One of the largest roadblocks I have in defending bitcoin (and cryptocurrency in general) is when people compare it to a Ponzi scheme.
There is plenty of bitcoin FUD that is easy to defend, but when people pull the Ponzi-card, that is when I begin to get agitated. This is because I don't have a sound argument to combat this claim.
For those who are not readily familiar; A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. The scheme leads victims to believe that profits are coming from legitimate business activity, and they remain unaware that other investors are the source of funds.
People compare bitcoin to a Ponzi scheme because the price increases when more money flows into the underlying asset. If I buy for X and sell for X+100 that 100 profit of mine came from another person who bought into the scheme after me. In the eyes of many, this is dangerously close to how Ponzi schemes generate value.
What is the best argument against the Ponzi scheme narrative?
In what ways are Ponzi schemes different from bitcoin?
What about swapping the example to lets say - Paypal, they dont produce anything physical,
its a digital service . . .
Bitcoin being similar as there is nothing physical produced, etc. etc.So If I bought paypal stocks 5 years ago and the value rises to todays value when I want to
liquidate my position in a profit, who pays that profit?
How do they generate value differently?
A ponzi is solely reliant on new investors so there funds can be used to pay liquidations, when
there are no new investors there is no liquidity to pay people who want to liquidate.