Is bitcoin a ponzi scheme?

Investopedia’s describes a ponzi scheme as a fraudulent investing scam promising high rates of return with little risk to investors. The ponzi scheme generates returns for older investors by acquiring new investors. This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers. For both ponzi schemes and pyramid schemes, eventually there isn’t enough money to go around, and the schemes unravel.

When reading the above is easy to understand that one of the characteristics of ponzi schema is the promise high and unusual returns whereas bitcoin’s original value proposition was never profit-driven as it’s described in bitcoin’s original proposal white paper of Satoshi Nakamoto published in late 2008.

The second big different to take into account is that bitcoin creates real value whereas a ponzi schema is merely a investing mechanism based on the premise of getting a high return on investment (ROI) by finding new investors to pay earlier backers.

It may not be fully understood by the general public yet, but the core of bitcoin-based systems are computations underpinned by blockchain technology, which produce computational results for a wide variety of use cases.

As a side note of humor, watch sports blogger Dave Portnoy in his inaugural video as a bitcoin investor where he also comments he doesn’t fully understood bitcoin yet 🙂