Is Bitcoin a Ponzi Scheme?


By no means can Bitcoin be labeled as a Ponzi scheme. It provides very valuable services. Bitcoin is not being sold either. The term “bitcoins” is a store of value on the Bitcoin network. This store of value can be sent or received by anybody else with a wallet on the Bitcoin network. This transfer of value is the same service that the major credit card companies provide. Yet, Bitcoin provides the service for nearly free or potentially free. Credit card companies charge huge fees to transfer wealth from one individual to another. Take a look at how much Western Union charges to transfer money from person A in one country  to person B from another country.

This would be like calling the internet a Ponzi scheme or calling email a Ponzi scheme. Bitcoin is a protocol. That means it is just a set of standard rules that a network must follow. The rest of the network can verify if any single node is not following the rules and not accept the work that they performed. Data center provide their processing power for a fee to businesses that need a website. E-mail is free for the end user because the companies that are paying for the hosting is also placing ads and making revenues from the users that way. Since Bitcoin is such a useful financial instrument, it can not be a Ponzi scheme. A Ponzi scheme can’t be selling a useful product. Some people are calling Bitcoin one of the greatest inventions of all time comparing it to the likes of the telephone. To call it a Ponzi scheme is completely inaccurate since it provides so much for nearly nothing.

When you buy bitcoins, you are buying a tool to make trading goods and services more easily. The USD is a tool to make trading goods and services more easily. Gold used to be a good store of wealth and excellent to trade for goods and services. However, it is very inefficient to send gold back and forth between people. The US Dollar was a receipt of gold before they detached its value from gold. It was then set by how much money they print and what people can get with the money that they have. Some financial institutions provide services like Bitcoin does, but they charge a large amount of fees to use it. Even if Bitcoin is not successful, it will be a competitor to the current financial markets and force them to lower the prices or risk losing customers.

The current institutions might try to make up for their losses by increasing their prices even more. This would, in turn, make more people try to find alternative sources. In the end, I think Bitcoin will be used around the globe and it will force the large financial institutions to lower their prices for their services. The financial institutions must adapt to meet the advancing technology that the human race is discovering. We are currently locked in an old system that a few wealthy individuals control. Bitcoin will free the world from the current monopoly and give the two out of three people on the planet banking that currently do not have it.