Bitcoin is a Ponzi scheme
Why is Bitcoin (k) a Ponzi scheme, Matthias Reder?
Ponzi scheme, pyramid scheme, Ponzi scheme - every year prominent opinions emerge that Bitcoin is a sophisticated fraud scheme from which unknown cheaters would benefit massively. Or at least people like to make such comparisons. Most recently, Nassim Nicholas Taleb, author of the world bestseller “The Black Swan: The Power of Highly Unlikely Events ", said in an interview that Bitcoin is a game that resembles a pyramid scheme.
The recent death of Bernard Lawrence "Bernie" Madoff, who operated a mutual fund based on a Ponzi scheme for decades (damage amount: more than 50 billion dollars), has again given many reasons to wonder whether Bitcoin is now such a pyramid scheme At the head of which there are strangers who make money, while at the base there are always new people who blindly pay into the system.
"Otherwise gold would also be the ultimate Ponzi scheme"
Matthias Reder has also dealt intensively with the question of whether Bitcoin is a Ponzi scheme or not. He has been working as Head of Compliance and AML (Money Laundering Officer) at Austria's oldest cryptocurrency dealer Coinfinity in Graz since March 2018. There he is responsible for the legal implementation of money laundering regulations and the prevention of terrorist financing and acts as a contact for banks and authorities, he is also a member of the advisory board of the Digital Asset Association Austria (DAAA) and an external lecturer on the subject of crypto-economics at the University of Applied Sciences Burgenland.
“Of course, Bitcoin may be reminiscent of a Ponzi scheme in various respects, but on closer inspection, it's not one. Otherwise, gold would also be the ultimate Ponzi scheme, and it has been for thousands of years, ”he says in an interview with Trending Topics. Reder mentions various points below that make it clear that Bitcoin is not a Ponzi scheme. Which would be among others:
- No commission:„There is no mechanism with Bitcoin that rewards someone when Bitcoin is bought or recommended. There is no one who receives a finder's fee for selling Bitcoin, ”says Reder. Sure, you can recommend other people to buy Bitcoin as well - only you won't get anything if they then buy BTC. Sure, the price can go up, but that doesn't depend on getting other people to buy BTC. The Bitcoin price can also fall in the same way
- No referral structure: Pyramid games live from the fact that older participants attract new participants in order to be one step above them in the system and thus to benefit from their deposits. "But there is no sales structure with Bitcoin," says Reder. There are no sales employees who swarm out and recruit new participants, and accordingly there is no referral structure, as is inherent in pyramid schemes.
- No promised return: Internet scammers trying to trick the unsuspecting into paying into a pyramid scheme often advertise high interest rates and returns. This does not exist with Bitcoin, nothing of it can be found in the whitepaper. "Bitcoin does not promise any return or interest, there are only rewards if you help the network," says Reder. “In principle, Bitcoin has no benefit for someone who got into Bitcoin early on. Nobody can predict the price of Bitcoin. This is different with the Ponzi scheme, it specifies how much return should come in the next few months and years, ”says Reder.
- No predefined packages: If you want to buy a whole Bitcoin, you can do it just like buying a few Satoshis. In other words: There is no limit or hurdle to be able to participate in Bitcoin. With the Ponzi scheme it is usually different, you usually have to pay in at least amount X in order to participate - otherwise the scheme would not work and collapse.
- No advertising: Sure, there are countless websites and apps that advertise BTC trading - but Bitcoin itself does not advertise. There are no marketing messages, no viral campaigns, no mass emails trying to lure people. Although there is a name of one or more strangers (Satoshi Nakamoto), these do not appear and do not entice anyone to join Bitcoin.
- No central issuing office: “There is no central, fixed point of purchase or issue of Bitcoin. Thanks to the decentralized Proof of Work process, different miners always receive the order for the cryptographic encryption of the transactions and currently receive 6.25 Bitcoin for it, ”says Reder. “Therefore, this reward is distributed more or less evenly aliquot to all those who provide the computing power. This means that new Bitcoins are always sold by different participants, but never happen centrally via a processing unit. "
Financial market watchdog warns of investment fraud in crypto assets
Bitcoin as a template for scams
But what you have to keep in mind: Even if Bitcoin itself is not a Ponzi scheme, the cryptocurrency has inspired countless fraudsters around the world to abuse it to put others into it. For example, OneCoin or Optioment have been exposed as scams in recent years, leaving countless people with great financial damage behind them.
In the past few months and years, the Austrian Financial Market Authority has also repeatedly issued urgent warnings against fraud models in which crypto assets are used:
“With this form of fraud, customer funds in the form of Bitcoin, Ripple, Ethereum etc. are collected with the promise of utopian high returns and low risk. Profits are often actually paid out initially, but these are not achieved through the sale of a particular asset. Instead, previous customers receive profit payments from new customer funds. However, as soon as a larger number of investors demand a payout of the winnings at once or no new customers are added, the system collapses. "
So how can you spot such fraud systems? There are several indications for which the alarm bells should ring, namely:
- You will be contacted unsolicited: According to the FMA, it is forbidden for companies to contact people on their own initiative in order to sell them something.
- No imprint: There is no legal notice on the provider's website and it is difficult or impossible to find out who is behind the offer
- Unrealistically high returns: Anyone who is promised the sudden, miraculous increase in money with a few clicks should be skeptical and better stay away from it
- Not allowed: If you can find out which company it is, take a closer look at them. Trustworthy financial service providers are approved and supervised by the FMA. More information here.
Financial market supervision warns of a sharp increase in pumps and dumps
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