I wouldn't say it fits the technical definition of a Ponzi scheme.
Now, the technology (the opensource daemon, and the network of nodes running it to create a peer to peer ledger and all that jazz) is really an quite interesting experiment in distributed systems.
The culture around Bitcoin the 'currency' at the moment (and forseeable future) is more complicated.
At worst its a pyramid scheme, and at best its an asset bubble. In practice I would say it most resembles a sophisticated, decentralized Multi-Level-Marketing scheme (MLM) of a particularly novel and insidious variety (Note that MLMs such as Amway & Herbalife have plodded along for years). This can be said not just of bitcoin, but of the entire ecosystem of cryptocurrencies.
Ironically, the fact that it has value derives from its perverse incentivizes of its "investors" to create a cycle of pump and dump bubbles, that bring more people into the fold each time. These speculators provide a liquidity pool that makes bitcoin useful to those who actually use it because they are shut out of the traditional payment system. Alarmingly, it seems at the moment that this group deriving actual utility (over credit cards) consists primarily of hackers, drug dealers, gamblers, arms dealers, pornographers, and other participants of the grey/black market economy. Yes, there is a big pool of legitimate merchants accepting bitcoin because of low transaction fees & no chargebacks, but adoption by non-speculator 'legitimate consumers' is far beyond merchant adoption.
The end game is uncertain. If the liquidity pool eventually grows large enough (resulting in a stable, high value) such that people feel confident to start settling contracts denominated in bitcoin (see mpex.co for a particularly sophisticated example), this will represent a massive challenge to the power of the state to control commerce and enforce taxation. In other words, an crypto-anarchists wet dream.
Perhaps bitcoin will stay somewhere around the size it is now or perhaps an order of magnitude larger in which case it may stay a fringe payment technology with a shady reputation, much like Liberty Reserve and egold before it.
It is also possible that governments will regulate it away by requiring all addresses be registered (see: http://blog.gardeviance.org/2014/03/how-to-fix-bitcoin.html). Or maybe they will just get fed up and attack it by targeting it at its primary point of centralization: all mining ASICs are currently fabbed at TSMC. TSMC could perhaps could be coerced into adding some kind of backdoor or kill switch into the next generation of mining chips. Note that other cryptocurrencies have and will adopt ASIC resistant PoW schemes that limit this at a risk of allowing a 51% attack by a large botnet (or entity with massive computing resources like Google or the NSA).
Either way, Pandora's Box has been opened. Future cryptocurrencies are in the works that use cutting edge advances in zero-knowledge proving techniques to completely eliminate the need for a public transaction history. With regards to bitcoin (and other Nakamoto-chain based cryptocurrencies) specifically, the widely noted scaling problems will be solved by ongoing work on 2-way pegging to side chains, tree-chains, and other ways of 'sharding' the blockchain, while maintaining bitcoin's enforced scarcity.
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So really, the reason why I want to know who Satoshi is, is because bitcoin is an incredible hack. Not just of computers and networks, but also of minds. To secure the network, mining has to be incentivized by giving the coins value, which means Satoshi anticipated not just the technical aspects of enforcing concensus in the ledger of coins, but also the economic & psychological aspects of getting people to think the coins are valuable (and that their value would increase). I'd personally like to know what motivated he/she/they to build & design Bitcoin, and what his/her/their thoughts were as it took off, and what he/she/they think of the current ecosystem.
I don't think it's a ponzi scheme, but some projects built on it, such as BitConnect, most likely are. I think Bitcoin is the 1st generation of cryptocurrency which should've either died a long time ago and replaced with the 2nd generation like Ethereum or evolved to Bitcoin v2. Instead, perhaps due to lack of competition for a period of time, it became a massive speculative bubble and amassed enough money that it's now too big to fail. So it just keeps on growing, mostly on hype and irrational investments from the influx of new people, and it's doing it so fast that its effectiveness and usability have become largely irrelevant for most general use cases.
Well it is not a ponzi in the sense that there is no organiser and no promise of an underlying profitable enterprise.
It has become, functionally, a decentralized pyramid scheme.
Let's look at some of the criteria reviewed in the article.
