There have been many arguments about experts believing that Bitcoin is a Ponzi scheme or a pyramid scheme worldwide. When dispersed to the masses, this opinion may have influenced many minds to avoid the crypto sector entirely. This isn’t very pleasant since it holds people from discovering the possibilities and wonders of cryptocurrencies.
Bitcoin has been a boon to the crypto sector and has brought success for many companies, investors, and artists in different ways. So to justify the notion of it being related to Ponzi schemes, especially when this one-sided argument is being expressed massively worldwide, it is important to also know what lets other people not believe that Bitcoin is a Ponzi scheme.
With so many achievements in Bitcoin already happening, listening to the discussions about Bitcoin being compared to Ponzi schemes may have made many feel they are not being shown all the sides of the argument. If you are one of those people, don’t worry; in this article, we will share with you five reasons why it is wrong to say that Bitcoin is a Ponzi scheme.
First, let us know what Ponzi schemes are. Ponzi schemes are a type of investment fraud in which existing investors are compensated with funds raised from new investors. Fraudsters who plan Ponzi schemes frequently offer to invest your funds and earn high returns with little or no risk. The fraudsters in many Ponzi schemes don’t invest that money. Instead, they utilize it to compensate previous investors, possibly keeping part of the money for themselves.
Now, we will be addressing the points made by those who believe Bitcoin is a Ponzi scheme by also sharing reasons behind those points not making sense. Let’s get into it!
- Bitcoin never promised any investment return
For the first decade of Bitcoin’s introduction, Bitcoin was recognized as a high-volatility speculation. Bitcoin did not have any quotable price for the initial year and a half, and then it had an extremely volatile price.
Satoshi’s digital writings are still available, and he rarely mentioned financial gain. He primarily wrote about technical issues, such as freedom, current banking industry challenges, and so on. A Ponzi scheme’s promise of abnormally high or consistent investment returns is a classic red flag, yet Satoshi’s original Bitcoin had no such promise. Bitcoin investors have frequently anticipated very high values over time, but the project itself did not mention such predictions from the start.
- Bitcoin doesn’t rely on secrecy
The majority of Ponzi schemes are based on secrecy. If investors realized that an investment in Bitcoin that they owned was a Ponzi scheme, they would strive to get their money out as soon as possible. Because of the secrecy, the market would have been unable to price the investment until the secret is revealed correctly.
For instance, investors in Bernie Madoff’s Ponzi scheme believed they had a diverse portfolio of assets. Earlier investor withdrawals were being repaid by new investor inflows rather than money being created from meaningful investments. The investments reported on their statements were false, and it would be highly impossible to verify that they were fake for any of those clients.
Bitcoin, on the other hand, is based on the opposite set of principles. Every line of code is known in Bitcoin as a distributed piece of open-source software that demands majority consent to update, and no central power can change it. One of Bitcoin’s primary focuses is to verify instead of trust.
The entire premise of Bitcoin is that it is immutable and self-verifiable, with no reliance on third parties. Bitcoin can only be moved with the private key associated with a specific address, and no one can stop you from doing so if you use your private key to do it.
Of course, there are some nasty characters in the ecosystem. Third-party exchanges have the potential to be fraudulent or compromised. People can be duped into exposing their private keys or account information through phishing attempts or other frauds. However, these are unrelated to Bitcoin, and users who use Bitcoin must understand how the system works to avoid falling prey to scams in the ecosystem.
- Bitcoin had no pre mine
When it comes to debating against the idea that Bitcoin is a Ponzi scheme, Bitcoin is leagues ahead of most other digital assets with no pre-mine concept. Satoshi demonstrated how to do it by publishing his whitepaper months in advance and then releasing the project as an open-source project on the first day of spendable coin generation, with no pre-mine.
Unlike many other blockchains, Bitcoin was developed organically through a revolving group of major stakeholders and voluntary user donations rather than through a pre-mined or pre-funded pool of capital.
- Bitcoin evolved without any central leader
One of the things that makes Bitcoin so fascinating is that it is the only major digital asset that has thrived without a centralized leader. Satoshi established it under a pseudonym, collaborated with others to manage it through the first two years of development on public forums, and then vanished. Therefore, there is no core mastermind benefitting from what is supposed to be a Ponzi scheme.
Other developers then took up the role of continuing to develop and promote Bitcoin. Some developers have been crucial, but none are fundamental to the project’s continuing development or operation. Even after Satoshi, the second group of developers mainly selected different routes.
- Bitcoin being unregulated
Bitcoin could have been an unregistered investment in its initial stages, but it now has a home in tax and regulatory frameworks worldwide. Although regulations modify over time, the asset has become popular. It’s so common that Fidelity and other custodians hold it for institutional clients, and J.P. Morgan shares price targets for it.
The only factors on the red flag list of Ponzi schemes that could apply to Bitcoin relate to unregulated investments. But this does not imply that something is a Ponzi scheme; instead, it indicates that a warning sign has been raised, and investors should proceed with caution.
Bitcoin is an excellent investment
After addressing everything against the notion that Bitcoin is a Ponzi scheme, let’s also address the fact that Bitcoin is an excellent investment. Due to its massive market cap of over $1 trillion and many users, Bitcoin is regarded as one of the most efficient cryptocurrencies ever launched.
If you are willing to invest in Bitcoin and buy Bitcoin in India, you can go to WazirX, which is a cryptocurrency exchange in India trusted massively by people. In April 2021, WazirX reached a transaction volume of $5.4 billion. The amount was 11x WazirX’s $500 million volume in December 2020.
Let’s go through the step by step process of how to buy Bitcoin in India from the WazirX cryptocurrency exchange
- Install the WazirX app.
