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SVTPerformance's Chain of Restaurants
Road Side Pub
BITCOIN
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<blockquote data-quote="Weather Man" data-source="post: 16791294" data-attributes="member: 137766"><p>Comment from a guy on Seeking Alpha.</p><p></p><p>It is true that Bitcoin does not fit perfectly into the classic Ponzi paradigm. But it's very close.</p><p></p><p>In the classic Ponzi design, early investors are awarded outsized payments or interest which cannot be sustained, because the basic 'investment' does not generate, in of itself, enough profits to cover those payments. Instead, new investors must be found, and that 'new money' is used to pay the earlier investors, to maintain the illusion that the underlying business opportunity is valid. As long as enough new investors can be found to keep paying for the (expanding) profits of the previous group, everything works fine. But once new investors can't be found, it is revealed that the underlying business is in fact worthless, and the 'final round' of investors is left holding the bag.</p><p></p><p>Bitcoin clearly is different. Whether there is an underlying business model is subject to debate. But clearly there are no ongoing profits or distributions which must be covered. In that sense, Bitcoin does not match the typical Ponzi scheme.</p><p></p><p>But, like a Ponzi scheme, Bitcoin shares the following characteristics.</p><p></p><p>• Early investors profit the most, and have the most margin of safety.</p><p>• the underlying business model is suspect or non-existent.</p><p>• new investors are needed for earlier investors to profit.</p><p>• the promise of outsized profits is promoted as a reason to invest</p><p>• the underlying business model is obscured in order to avoid scrutiny</p><p>• the endeavor is unregulated, with little recourse to recover losses</p><p>in the case of fraud</p><p>• the potential for 100% loss is higher than most other investments, due</p><p>to the lack of a profitable business model</p><p></p><p>So while it's not exactly accurate to call Bitcoin a Ponzi scheme, in the short hand of dialogue, the matches are enough to where most people can understand the reference.</p><p></p><p>It would be most accurate, though, to say that "Bitcoin shares many qualities of a Ponzi scheme."</p></blockquote><p></p>
[QUOTE="Weather Man, post: 16791294, member: 137766"] Comment from a guy on Seeking Alpha. It is true that Bitcoin does not fit perfectly into the classic Ponzi paradigm. But it's very close. In the classic Ponzi design, early investors are awarded outsized payments or interest which cannot be sustained, because the basic 'investment' does not generate, in of itself, enough profits to cover those payments. Instead, new investors must be found, and that 'new money' is used to pay the earlier investors, to maintain the illusion that the underlying business opportunity is valid. As long as enough new investors can be found to keep paying for the (expanding) profits of the previous group, everything works fine. But once new investors can't be found, it is revealed that the underlying business is in fact worthless, and the 'final round' of investors is left holding the bag. Bitcoin clearly is different. Whether there is an underlying business model is subject to debate. But clearly there are no ongoing profits or distributions which must be covered. In that sense, Bitcoin does not match the typical Ponzi scheme. But, like a Ponzi scheme, Bitcoin shares the following characteristics. • Early investors profit the most, and have the most margin of safety. • the underlying business model is suspect or non-existent. • new investors are needed for earlier investors to profit. • the promise of outsized profits is promoted as a reason to invest • the underlying business model is obscured in order to avoid scrutiny • the endeavor is unregulated, with little recourse to recover losses in the case of fraud • the potential for 100% loss is higher than most other investments, due to the lack of a profitable business model So while it's not exactly accurate to call Bitcoin a Ponzi scheme, in the short hand of dialogue, the matches are enough to where most people can understand the reference. It would be most accurate, though, to say that "Bitcoin shares many qualities of a Ponzi scheme." [/QUOTE]
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