- Investment Returns: Not Promised
The promise is peer to peer: players convince each other of investment returns and almost all players (that remain) are there because they believe in that promise. Once the last dude who wanted to buy pizza without giving Visa or Mastercard a cut has left the room...
- Open Source: The Opposite of Secrecy
Yes but that the mechanism of redistribution is (partially) in the open does not invalidate that something is a ponzi or a pyramid scheme. The openness is also partial, Bitcoin is still pseudonymous enough that we know what moves but not always who and why.
- No Pre-Mine
Early mining with exponential reduction in block reward is functionally equivalent to a pre-mine: the founder(s) have a considerable advantage. A bit more open but then one can also usually do well by buying early on the secondary market an explicitly premined coin that later becomes successful (e.g. ethereum). It's effectively a more elegant way to do a premine with nice deniability (harder to get caught for doing a security offering).
- Leaderless Growth
Yes it's decentralized. A decentralized pyramid scheme remains a pyramid scheme. It's not an intrinsic property of the tech but of the social happenings around it. (Many altcoins that are other instances of the same code have failed to get traction and become pyramid schemes.)
I think many people in these comments are bound to talk past each other when the real answer is:
Yes, Bitcoin is a Ponzi scheme (by virtue of people making it so), but that does not, nor should it, imply that the only thing Bitcoin is, is a Ponzi scheme.
It's part of the ethos but does not describe the whole ethos, and trivializing Bitcoin to a Ponzi scheme is the wrong answer. As, honestly, is trying to defend that Bitcoin is not a Ponzi scheme.
Irrespective of how value is in practice (or volume) making its way through the system is different from the system itself.
There are several promising elements of Bitcoin which contribute to its value. One is sheer access and connectedness (e.g. Metcalfe's law). People use facebook (its valuation reflects this) or pay for a phone plan because connecting to the Internet is a synecdoche for ubiquitous access. Creating a fabric where people in any country may work for a company, irrespective of its location, is a paradigm shift from what we had previously. Today, working for a US company from Taiwan is a legitimate challenge & deterrent.
There are many such examples, where transparent ledgers for instance may increase trust between parties and give people more confidence in financial robustness. All of these things have intrinsic value, just as the architecture which is PageRank has value for Google.
A common mistake I hear is for people to point to these advantages as if to suggest that it is without flaws or incapable of flaws, when we -- the people using the system -- are quite fallible and driven by prisoner's dilemma-type incentives which may by no means be long-term efficient or equitable (given we're all in the same boat). And I think these social challenges should be noted and not discounted on behalf of "technology being good enough".
How exactly bitcoin resemble a Ponzi scheme? It kinda sounds like you mean pyramid scheme, rather than Ponzi scheme. (Not that bitcoin is a pyramid scheme either...)
I don't think bitcoin is a Ponzi scheme. But if it becomes the "last man standing" in crypto, the scammers will just use it as the backbone for their scams, instead of promoting their own standalone coins. Smart contracts, NFTs etc. all grafted onto bitcoin just like the lightning network has been (I am not saying the lightning network is a scam, just an example of something complex grafted onto bitcoin).
Ponzi schemes involve fraud by an operator secretly paying out existing investors with new investors' money. Unless exchanges are artificially inflating the price and running fractional reserves then Bitcoin is not a Ponzi scheme.
Technically Bitcoin is not a Ponzi scheme, but it has structural incentives for speculators to rope in more and more other speculators to drive up the price.
No Bitcoin is not a Ponzi. A Ponzi scheme has a very particular set of characteristics. Bitcoin is not even a pyramid scheme. It does not require new buyers for its value to increase.
It currently is highly speculative and manic market, possibly a bubble.
The quality of your link speaks for itself, it reads like schizoid scribbles.
I'm not sure that I see how it could be a ponzi scheme. Ultimately, everyone has as many bitcoins as they believe that they have. The only question is how valuable are those coins? That should always be a function of market demand.
I don't think it really qualifies as a Ponzi scheme, functionally it's not all that different from any other speculative asset. You're not giving your money to the 'blockchain' expecting it to give back X amount of dollars, you're trading your money for bitcoins and that's the end of it. Whether you want to keep your bitcoins forever, or attempt to find someone else to sell them to is up to you.