- Register and validate your KYC to set up your account. To make your app even safer, make sure you use two-factor authentication.
- Add your bank/UPI information to the app. Once your bank details/UPI are registered, you can put money on the exchange.
- You can now easily buy Bitcoin on the WazirX cryptocurrency exchange platform.
Further Reading:
Bitcoins in India: Challenges and Opportunities Ahead
Top Bitcoin Myths That You Should Stop Believing
How to Spot a Cryptocurrency Scam?
Does Bitcoin have a volatile nature? Why?
Top Things to Consider Before Investing in Bitcoin
Frequently Asked Questions
How To Create Bitcoin Account?
Firstly, Go to the WazirX website and sign up. Then, a verification mail will be sent to you. The link sent via verification mail would be available only for a few seconds so make sure you click on the link sent to you as soon as possible, and it will verify your email address successfully. The next step is to set up security, so select the most suitable option for you. After you have set up the security, you will get a choice to either proceed further with or without completing the KYC procedure. After that, you will be directed to the Funds and Transfer page, where you could start depositing Bitcoins to your wallet. You can also deposit INR and then use it to buy Bitcoin for your WazirX Bitcoin wallet.
How To Make Bitcoin?
Bitcoin mining is not just the process of putting new Bitcoins into circulation, but it is also an essential part of the blockchain ledger's upkeep and development. It is carried out with the assistance of highly advanced computers that answer challenging computational math problems. Miners are rewarded for their efforts as auditors. They are in charge of ensuring that Bitcoin transactions are legitimate. Satoshi Nakamoto, who is the founder of Bitcoin, innovated this standard for keeping Bitcoin users ethical. Miners help to prevent the "double-spending problem" by confirming transactions.
What Is Meant By Bitcoin?
Bitcoin is a digital currency that was initially released in January 2009. It is based on ideas offered by Satoshi Nakamoto, a mysterious and pseudonymous figure, in a whitepaper. The name of the person or individuals who invented technology has not been revealed. Bitcoin promises lower transaction fees than other online payment systems, and unlike government-issued currencies, it is decentralized.
Is Bitcoin Safe And Legal In India?
In 2020, the Supreme Court of India lifted the RBI’s restrictions on cryptocurrencies. According to the Supreme Court, the existence of Bitcoin or another cryptocurrency is unregulated but not unlawful. The verdict has greatly aided the world of digital money in the country. To put it another way, investing in Bitcoin is perfectly legal, and you may do so through various apps and traders.
How Does Bitcoin Work?
The blockchain, a distributed digital ledger, is what Bitcoin is based on. As the name suggests, blockchain is a linked database made up of blocks that store information about each transaction, such as the date and time, total amount, buyer and seller, and a unique identifier for each exchange. Entries are linked in chronological order to form a digital blockchain. Entries are linked in chronological order to form a digital blockchain. Blockchain is decentralized, which means any central authority does not control it.
Who Created Bitcoin?
Bitcoin is the first application of the concept of "cryptocurrency," first articulated in 1998 on the cypherpunks mailing list by Wei Dai, who proposed a new form of money that relies on cryptography rather than a central authority to manage its creation and transactions. Satoshi Nakamoto published the initial Bitcoin specification and proof of concept on the cryptography mailing list in 2009. Satoshi exited the project in late 2010, with little information about himself available. Since then, the community has evolved, with numerous people working on Bitcoin. Satoshi's anonymity has sparked unfounded fears, many of which may be traced back to a misunderstanding of Bitcoin's open-source nature.
What Are The Chances Of Bitcoin Crashing?
Two Yale University economists (Yukun Liu and Aleh Tsyvinski) produced research titled "Risks and Returns of Cryptocurrency" in 2018. They looked at the possibility of Bitcoin crashing to zero in a single day. The authors discovered that the chances of an undefined tragedy crashing Bitcoin to zero ranged from 0 percent to 1.3 percent and was around 0.4 percent at the time of publishing, using Bitcoin's history returns to determine its risk-neutral disaster probability. Others claim that because Bitcoin has no intrinsic value, it will inevitably crash to zero. On the other hand, Bitcoin advocates argue that the currency is backed by customer confidence and mathematics.
Is Bitcoin Trading Is Legal In India?
In 2020, the Supreme Court of India lifted the RBI’s restrictions on cryptocurrencies. According to the Supreme Court, the existence of Bitcoin or another cryptocurrency is unregulated but not unlawful. The verdict has greatly aided the world of digital money in the country. To put it another way, investing in Bitcoin is perfectly legal, and you may do so through various apps and traders.
Is Bitcoin Cash A Good Investment?
Bitcoin Cash is a hard fork of Bitcoin formed in 2017 to address Bitcoin's scalability and challenges. Bitcoin Cash seeks to make global transactions faster, cheaper, and more secure. Bitcoin Cash is now accepted by thousands of online and offline businesses all over the world. Studied correctly, Bitcoin Cash may be an investment worthy of consideration.
Is Bitcoin Legal In India?
In India, Bitcoin is not illegal. Because of cryptocurrency's rapid evolution, policymakers and regulators seemed to have recognized the chance to accept the new technology early. From the infamous 'RBI ban' in 2018 to reports of an impending bill banning cryptos in 2021 that has yet to develop, India has seen its fair share of ups and downs when it comes to Bitcoin regulation. Last year, the Supreme Court Of India approved the use of Bitcoin throughout the country. According to the Supreme Court, the existence of Bitcoin or any other cryptocurrency is unregulated but not unlawful.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
Very useful article. I want to know more Information about Ponzi Scam and how it works. Here you describe bit coin is not a Ponzi scheme or Pyramid scheme.