price. Slam dunk!

That proves this is not a currency and it is no where nearly similar to a bank account!

You can't argue that is okay for stocks so it should be okay for a currency, because as I explained in #4, stocks have an intrinsic value. Bitcoin has no intrinsic value because it is not a currency. Yet if it were a currency, then exchanges wouldn't lie about your account balance. It can't be both ways. If 90+% of Bitcoin wasn't concentrated in a few hands, then the exchange markets would have orders-of-magnitude higher float and liquidity, and thus it could be both a currency and an investment. I suggest a fix in the OP.

13. Ditto in Bitcoin.

14. As explained in #4, those who cash out run away with all the money. It is important to understand that those who cash out take out more than they put in, due to the illusion of price gains. See #12 for why price gains are an illusion.

15. I have explained above why it is not effectively 100% transparent. For example in #12, there is no way to know what your balance is. And in #5 how the psychology of later investors is manipulated causing the truth to be opaque to them. Also this point is irrelevant because in #6, I explained why transparency is not required for a ponzi scheme. The definitions of a ponzi scheme in the OP don't require transparency.

16. Refuted in #4.

See points #4 and #12 in my prior long post. You are comparing apples-to-oranges.

It would be better described as a Pyramid scheme, which is similar to but distinct from a Ponzi scheme.

The main distinction is that Pryamid schemes are normally decentralized or at least the 'center' is constantly in motion, were as as Ponzi scheme always has it's money flowing through one individual which is the linch-pin of the whole thing.  In a sense the rebuttal that BTC is not a Ponzi because it is decentralized it true, but this not mean it is not a scam, it's just a different kind of scam.  Believe it or not humans invented decentralization before Peer-2-Peer software and have used it for scams for a long long time, but naivete people always thinks that anything with the glow of Technology on it is new and revolutionary and none of the obvious lessons of history apply.

Most Pryamid schemes involve a recruitment quota for each new member both directly and indirectly as their recruits recruit more in an exponential growth.  Eventually people who reach the quota are automatically cashed out and the Pyramid they were in fissions as the 2nd Tier members become the next in line to be cashed out when their pyramids reach completion.  Another key distinction is that while a Ponzi scheme always involves the ringleader lieing about what they are doing, a Pyramid scheme often WILL disclose EXACTLY how it works to everyone involved, after all in a decentralized system everyone needs to know the 'DNA' of the scam to perpetuate it.  The problem is that  greed and a lack of 'categorical imperative' (aka failure to think about the systemic effects of everyone acting some way) in most people moral thinking allow them to blithe-fully engage in the Pyramid activity without actually believing it is fraudulent.  You would be appalled at the simplicity of some of the pyramids people will engage in, shit like "recruit 10 people each of which gives you $100 then they recruit 10 people each", literally it can be that simple on it's face.  So the overall attitude of 'it's not fraud because I understand it' that comes from BTC folks is very much like what we would expect in a Pryamid scheme.

BTC modifies the Pryamid scheme by allowing early adopters to never cash out, but instead keep watching their unrealized gains pile up as long as they can delay their gratification.  It even has a way to move up in a sense, if you buy more BTCs you can feel like one of thouse early adopters too.  The real key here is the mining model of exponential decay that guaranteed early adopters would always have the most coins and later adopters (mining or buying) would face a shortage.  The speculative bubbles have just been the icing on the whole thing, even without them the long term trend reflects the pyramid growth as more people are recruited and thouse already in ante up more money so as not to be 'left behind'.

Lastly this was all wrapped in an incredibly slick marketing package by Satoshi, the combination of cryptographic anonymity, libertarianism and gold-buggery was the perfect sell to a generation of disgruntled internet mouth breathers.  More then all the technical details the way it was sold as 'digital gold' was the most fraudulent part.  Satoshi even claimed the declining mining curve was 'like gold' which is a complete lie, annual gold production as been climbing for centuries not declining, so the choice of a decay curve is for one thing only to make a guaranteed profit for early adopters.

I agreed in the OP:


I also concur with the other points you made and you stated them more eloquently or lucidly than I did.

One of the first flaws that stuck out to me like a sore thumb was Satoshi comparing Bitcoin's declining coin rewards to gold. I smelled immediately a scam. Good to see you saw that too.

I guess we are the only two guys who don't lack of 'categorical imperative' morals on the entire forum here?

That would be a very sad statement about humanity if that is the case. Should you and I join the Illuminati and be done with the cattle then? Or is there hope for us to save them from themselves?