Quote from: CoinCidental on July 30, 2012, 08:35:10 PM

Yes ,if madoff had decided to repay everyone before his arrest ,he would have been about 750 million dollars short so im thinking YES ,someone would have noticed Wink

te problem with a ponzi is the money isnt real and paying interest from the deposits is only going to work for so long before it bites you in the ass

and madoff only paid 12% a year ..........now look at pirate paying 3400% and its simple to see hes not going to run as long as madoff did

The question after that is: would anyone say anything? If it were $750mm of new investors' money, probably. If it were distributed among the largest investors that had already received billions, they'd probably chalk it up to the good times having run their course instead of balking and risking frozen assets, or worse: confiscation/loss.

The money is real, it's just that it runs out before promises can be fulfilled if it continues for too long - very much like the global economy today...

Mongolian deposits are earning 16% per year, but that isn't a scam - it's simply a high volume influx of capital. Pirate's returns are high because the market hasn't been saturated yet, and the market itself is also growing rapidly - two factors that synergistically amplify the growth rate. A Ponzi normally only has one growth factor, that being market share. The market itself usually isn't growing in combination.

As BS&T continues growing from perhaps 10% of the Bitcoin economy to 20%, it will become harder to maintain high rates of return because instead of 90% headroom, there's only 80% (which is where the Ponzi similarity arises). Likewise, as the block reward halves, it will be more difficult to acquire the necessary bitcoins to provide for return. Both of the factors that contributed to explosive growth then start to act as a brake.

The thing with Bitcoin and BS&T is that the draw to invest in BTC because of the high rates of return means acquisition of bitcoins has to occur first. That means capital flows from other sources into the Bitcoin economy. That pushes up the exchange rate against fiat currencies, garnering even more outside interest - a virtuous cycle.

What does that have to do with BTC->BTC returns?

If the incentive to hold bitcoins is rising, that starts to attract business interests, because there's always a search for an edge and new markets to capitalize on. With a growing pool of wealth forming in Bitcoin, it's only a matter of time before companies larger than independent shops take notice. Once that threshold is reached, Bitcoin quickly becomes viable in the eyes of a new wave of potential investors and businesses - another layer added to the virtuous cycle.

There's a difference between the way consumers and producers look at money. A consumer generally wants to accumulate money to acquire goods and services at a later time. A producer seeks to increase the flow of money through the business, increasing its market share - accumulation is not as much of a priority. It's sorta-kinda like the difference between eating and breathing: you can stuff yourself with a big meal and be fine for hours, but you can't stop breathing for more than a couple of minutes.

Coming back to dividends in-kind: unless BS&T manages 100% of all bitcoins in existence, there is still potentially room for growth. With market activity, there are always sellers putting BTC up for sale (think miners and those with billing cycles requiring payment), and the greater the value, the more incentive there is to do so. By the same token, there are always buyers looking to acquire for value or use.

Some buyers, like businesses, only care that the value is relatively consistent for the period they use it in - once transactions are conducted, the risk of holding BTC is either reduced or no longer exists (the same applies to any medium that isn't desired for itself). Those bitcoins are likely to find their way back into the markets for exchange, at which point Pirate is able to reacquire them. Pirate isn't just getting bitcoins from the 7,200 newly mined daily supply, but also from the market. The more the exchange volumes rise, the bigger the supply available for him to pull from, allowing high rates of return to continue. Since he is paying out what appears to be a majority of the profits, he is insulating himself from the kind of jealous animosity that demagogues play on by pointing at wealth disparities.

Everyone screaming "Ponzi" when talking about Pirate is missing the aspect of growth at the margin in the context of external market influence. The Bitcoin economy is not isolated, nor is it static; cyclical capital flow is critical to follow, both internal and external - especially at the margin.