This instance is a straightforward comparability to focus on the distinction between a Ponzi and Bitcoin. There’s the narrative that Bitcoin follows a Ponzi due to the “Higher Idiot Idea”. This states that like a Ponzi, Bitcoin depends on new folks to place cash so nobody is left holding the luggage.
Allow us to evaluate when investing cash utilizing a theoretical instance. We’ll evaluate two traders, Alice and Carol. Every investor could have $1,000 to take a position. Alice will spend money on a Ponzi scheme whereas Carol will spend money on Bitcoin.
Funding Comparability — Ponzi Scheme (Instance 1)
Allow us to say that Alice has $1,000 to take a position. She was approached by an funding analyst at firm XYZ to spend money on their holdings with yields of 250% every year (APR). She would have a terrific $3,500 return on funding after 1 yr, reasonably than have money idle on the aspect.
The funding analyst tells her an unimaginable story, that sounds unbelievable at first. Then they resort to “superstar” endorsements with ensures of earnings from testimonials by early traders who’ve made insane features.
She is keen to earn these earnings, so she provides an preliminary fee of $1,000 to the funding analyst and in return obtain a bond certificates that “proves” her declare. This creates…
