Bitcoin is not a Ponzi.

This is my short explanation to the people who are studying Bitcoin, looking to learn all about it, and are smart enough to know about the existence of Ponzi Schemes, and has doubts if Bitcoin is actually one.

To put it simply, A Ponzi scheme is a business model that could be incorporated in any business. Anything you can sell, could probably be a Ponzi scheme.

It’s fundamental mechanic is it promises its investors returns that are higher than what the business can actually generate with its working capital. In theory, if this business continues to run, it will eventually deplete all its cash and go bankrupt.

The way a Ponzi scheme fills this gap, and keeps the wheel turning, is by always feeding the business with loans (not from banks) but from new investors.

But since the business is already broken, it always needs more loans, and it grows exponentially, until people realize what’s happening, or simply that’s as much interest it can generate. And the new loans will stop and the business will go bankrupt.

People who lended money in the beginning make money, people who joined in the middle break even, people who joined last lose money.

Bitcoin on the other hand is not a business. And it’s operating with or without new people. Even if no one joins Bitcoin from today onwards, the network will continue to operate, Bitcoiners will be able to transact normally. 1 BTC will remain 1 BTC. It doesn’t need loans from new people, and it’s not promising anyone returns.

The price has nothing to do with the network. Bitcoin works if it was $1 exactly the same way if it was $1M. The price is not a part of the network.

And that’s why Bitcoin is not a Ponzi. You might think it is because someone convinced you that you will be rich from it. But that’s a promise Bitcoin never made.

If you reached this point, I salute you.

Thanks.

to;dr Bitcoin is not a Ponzi, because its operation is not dependent on new joiners nor the price. It will continue to run even if 0 new Bitcoiners join or if the price drops to $1 per bitcoin.

Tick Tock, next Block.