Perhaps somewhere someone's even running an actual Ponzi scheme using BitCoin.
Sure, but that's a different question. I'm talking about new investment in a security being the only source of increased value in that security. Which is what a Ponzi scheme is.
Equally true of most other commodities and currencies, right?
If you have a gold bar, or a stack of 10 Euro notes, the only way you make money off of it is if enough more people want to buy gold/Euros that the price goes up. Neither asset does anything on its own.
A critical ingredient of a Ponzi scheme is fraud.
Taken to the extreme to illustrate: if everyone together today instantly decided each bitcoin was worth $1b, then in that first instant, nobody would sell and no trades would occur, but the price would be very different.
How does simply deciding 1 bitcoin is worth $1b effect the value of bitcoin if no one is willing to buy at that price?
2. 'willing to buy' and trades executed are two different things.
If you are measuring the price of bitcoin by looking at the price of the last trade that occurred, then you are right: trades need to happen for you to get price information.
But there is also the order book. In [1], thousands of 'intents to trade'/outstanding orders are displayed but no trades are listed.
When I looked at the page, the highest anyone was willing to buy (in this specific order book at this time) was $4076, and the lowest anyone would sell was $4086.
This is a good indicator of the current consensus on Bitcoin price but isn't actually trade data.
Now, let's say the market gets just a little more bullish on Bitcoin and someone places an order to buy at $4080. Has the price of Bitcoin changed? One could argue yes if you judge price from the order book: from ~$4081 to ~$4083 or so. But no trades have occurred.
So back to the original question: in the absence of trade data, the price of bitcoin can be seen from what everyone decides it is, via an order book.
No; if I hold a stock I receive a dividend from the company and a vote in their governance; if I hold a bond I receive interest payments; if I hold bauxite I can use it to make whatever you make with bauxite.
That is not a Ponzi scheme. A Ponzi scheme is giving someone payouts on their investment funded solely from people putting the money in, while fraudulently telling them that the money is coming from real investment. You can't have a Ponzi scheme when on average both sides of the transaction are (generally) aware of the situation and aware of how the value is flowing, because you lack the fraudulent aspect. Also, for any given transaction, value is flowing instantaneously; when someone sells their bitcoin, they aren't getting paid in funds being fraudulently kept aside from somebody else's previous purchases. It's an instant commodity exchange.
Again, in a nutshell, the reason why this doesn't fall afoul of laws against Ponzi schemes is that it simply isn't one.
No. A person was using the silver market as a ponzi scheme vehicle, it doesn't mean the silver market itself was a ponzi scheme.
Same as Bitcoin here. A devious actor could use Bitcoin as the product for a ponzi scheme, that doesn't mean bitcoin is a ponzi scheme as much as the tulip bulb market itself is a ponzi scheme.
That's 1/2 a Ponzi scheme, the other 1/2 is an entity promising you a return. I think you'd need to commit some fraud along the way too. If someone said "For every 5 dollars given to me, I will provide a share, and dispense 1/(2*N) dollars to all other shareholders, where N is the number of other shareholders (N=0 for the first donation, 1 for the second, etc)." Would that be a Ponzi scheme? There's no fraud, so I don't think it would be, despite having identical mechanics.
Exchange rate, also known as 'cost,' is a form of value.
>Pyramid schemes however "may purport to sell a product, but they often simply use the product to hide their pyramid structure".
>They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public
By contrast Bitcoin profits are based on the real investment in Bitcoins, which are really sold to the public. They go on:
>little or no product moves to market
Obviously very different than Bitcoin
https://www.ftc.gov/public-statements/1998/05/pyramid-scheme...
>Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure. There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company's incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs throughout the company's distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements. A lack of retail sales is also a red flag that a pyramid exists. Many pyramid schemes will claim that their product is selling like hot cakes. However, on closer examination, the sales occur only between people inside the pyramid structure or to new recruits joining the structure, not to consumers out in the general public.
It notes "lack of retail sales is also a red flag that a pyramid exist". What percentage of Bitcoin sales involve actual transactions of goods or services and not just a speculative investment? The price of Bitcoin has gone up some 2000% in the last two years when it simultaneously seems harder to spend when companies like Dell have stopped accepting it. It certainly seems like Bitcoin shows a lack of retail transactions.
If you've ever heard of Coinbase you know there are plenty of sales of Bitcoin.
>What percentage of Bitcoin sales involve actual transactions of goods or services
100% of the sales of Bitcoins involve actual transacting of Bitcoins.
Please explain. How is Bitcoin not a Ponzi scheme? It checks all boxes:
- No immediate value, nothing in Bitcoin has worth outside of it. No IP, no machines, no added value to society
- Old investors get paid exclusively by new investors (buy at $500, sell at $3,000)
- Heavy marketing by old investors through promises of extreme gains ("if you bought in 2011, you'd have made 10,000% gains right now!")
They absolutely do not, no dividends are paid in Bitcoin by any entity.
Bitcoin's value may rise based on many factors, of which new buyers are only one (not the "exclusive" factor as you claim).
https://news.ycombinator.com/item?id=15020232 , up or down thread a bit.
In particular, it isn't clear to me how you can have a "decentralized" Ponzi scheme without making it something fundamentally different from a Ponzi scheme.
To the extent that BitCoin may be fraudulent or people may be engaging in illegal behavior, it's going to be other things. Perhaps somewhere someone's even running an actual Ponzi scheme using BitCoin. But BitCoin itself is not a Ponzi scheme.