Is Crypto a Ponzi scheme?

[raaman]

Is Crypto a Ponzi scheme?

Cryptocurrency is not a Ponzi scheme, as some people may think. Of course, there have been cases of fraudulent activities and scams in the cryptocurrency market that have come to light. However, the existence of fraudulent activities and scams does not mean that cryptocurrency as a whole is a Ponzi scheme.

A Ponzi scheme is a fraudulent investment scheme where returns are paid to the earlier investors using the money paid by the new investors into the scheme. Such schemes sooner or later collapse when there are not enough new members in the scheme to pay the assured earnings to earlier investors.

On the other hand, cryptocurrency is a digital asset designed to function as a medium of exchange, using tough cryptography to protect financial transactions, and to check the transfer of assets. The value of cryptocurrency is decided by market demand and supply, akin to any other asset such as stocks, gold, or real estate.

The cryptocurrency market is still quite new and unstable. Therefore, it is not characteristically a Ponzi scheme. Nonetheless, it is important for investors to conduct due thoroughness and invest only in trustworthy cryptocurrencies, and exchanges to avoid falling prey to fraudulent schemes, or scams. ​

 

[Shaf]

A ponzi schemes is a fraudulent method designed to rob money from Peter and pay Paul, without any exchange of goods or services or value added.

Cryptocurrency adds value to the economic system, as most of the projects are used in solving real life problems in economics and other areas like storage, logistics and much more.

Like investing in stocks and shares, buying cryptocurrency is like buying a part of a company, and you make money when the stocks rise or fall.

Ideally, someone will have to lose money for another one to make money in crypto, but you can arm yourself with the skills and tools to avoid being at the losing end.

 

[raaman]

hi@shaf,
It is but true that a Ponzi scheme is an unethical method used to steal money from one person and pay it to someone else, with no exchange of anything or any services or adding any value.

I am not sure as to what projects of cryptocurrency are utilized to address practical issues in economics and other fields like storage of products, logistics, and many more, and how cryptocurrencies contribute value to the economy, since many Governments across the world has not recognized it so far.

Purchasing crypto may be like buying a stake in any business similar to investing in stocks and shares in various companies. But how safe and secure it is questionable. And, the profit one may earn when the stock price increases is also not guaranteed by any agency or authority, I think.

According to me, in order for crypto to work, someone has to lose money, in order for someone else to gain it is not a good idea as to how a scheme should work. At the same time, you can be alert, and cautious with appropriate knowledge on the subject, so that you can prevent losing your hard earned money in the end. ​