Economically it's much more like gold than a ponzi scheme:
Gold: Asset that goes up and down in price according to demand. No central body controlling it. Some utility as jewelry though we could get by without that. Massive dollar and environmental cost from mining the stuff.
Ponzi scheme: Fraud where insiders take money from investors and use it to pay other investors. Collapses and the fraudsters run off or go to jail. No mining no utility.
Bitcoin: Asset that goes up and down in price according to demand. No central body controlling it. Some utility as a payments system though we could get by without that. Massive dollar and environmental cost from mining the stuff.
Gold has a certain permanence as the only element in the periodic table that has properties that has made it the #1 jewellery metal for the last few thousand years and probably the next few thousand though while Bitcoin was invented ten years ago and may well get outcompeted by a better invention/currency.
Now, the technology (the opensource daemon, and the network of nodes running it to create a peer to peer ledger and all that jazz) is really an quite interesting experiment in distributed systems.
The culture around Bitcoin the 'currency' at the moment (and forseeable future) is more complicated.
At worst its a pyramid scheme, and at best its an asset bubble. In practice I would say it most resembles a sophisticated, decentralized Multi-Level-Marketing scheme (MLM) of a particularly novel and insidious variety (Note that MLMs such as Amway & Herbalife have plodded along for years). This can be said not just of bitcoin, but of the entire ecosystem of cryptocurrencies.
Ironically, the fact that it has value derives from its perverse incentivizes of its "investors" to create a cycle of pump and dump bubbles, that bring more people into the fold each time. These speculators provide a liquidity pool that makes bitcoin useful to those who actually use it because they are shut out of the traditional payment system. Alarmingly, it seems at the moment that this group deriving actual utility (over credit cards) consists primarily of hackers, drug dealers, gamblers, arms dealers, pornographers, and other participants of the grey/black market economy. Yes, there is a big pool of legitimate merchants accepting bitcoin because of low transaction fees & no chargebacks, but adoption by non-speculator 'legitimate consumers' is far beyond merchant adoption.
The end game is uncertain. If the liquidity pool eventually grows large enough (resulting in a stable, high value) such that people feel confident to start settling contracts denominated in bitcoin (see mpex.co for a particularly sophisticated example), this will represent a massive challenge to the power of the state to control commerce and enforce taxation. In other words, an crypto-anarchists wet dream.
Perhaps bitcoin will stay somewhere around the size it is now or perhaps an order of magnitude larger in which case it may stay a fringe payment technology with a shady reputation, much like Liberty Reserve and egold before it.
It is also possible that governments will regulate it away by requiring all addresses be registered (see: http://blog.gardeviance.org/2014/03/how-to-fix-bitcoin.html). Or maybe they will just get fed up and attack it by targeting it at its primary point of centralization: all mining ASICs are currently fabbed at TSMC. TSMC could perhaps could be coerced into adding some kind of backdoor or kill switch into the next generation of mining chips. Note that other cryptocurrencies have and will adopt ASIC resistant PoW schemes that limit this at a risk of allowing a 51% attack by a large botnet (or entity with massive computing resources like Google or the NSA).
Either way, Pandora's Box has been opened. Future cryptocurrencies are in the works that use cutting edge advances in zero-knowledge proving techniques to completely eliminate the need for a public transaction history. With regards to bitcoin (and other Nakamoto-chain based cryptocurrencies) specifically, the widely noted scaling problems will be solved by ongoing work on 2-way pegging to side chains, tree-chains, and other ways of 'sharding' the blockchain, while maintaining bitcoin's enforced scarcity.
-----------------------
So really, the reason why I want to know who Satoshi is, is because bitcoin is an incredible hack. Not just of computers and networks, but also of minds. To secure the network, mining has to be incentivized by giving the coins value, which means Satoshi anticipated not just the technical aspects of enforcing concensus in the ledger of coins, but also the economic & psychological aspects of getting people to think the coins are valuable (and that their value would increase). I'd personally like to know what motivated he/she/they to build & design Bitcoin, and what his/her/their thoughts were as it took off, and what he/she/they think of the current ecosystem.
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