[Blockchain Science_Bitcoin] Is Bitcoin a 'Ponzi scheme'?

There is a well-known saying in the industry:

If you want the whole world to know that you know nothing about Bitcoin, the best way is to use the "tulip bubble" as a metaphor; Says Bitcoin is a "Ponzi scheme".

Today, let’s talk aboutwhy Bitcoin is not a “Ponzi scheme”.

01. What is a "Ponzi scheme"?

"Ponzi scheme", as the name suggests, is a scam invented by a person named "Pang". The protagonist's name is Charles Ponzi, who was born in Italy and immigrated to the United States in 1903.

In 1919, he designed an "investment plan." He claimed that this "investment plan" could achieve a return of up to 40% within 90 days. Moreover, he also gave evidence that "seeing is believing": the first batch of "investors" in this "investment plan" did get the promised returns within the specified time.

So, a large number of Americans began to follow.

In August 1920, Charles Ponzi went bankrupt. The reason is very simple. This "investment plan" was a scam from the beginning. There was no investment at all. It just used the money invested by subsequent participants to pay for the money invested by previous participants, creating the illusion of a "high return on investment." Because the promised rate of return was too high, the newly absorbed funds were not enough to cover the funds that early participants needed to redeem.

Since then, "Ponzi scheme" has become a proper term, specifically referring to those companies that promise high returns, but actually use the money invested by new participants to pay interest and short-term returns to early participants to create A scam that creates the illusion of making money and then lures more people into participating.

So, we can summarize the three characteristics of "Ponzi scheme": there is a central figure or institution to operate; promising high returns; using the money invested by new participants to Early participants pay interest and short-term returns.

02. Why is Bitcoin not a “Ponzi scheme”?

Next, let’s take a look at whether Bitcoin has three characteristics of a “Ponzi scheme”.

First, "there is a central person or institution to operate from."

We all know that Satoshi Nakamoto invented Bitcoin in 2008 and retired two years later. Since then, Bitcoin has been maintained by a group of top programmers from around the world, known as "Bitcoin Core Developers."

Looking at it this way, it seems that Bitcoin has a "central institution", but this is not the case. The main job of these core developers is to maintain the Bitcoin code and how to improve the Bitcoin system, not to fool ordinary people into buying and investing in Bitcoin.

Second point, “promise high returns”.

In the Bitcoin white paper released by Satoshi Nakamoto in 2008, there was no word "promising high returns", and Satoshi Nakamoto did not publicly declare that investing in Bitcoin could bring huge returns.

Bitcoin itself is open source, so anyone can view and contribute to the Bitcoin code. All Bitcoin transaction records are stored in the Bitcoin network and can be viewed by anyone in the world.

If there really was a "promise of high returns", no programmer would have exchanged 10,000 Bitcoins for 2 pizzas worth $25 in 2010 (these 10,000 Bitcoins are now equivalent to 1.36 billion yuan, with a peak value of 4.6 billion yuan).

The last point is, "Use the money invested by new participants to pay interest and short-term returns to early participants."

Since Bitcoin does not have a "central institution" and does not "promise high returns", it is impossible to "use the money invested by new participants to pay interest and short-term returns” operation.

You may say, right? Buying at a price of 44,000 yesterday and selling at a price of 45,000 today is using the money invested by new participants (those who bought 45,000 today) to pay interest and short-term returns to early participants (44,000 yesterday) 45,000 people who bought and sold today).

What's wrong?

As we all know, buying and selling Bitcoin is personal freedom. One is willing to buy and the other is willing to sell. There is no forced buying and selling behavior, and there is no induction of new people to participate, so it cannot be called "using new participants' money to pay interest and short-term returns to early participants."

Besides, the price of Bitcoin does not keep rising, but fluctuates violently. No one can guarantee that after buying it, it will be sold to the next investor at a higher price. In the circle, the number of Bitcoin speculators who have lost money or even gone bankrupt far exceeds the number of investors who have made profits and achieved financial freedom.

03. Conclusion

After reading today’s article, if someone tells you that “Bitcoin is a Ponzi scheme” in the future, you know How did you respond?

Yes, ask him directly: Does Bitcoin “have a central person or institution to operate it”, does it “promise high returns”, and does it “pay early participants with the money of new participants” interest and short-term returns”?

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