[pbhjpbhj]

It's like a pyramid scheme in that so long as people keep buying in on the hope of a profit you'll keep making more and more. As soon as people say "hang on this is a con" and convert to another currency then this factor of the supposed value of Bitcoin could deflate to zero. It's not formalised like a pyramid or MLM scheme but it has some of the same structure.

[buchanaf]

A pyramid scheme involves some form of active (fraudulent) recruitment to help increase the price of the asset. Bitcoin doesn't have this.

From what you described above, every single speculative/overinflated asset would be a pyramid scheme. That's not the case.

[zanny]

It is a bit of a fraud to claim bitcoin can ever replace fiat currencies, though. Its deflationary, has a fixed coin limit, is incredibly centralized, and its tx rate is awful and costs a ton to move any of it around the chain.

The only value in bitcoin is in how much it exchanges for at this point, and that is definitionally a pyramid scheme, because current buy-ins need more adoption to drive the price up so they profit off their investment.

3% of all addresses control 97% of all coins. 0.01% of all addresses control 21% of all coins. And bitcoins mint rate is slowing every four years and almost 80% of all bitcoin that will ever exist already exists.

Its absolutely a pyramid scheme. Early adopters were incentivized with large quantities of limited coins to persuade them to mine and participate when the value was low. Those really early wallets (circa 09-12) amassed over half of all bitcoin ever and are now worth extreme fortunes. Those fortunes are based on demand for BTC, demand for the tiny amounts actually left circulating.

The real question is how much of that old money is actually dead - lost wallets and lost passwords - and how much is just waiting to cash out for absolute fortunes. All it would take is one early wallet carrying thousands of BTC to liquidate to cause a panic.

[SippinLean]

What you said still falls quite short of a literal pyramid scheme, which has a pretty specific definition. There is no central organization to recruit new members. People that buy bitcoin receive a real, usable product. Every person holding bitcoin profits when the price goes up. This is all in stark contrast to a true pyramid.

The way specific ICOs are structured, I could see an argument for some kind of pyramid; but "bitcoin is a pyramid scheme" is easily proved false.

[mywittyname]

Well, there are two components to a pyramid scheme: 1. returns to early investors are generated by contributions from new investors. 2. Each new investor attempts to recruit two or more new investors.

The "profits" for existing investors are paid with money from new investors. So it checks the first requirement to be a pyramid scheme. Now, this isn't explicit, but people still understand that the more BTC investors, the higher the price.

And BTC investors go online and evangelize. They talk about how BTC is a full-proof investment that can only go up-up-UP. Even this thread is full of them. So that checks the second requirement to be a pyramid scheme.

[coryfklein]

Point 1 applies to Apple stock as well

Point 2 has nothing to do with Bitcoin. Yes, there are bitcoin holders that evangelize the currency, but there are plenty that don't.

You are not analogizing correctly - just because you can find a similarity or two between two things doesn't mean one is a metaphor for the other. See Hume's response to the Watchmaker Analogy[1] for more.

[1] https://en.wikipedia.org/wiki/Watchmaker_analogy#David_Hume

[mywittyname]

No. Apple stock returns profits to investors. While it's possible to also profit on speculation of future profits, that's not the sole, or even primary reason for investing in it. The primary reason for buying Apple stock is for a share of profits.

> but there are plenty that don't.

Bull. The BTC community as a whole, are evangelists and will point out the multitude of reasons why the price of BTC will trend toward infinity. It's no surprise that, as the financial institutions get more invested into BTC, Bloomberg, et. al. report more on how the price keeps going up! Because the only way to make money on BTC is to find someone willing to pay more than you did for one.

Apple could literally pay a $50/share dividend. BTC could never do that.

I'm not saying a pyramid scheme is a metaphor for BTC, I'm saying it is an instance of pyramid scheme in action. It's just a more modern evolution. The creators were smarter and covered their asses: making it a brand, not a company, hiding their identities, making it pseudo-anonymous.

[SippinLean]

There are many more components to a pyramid scheme, you've purposefully left out the ones that clearly don't apply to bitcoin and gone with a definition that is too broad to fit.

Further, your first component leaves out the necessity of a purposefully fraudulent bad actor to redistribute the new investors' "investments" to old investors, instead of investing them. This is clearly impossible with a distributed ledger. Returns (and losses) to all investors, new or old, are equally distributed.

Your second part is clearly much too broad, in a pyramid scheme new members are promised a share of the money taken from every additional member that they recruit.

Simply saying "hey, this could be a good investment" doesn't make something a pyramid scheme, unless Apple is a pyramid because my financial advisor told me and one more client to buy shares of it.

[coryfklein]

> literally the only way to earn a profit is to get someone else to buy it for more than you paid.

Don't you mean figuratively? An individual who bought $10 of bitcoin a year ago would have made a profit without bringing anybody else to Bitcoin. In a pyramid scheme, the ONLY way to make money is to bring others in.

[mywittyname]

Actually, I looked up the literal definition of a pyramid scheme before posting, to ensure I hit all the points.

> Returns (and losses) to all investors, new or old, are equally distributed.

No, old investors can profit while new investors lose money. Or, the new investors paid the old ones. Original BTC investors got them for free, the next generation paid pennies for them, the next paid dollars, then hundreds, and the current generation is paying thousands each.

