People who don’t fully understand what crypto-currencies are and see them more as some form of “imaginary money” are inclined to make unflattering comparisons between Bitcoin and ponzi schemes. Many countries and central banks have issued warnings on the crypto-currency and attacked it using this allegation with little substantiation. A few simple tests and closer examination will reveal whether there is any truth in such accusations.
APR 23, 2014
Examining Bitcoin for Ponzi Scheme Signs
People who don’t fully understand what crypto-currencies are and see them more as some form of “imaginary money” are inclined to make unflattering comparisons between Bitcoin and ponzi schemes.
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The interest towards Bitcoin became immense during the past year. As it is decentralized, promotes libertarian ideas and aims to help people, the virtual asset hardly matches traditional principles behind fiat currencies. It simply breaks ll crusty and outdated rules.
Being too alternative, too interesting, progressive and relevant to changes, Bitcoin scares conservatives who either do not understand it or fear its implications. Skeptics doubt its origins, claim it to be the invention of one or another government trying to shake the leading global currencies like the US dollar, and even accuse it being a ponzi scheme.
The absurdity of most of these claims speaks for itself. Only the ponzi scheme is a burden to be dropped off with sufficient analysis and strong proof.
Generally, a ponzi scheme is a fraudulent investment process, where the responsible person or organization pays out dividends from new investments, because no profit has been earned. The money collected is not completing any work, being simply collected for an idea.
The operation was named after Charles Ponzi, who was first in 1920 to create such an investment initiative on the arbitrage of international reply coupons for postage stamps. It did not last long proving the futility of the criminal activity.