This example is a simple comparison to highlight the difference between a Ponzi and Bitcoin. There is the narrative that Bitcoin follows a Ponzi because of the “Greater Fool Theory”. This states that like a Ponzi, Bitcoin relies on new people to put money so no one is left holding the bags.
Let us compare when investing money using a theoretical example. We will compare two investors, Alice and Carol. Each investor will have $1,000 to invest. Alice will invest in a Ponzi scheme while Carol will invest in Bitcoin.
Investment Comparison — Ponzi Scheme (Example 1)
Let us say that Alice has $1,000 to invest. She was approached by an investment analyst at company XYZ to invest in their holdings with yields of 250% per annum (APR). She would have a great $3,500 return on investment after 1 year, rather than have cash idle on the side.
The investment analyst tells her an incredible story, that sounds unbelievable at first. Then they resort to “celebrity” endorsements with guarantees of profits from testimonials by early investors who have made insane gains.
She is eager to earn those profits, so she gives an initial payment of $1,000 to the investment analyst and in return receive a bond certificate that “proves” her claim. This creates…