So should the price collapse, the old generation still stands to make massive profits, at the expense of current investors.

> Simply saying "hey, this could be a good investment" doesn't make something a pyramid scheme, unless Apple is a pyramid because my financial advisor told me and one more client to buy shares of it.

Apple earns a profit, of which a share is provided to owners. That's why it's a good investment.

BTC is a purely speculative investment and literally the only way to earn a profit is to get someone else to buy it for more than you paid. It will never pay you a dividend, it will never generate any revenue.

[mrhappyunhappy]

Bitcoin is highly divisible so I think your point regarding it being fixed is unjustified.

[pbhjpbhj]

Have you bought some BTC, I made a killing on it, it's free money, get some now because after the fork you'll be able to bank at least 20% of your initial sum, ...

The peons in pyramid schemese usually aren't committing fraud, they don't realise that they're in a scheme, they're not lying, they are really convinced that they found the money tree and if only people buy in it will bear fruit forever.

I still think the analogy is useful.

[weddpros]

Forks are a corner case. As long as someone is willing to pay for the minority coin, why not sell it: the fact that someone is willing to pay for it makes it valuable.

"The peons in Theranos didn't commit fraud, they didn't realise they were in a scheme, they were not lying, they were really convinced that they found the money tree and if only people buy in it will bear fruit forever".

You can't call every company that has failed a pyramid scheme.

You can't call every company that seeks funds through VC or IPO a pyramid scheme, yet they know that they'll only get rich if others buy in.

[aw3c2]

> A pyramid scheme involves some form of active (fraudulent) recruitment to help increase the price of the asset. Bitcoin doesn't have this.

Haha, have you ever looked at what Bitcoin owners/speculaters post online?

[coryfklein]

More specifically, a pyramid scheme requires that you recruit others to make money. If you bought $10 of bitcoin 5 years ago and never told another soul or recruited another person, then you'd make a profit. The same cannot be said for a pyramid scheme.

[weddpros]

The same can be said of any startup/company.

Founders throw 1k$ in the pot, investors 100M$, the public 1B$, yet the founder has benefited a lot, by being there first.

If people start thinking "he's a con", the company's value will drop to 0. Bankruptcy.

Is the whole stock market a pyramid scheme?

A market isn't a pyramid scheme just because you didn't enter it at the beginning (that's also true for real estate).

The alternative would be a market where you'd benefit more if you enter last, which means there would be no incentive for anybody to enter first and create the market. That's why the alternative doesn't exist and markets do reward the first mover.

[mrb]

"It's like a pyramid scheme in that so long as people keep buying in on the hope of a profit"

You just described any investment. FX market, stock market, housing, etc. It doesn't make them "pyramid schemes".

[wbl]

I could buy a bitcoin and hope to sell it later. Or I could buy the S&P 500: a market cap weighted set of pieces of companies that will conduct business and grow by the time I have to sell them, and some will give dividends. Which seems better to you?

[cableshaft]

Determining that one thing is better than another thing (by however means you determine it, I think both are good for different reasons and have money in each) does not mean the less good thing must therefore be a scam, and definitely not a pyramid scheme, which has a specific definition that bitcoin doesn't fit.

Yes, bitcoin benefits from having more people participating in it, but so does Facebook, so does Twitter, so does Youtube, so does the Internet, so does the US dollar, so does the stock market, etc etc etc. That doesn't make these all pyramid schemes.

[coryfklein]

Historically speaking, if you bought bitcoin at any point and time and held on to it for 2 years it would outperform an S&P 500 index. We can argue about how long that trend would continue, but those who have chosen to invest at least something in bitcoin have made a good investment so far.

Yes, it is a high risk investment, and yes you could lose 99% of your investment. If you don't have a tolerance for that kind of risk, then bitcoin shouldn't make up much (if any) of your portfolio.

[wolco]

For the next few months you would be better off dividing the assets based on your risk profile. Based on current market trends the s&p may go down in the short term so bitcoin may allow you to spread that risk

[mrb]

Bitcoin changes the world: a permissionless decentralized financial ledger reduces payment friction hence boosts trade, gives access to the unbanked/underbanked, helps people escape inflation, etc.

[njarboe]

Investment used to mean putting up capital to create or own something that, with some work, would return a stream of income. Farmland produces food with the work of farming. A factory produces goods with lots of people working. A mine produces iron or copper with lots of machines and effort. With the financialization of the economy, lots of people are increasing their "wealth" by speculation and skimming a percentage on transactions. When people start believing that speculation is the only form of investing, society is in for a hard fall at some point.

[mrb]

By your definition, this still leaves FX trading as a "pyramid scheme". Trading fiat for fiat doesn't "put up capital to create something".

[matthewmarkus]

In FX trading people are putting up capital to create exchange ratios, which is information. Right now people are putting up capital to determine how much coin issued by a central bank with a "deflationary" bias written in code and run and administered by a collective (i.e., Bitcoin) is worth vis-à-vis USD. Something is most definitely being created.

[mrb]

You seem to be arguing that trading fiat↔fiat is comparable to trading fiat↔BTC. In which case I agree. That's the point I was making.