Is Bitcoin a Ponzi Scheme or Another Tulip Story?

Is Bitcoin a Ponzi Scheme or Another Tulip Story?


 

     Ponzi scheme : A fraudulent investment operation in which an individual or institution returns new investors' funds (rather than earnings) to previous investors.

 

     Many people accuse Bitcoin of being a Ponzi scheme, saying that as more and more investors enter, early investors get high profits, which is a Ponzi scheme. But this statement is stupid, because any new technology, new method, and new company has this characteristic.

 

     The first investor in Apple made huge profits from the investors who bought the stock later because the stock price went up. When something new comes out, the risk is very high before the concept or technology is fully recognized.

 

     Therefore, high returns are required to offset this risk.

 

     There are numerous get-rich-quick stories in the Bitcoin space in the news. For example, a Norwegian college student invested $26 in Bitcoin in 2010 and forgot about it. In 2013, he found that his investment had turned into more than $800,000, which he used to buy himself an apartment. The price increase between 2010 and 2013 was because more people discovered the value of Bitcoin than initially thought.

 

     One element of a Ponzi scheme is that there needs to be a central party controlling the operation ; no one person can control Bitcoin; it is a network system consisting of millions of users.

 

     People who want to discredit Bitcoin often compare it to the tulip mania that occurred in Amsterdam in the 16th century. At that time, collecting was a common way to invest, and tulips were considered a rare collectible, so the price rose rapidly, up dozens of times. Many people made a lot of money from early tulip investments, but eventually the price suddenly fell, and many people were left with some worthless flowers.

 

     The only similarity between the tulip event and the rise of Bitcoin is the sudden increase in value . However, the differences are many. Tulips are beautiful, but have no real value and cannot solve real problems. They were rare at first because tulips are a plant native to Central Asia, but as the price increased, the supply also increased. Bitcoin is valuable in itself because it solves real-world problems. In addition, despite the increase in demand, the supply cannot increase. Comparing Bitcoin to tulip investments in the 16th century is foolish and naive.


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