The accusation that bitcoin is nothing more than a Ponzi scheme is perhaps the oldest, longest-standing criticism of the digital bearer asset. The basic idea is that there is nothing of value here and the entire purpose of bitcoin’s existence is to enrich Satoshi Nakamoto and the speculators who bought in for a few pennies or dollars in the early days by tricking others into buying in at a higher price.The key characteristic of a Ponzi scheme is that returns promised to early investors in a nonexistent enterprise are paid out with money put into the scheme by later investors. These sorts of scams fall apart when there are simply no new people to scam into “investing” in the project. At that point, the early investors stop receiving a return on their initial investment and it becomes clear the whole scheme was based on lies and deceit rather than some sort of legitimate investment strategy or product.Bitcoin is clearly not a Ponzi scheme for two key reasons: (1) bitcoin exists to provide real value and utility to its users, and (2) bitcoin does not require new investment to keep working.Bitcoin’s Utility Doesn’t Require New InvestmentI’ve already debunked the argument regarding bitcoin’s supposed lack of intrinsic value in a separate article, but it’s important to cover that again as it’s also part of the Ponzi scheme claim. In a Ponzi scheme, there is no product, business plan or investment strategy that leads to returns. In...
