Many new investors get to know the crypto world through Bitcoin and claim that the whole scheme is Ponzi or Pyramid.
Although this statement is far from true, it is understandable why many novice investors consider it valid.
This point of view can be achieved due to a lack of more profound knowledge about Bitcoin and cryptocurrencies.
This article will explain why Bitcoin is not a Ponzi Scheme or even a Pyramid Scheme.
Getting to Know The Ponzi
The scheme The Ponzi scheme comes from the name of Charles Ponzi, who created this scheme by committing money fraud in the early 1920s.
An Example of a Ponzi Scheme
An example is when someone offers an investment with a fixed profit rate of 10% to someone willing to pay $1000.
However, the condition is that these benefits can only be obtained if $1000 is invested in him within one month.
Within this one month fraudster will continue to look for other people who want to invest $1000.
When one month ends, the fraudster will pay a profit of $1000 or 10% to the initial investor with the last investor he met.
Generally, these fraudsters will also invite early investors to reinvest so their money can continue to multiply.
But over time, when it becomes difficult for fraudsters to find other “investors,” the system will become challenging. When these conditions occur, generally, new conditions will begin to appear or several reasons for delaying profit payments; there is even a possibility that the fraudster will run away.
Differences Between Ponzi Schemes and Pyramid Schemes
Ponzi schemes are generally equated with Pyramid Schemes, although they have differences, where there are differences in their legality and validity.
Pyramid schemes generally occur in the business sector, where investors invite others to get rewards.
In addition, the Pyramid Scheme does not have one manager like Ponzi, but members or investors also become managers who will get rewarded if they succeed in getting other members.
Please note that there is a difference between Multi Level Marketing (MLM) and Pyramid Schemes.
Generally, the Pyramid Scheme does not offer any services or goods and only survives on money from the growing number of members.
So please note that not all MLMs are Pyramid Schemes, but MLMs carried out with bad ethics may be categorized as Pyramid Schemes.
It can be said that the majority of investments that are Ponzi Schemes or Pyramid Schemes are fraudulent investments that are still circulating in Indonesia. So it is essential to consider what is offered in the investment before investing.
Bitcoin Is Not a Ponzi Scheme or Pyramid
As previously said, some new investors still often believe Bitcoin is a Ponzi Scheme or a giant Pyramid.
This statement is wrong because Bitcoin is not offered as an investment tool but as a medium of exchange with innovative technology.
Unlike the investments offered by this scheme, Bitcoin is something that has a specific product and a broad ecosystem.
To be clear, five comparisons can be made between Ponzi Schemes or Pyramids with Bitcoin and crypto.
These five comparisons are formed based on their essential characteristics, from their original nature to their yield.
Comparison of Bitcoin and Ponzi Schemes
The first comparison is the return or return on investment, where the Ponzi Scheme generally yields will remain constant.
Meanwhile, the return on investment in Bitcoin or digital money is not something that can be promised because it moves according to its development as a financial asset.
The second comparison is openness, where Bitcoin is an open system or has an open source that can be developed and transparent.
This nature is different from the Ponzi Scheme, which is generally confidential and not transparent, especially by the manager or “early leaders.”
The third comparison is the number of holdings, where initial and new investors can have the same opportunity.
New investors can own a more significant amount of Bitcoin than the initial investors if they buy more. So the benefits can also be even more significant.
This is different from the Ponzi Scheme, where those who follow the system initially will profit more significantly.
Also, in a Ponzi Scheme or Pyramid, generally, new parties will not have the same opportunities.
When Bitcoin was first established, Satoshi Nakamoto also gave the public the same opportunity to mine so that he did not monopolize it.
The fourth comparison is the nature of centralization and decentralization, where Bitcoin grows decentralized without a leading manager or leader.
In a Ponzi Scheme, there will generally be a leading manager who makes it move in a centralized manner because it is centered on that party.
The Fifth Comparison is nature, where Ponzi Schemes are generally only Investments or businesses.
Bitcoin is a medium of exchange created to disrupt the current financial system.
With its ecosystem and technology, Bitcoin is very different from Ponzi Schemes.
To think of the two as the same thing is wrong.
So, it can be concluded that Bitcoin differs much from Ponzi Schemes or Pyramids because Bitcoin itself was created as a financial asset and a medium of exchange.
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