Cryptocurrencies Could Be One Big Ponzi Scheme

While Bitcoin and pals have taken a couple of knocks to their value recently, the general consensus is that the currencies remain more or less strong. But, there are also some growing voices that think all of these digital monies could just be elaborate, 21st-century iterations of the classic Ponzi Scheme.

If you’re unfamiliar, the Ponzi is among the most classic of cons. You essentially start by creating some type of organization that people would trust with money. Then you can pull in cash telling investors that they will receive dividends in the future. For a while, you can do what you will with the cash you pulled in, but eventually, those investors will want to see your dividends. To cover those, you pull in more victims, and the cycle continues. While they might sound like an obvious trap, Ponzi-style cons have been among the most successful in history. As long as you keep cash flowing, you can outwardly present yourself and your operation as legitimate. And the longer you can hold the ruse, the more you stand to gain — and lose — should it all fall to bits.

The Infamous Bernie Madoff scandal in the late 00s was one such example that fell apart, but, for a time, produced untold wealth for those involved.

At this point, you can probably see some parallels between this and Ethereum or Bitcoin or whatever. People are investing because they want to get a piece of the pie. We all here news story after story talking about the insane quantity of cash you can pull in by trading this stuff. And yeah, some folks have become insanely wealthy using blockchains and mining and all that goodness. But these things all have a critical weakness — they aren’t backed by anything.


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