Letter: Is Bitcoin a Ponzi scheme?

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  • cjb Bountiful, UT
    Jan. 28, 2014 5:17 p.m.

    I read an article of a man that had many thousands of dollars of bit coins on his hard drive then mistakenly disgarded the hard drive and unless the drive was found the bit coins were unrecoverable.

    I don't understand them. I'm curious to learn how they actually work.

  • seanmft Los Angeles, CA
    Jan. 25, 2014 2:09 p.m.

    The reason you think Bitcoin looks like a Ponzi scheme is because you don't understand Bitcoin, and apparently you don't understand what a Ponzi scheme is either. Point #1 could be any financial opportunity. Is the internet a Ponzi scheme? Was Apple stock a Ponzi scheme? Why not? Early investors made big gains. Point #2 isn't even a point really, unless it's meant to be a point about groups in general. Yes, groups tend to do things together...as groups. Points #3 and #4 are essentially the same point reworded, and neither applies to Bitcoin. The Bitcoin protocol is open-source. Anyone can view it, use it, or modify it however they wish to. The fact that no one knows the exact identity of the person who first came up with the idea is meaningless to the question of Bitcoin's usefulness or honesty. Do you know who invented the wheel? No? Yet you can take a wheel, verify that it is indeed round, and test for yourself that it rolls. The same applies to Bitcoin, only it is more complex and therefore requires more effort in understanding.

    Please look up "Ponzi scheme", because you are grievously abusing the phrase.

  • Mister J Salt Lake City, UT
    Jan. 24, 2014 4:42 p.m.

    re: 2 bits

    A pyramid scheme you say? Like Fractional Reserve banking used by the Fed & US financial institutions?

  • one vote Salt Lake City, UT
    Jan. 23, 2014 9:41 p.m.

    The wealthy Chinese trying to avoid the communist government will make it the next currency.

  • wrz Phoenix, AZ
    Jan. 23, 2014 4:11 p.m.

    @: bits
    "It's not a 'Ponzi scheme'... it's a 'pyramid scheme'..."

    It's also illegal. Only the government (federal) can create money. This per the US Constitution.

  • Mike in Sandy Sandy, UT
    Jan. 23, 2014 10:41 a.m.

    How much is it in Canadian?

  • 2 bits Cottonwood Heights, UT
    Jan. 23, 2014 10:05 a.m.

    It's not a "Ponzi scheme"... it's a "pyramid scheme"... there's a difference. One is legal, the other isn't.

    It's kinda like the stock market. The value of the stock certificates are base only on what people are willing to pay for them today (no intrinsic value).

  • Irony Guy Bountiful, Utah
    Jan. 23, 2014 9:48 a.m.

    It smells exactly like a Ponzi scheme to me. If Bitcoin wanted credibility, they should tie each unit to a specific unit of currency, e.g., a serial number on a dollar bill. Then they could exchange money at will and make something off the float. What they're doing now is simply a scam.

  • Hutterite American Fork, UT
    Jan. 23, 2014 8:36 a.m.

    The difference we seem to be losing sight of is that, in spite of the hype, we need not have anything to do with it, and will not be any the worse for it.

  • micawber Centerville, UT
    Jan. 23, 2014 8:27 a.m.

    The hallmark of a Ponzi scheme is the use of new investor money to pay old investors. The other factors listed sometimes accompany a Ponzi scheme, but they do not define it.

  • MillyBitcoin ocean city, NJ
    Jan. 23, 2014 1:25 a.m.

    Those involved in finance and investment often completely misunderstand Bitcoin. It is an experiment in a decentralized consensus system. The consensus of the public ledger is done with no central authority which is a fundamental change in the way things have been done. As for Bitcoin itself it is a currency, payment system, and a commodity. All these things have to be taken into account when evaluating Bitcoin as well as the fact that it is still experimental. Also, whatever happens at Bitcoin exchanges really have nothing to do with Bitcoin itself as they are just private companies and do not issue Bitcoin. As for the investment part, you are dealing in a mostly unregulated experimental system and most of the major players repeat over and over that people should not invest money that they cannot afford to lose completely.

  • wrz Phoenix, AZ
    Jan. 23, 2014 12:52 a.m.

    "Almost no information is available about how the scheme is generating gains."

    Good point. With coinage there is what's called Seigniorage which is the value of a minted coin over the cost to mint. If if costs one cent to mint a nickel, the seigniorage is four cents.

    With bitcoin the seigniorage seems to be one hundred percent since there is not cost 'mint' the 'coin.' So, who gets to retain that value? With the nickel the US government retains the four cents in net value.