Crypto A Ponzi Scheme

“Crypto A Ponzi Scheme”

“Crypto a Ponzi scheme”- I hear this often from people who know little about it. They see crypto as “fake” and always describe it as some “Ponzi scheme”.

img credit

After seeing so many DeFi projects built as Ponzi’s, it got me thinking “What if they are right?” There is no doubt that some of the DeFi projects have successfully taken crypto from zero to a hero of our time. But what about crypto as a whole, is it all just one big Ponzi scheme? To answer this let’s find out what Ponzi means.

What is a Ponzi scheme? A Ponzi scheme is an investment that pays existing investors with funds collected from new investors. It was named after Charles Ponzi who committed fraud in the early 1920s when he promised investors a 50% return within a few months. Ponzi used capital from new investors to payout earlier investors, but today we know these schemes fail if not enough new investors are coming in to pay off those expecting their returns leading to an eventual collapse. Typically these fraudulent schemes offer high rates of return with little risk associated with the project, in other words, they are “too good to be true”

  • Benefit — the promise of an above-average return or yield
  • Explanation — the believable story that explains how it all works
  • Credibility — the person(s) running the scheme appear credible
  • Pay Outs — early investors receive the payouts promised
  • Word Spreads — new investors join in after hearing about the success
  • Collapse — at some point the requested payouts exceed existing capital

Bernie Madoff ran the largest and most well-known Ponzi scheme in his hedge fund. He promised returns of about one per cent per month and his customers believed they would be able to cash out both their initial investments and their returns whenever they wanted. Participants received statements showing the growth of their accounts and everything appeared fine until the financial collapse in 2008 when a large number of redemptions occurred at the same time and there wasn’t enough money to cover the fund outflows. Estimated losses from this scheme range up to 50 billion US dollars.

Let’s use Bitcoin as an example since its largest cryptocurrency, Bitcoin (BTC), may appear to be a Ponzi from the outside. Investors buy bitcoin expecting or perhaps just hoping, that it will increase in price. Bitcoin has little to no utility so there is no source for profits for the coin to generate. Price increases come from new investors coming in and buying bitcoin driving up the price. That is starting to sound like a Ponzi, however, bitcoin doesn’t promise any sort of yield of the coin so investors know they can lose money if the price declines.

What makes bitcoin differ from a Ponzi scheme? The point here is that it is easy to take many things and compare them to Ponzi schemes using the Key elements of a Ponzi scheme. But in reality, Crypto is like the stock market, if new money stops coming in the prices will fall while many of those holding stocks will sell to limit their losses. The entire thing starts to crash and almost any form of investment has this potential economically. Is every investment therefore a Ponzi, of course not.

Why You Should Get $XFP.

No. Crypto is never built for a Ponzi scheme. It is a lazy analysis by those who don’t understand the industry. It is a complicated world, no doubt, and this is why lazy opinions come out and throw out words like Ponzi to dismiss something they fail to understand.

That stated, bad actors do exist in crypto just like everywhere else. There are also a number of protocols built on ponzinomics but these do not paint the picture for the entire industry.

While I don’t believe crypto is a Ponzi scheme and this is certainly not financial advice. If so, the good news here is that you are very early in on crypto so you should benefit on behalf of all the suckers who get in late!!! But always do your own research.

Did you know you can earn crypto through FishFactory P now? Jumpstart and

partner with FishFactory P to boost your passive income!

You can earn more Click here for more announcements and

subscribe to my email list for legit ways to make passive income with crypto!


Source link

Check Also

Swap farming Crypto buy and sell made simple

Swap farming- Crypto buy and sell made simple.

Swap farming- Crypto buy and sell made simple. What is Binance Swap Farming?Binance Swap Farming …