Seriously, think about it for a moment, the true nature of Bitcoin is incredibly instrumental in making the case against this farcical claim.
The fundamental issue with the “Bitcoin is a Ponzi scheme” argument is that the most common Ponzi scheme operates by offering investors an explicit profit from hand-to-mouth — and this is done without any underlying asset or deliverable product whatsoever.
You may have heard that Bitcoin is a Ponzi scheme or a bubble, and you’re not sure what to believe.
In this piece, you’ll learn more about how bitcoin is literally the complete opposite of a Ponzi scheme and why it is not only legitimate but are also here to stay.
What is Bitcoin?
Understanding the technology behind Bitcoin is important because it can help us understand what it is and where it’s going.
It is the first peer-to-peer, decentralized digital currency. It was invented by an anonymous programmer or group of programmers under the name Satoshi Nakamoto.
In a Ponzi scheme, the early investors profit because they use new investors’ funds to pay off earlier backers.
In Bitcoin technology, the early adopters were rewarded because they were willing to contribute their hardware and electricity power to help solve mathematical problems that enable the Bitcoin network to function.
If you haven’t read the original proposal paper of Satoshi Nakamoto published in late 2008, you should. It’s eight pages long, quite technical, but 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 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”.
How then do people make money with Bitcoin
Well, it’s not a stock. It’s not an investment. It doesn’t generate returns. Bitcoin is an open-source software program that has no value in and of itself.
The price of Bitcoin is directly correlated to its scarcity and demand, which is determined by the number of people willing to use it as a currency in their daily lives.
The demand isn’t 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 do not receive funding from older users with new money; instead, they benefit from being part of a global community that supports and encourages them as they explore this new technology.
However, a typical pyramid scheme has an unsustainable structure that makes it easy to spot and avoid. The founders are usually the ones who make the most money, as they disguise themselves as potential investors.
As more people join the pyramid, they will make less and less money until they run out of new members. This is why people are skeptical of multi-level marketing schemes because they don’t want to be involved with one that’s built on nothing but hot air.
With ponzi schemes, the value for early investors rely solely on new entrants coming in with fresh capital. However, Bitcoin is different—the people who got in early on Bitcoin have not cashed out yet; instead, they are holding onto their Bitcoins as the price continues to increase- we like to call them the “Grand Hodlers”.
Of course they’ve made profits, but they didn’t “cash out” and get rich. In fact, it’s the opposite. Old Bitcoin hodlers are the ones who will never sell their Bitcoins but keep stacking more and more from reputable exchanges.