This post is the direct result of a conversation occurring on:
https://steemit.com/steemit/@clayop/is-bitcoin-a-ponzi-too-a-simple-explanation-about-where-does-money-come-from-for-dummies
That post makes the claim that bitcoin and steemit are not Ponzi schemes. Though technically, I agree with that, I think the author misses the bigger point: practically every investment can be a Ponzi scheme under the right circumstances.
Before you roll your eyes and click away...hear me out.
Let's start with "real" money.
Until 1971 the dollar was attached to the value of gold. Then Richard Nixon got rid of this "gold standard." Thus, the value of your dollar is decided by nothing or, by everything - depending on your perspective.
Essentially, as long as the world thinks that America is a great country and its economy is sound, the dollar will keep its value. As much as the world supposedly hates us... they use us.
Countries upon countries hoard the dollar as government securities because they are considered safe investmentments and that in turn helps maintain the dollar's value. China is the best example
Now this thought of "something only has value if enough people say it does" can really be applied to everything. Gold, silver, platinum, diamonds, bitcoin, ethereum, literally every cryptocurrency and so on.
But most of these "things" actually perform a task so doesn't that makes them "better investments?" And, how are these things a Ponzi Scheme??
Here's how Wikipedia defines Ponzi Scheme: A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources.
Read that again.
A middle man takes person B's money and gives it to person A and calls it "earnings."
What differentiates dollar, stocks, bitcoin, ethereum, steem etc from a Ponzi scheme is that supposedly these things perform a task and offer value through that task.
But, I am here to convince you that in the worst case scenario all these things are in fact ponzi schemes.
(Dollar image from Wikipedia)
Your dollar allows you to buy/sell things so it holds value. Worst case scenario: US economy crashes; Chinese yuan, Russian rubles, bitcoin (let's hope!) or something else takes its place as the world's store of value and no one is interested in using your dollar.
Here the government is the middle man and we are all persons A and B. We all believe we will be able to buy things with our dollars thus we keep asking for more. The government is happy to keep giving you more even if it knows that the value is crashing. Fraud? Maybe... Depends on who you ask.
(Bitcoin image from bitcoin.org)
Bitcoin was created for the same purpose, to be a currency. It holds value because enough people buy it and use it. Worst case scenario: it's only holding value because most of it is being hoarded by the Chinese.
They continue to hoard and the world buys in because of its rising value.. And then the Chinese dump it!
The miners/sellers are the middle men here. We are buying because well: Bitcoin to the moon! And, we will continue to buy because we expect it to rise in value against the dollar. But, if the miners/sellers knew they were going to dump all their holdings then they just sold us a product that will crash. Fraud? Probably... Depends on who you ask.
(Image from Wikipedia)
The stock market is essentially a direct copy of the ponzi scheme.
Middle men (a company) takes person A's money and gives them shares. These shares can then be given to person B in the future for a higher price. Person A bought the shares hoping for that. These transactions are OK because the company supposedly provides a product and you are buying a piece of that company.
Worst case scenario: these companies are doing something very risky or even illegal. Enron? AIG? No person B for those stocks because the middleman were selling you something that they knew would lose its value. Definitely fraud.
As a caveat, when a stock pays dividends it's definitely not a ponzi scheme because you are getting a cut from the companies profits.
But for the "non-dividend" so called "growth stocks" the money comes from other people.
Yes there might be a product that company is making but ultimately the "growth stock" is growing because someone other than the company is willing to give you money for it because they expect someone else to come along and pay them more for the same thing. Might not be fraud because the company is selling a product... but gets awfully close to being a ponzi when said product ends up being fraudulent.
To this last point: I have had this conversation with a lot of "financial people" who always seem to get annoyed and state..."but the stock is growing because the company is doing well." I would buy that idea only if the price of a stock was directly tied to a companies profits.
(Steemit logo!)
Steem is different. In no way is this a Ponzi scheme. The investors money (read "real" fiat dollars) is used to turn writers/curators/users into investors themselves. It's an amazing take on the entire situation.
But one that without new "real dollars" being pumped in will continue to lose value. So hopefully the steem guys have a business plan to get money into steemit through means other than just investors.
If investors see that steem is only growing it's userbase because the newbies are coming in to write and get steem, thus diluting the "dollar per steem" value then the investors will definitely lose interest quickly.
I hope the creators of steem have other plans... Ads? Curated content? Publication deals? Something other than: buy steem to have power and hope your steem power grows. Because, that will get old quickly!
That's it, quick and dirty. Hopefully this doesn't offend too many people!
Full disclosure here - I own "positions" on bitcoin, ethereum, lisk, dash and a few others and definitely own "real" stocks...So I have definitely bought into the Ponzi Scheme! Hoping that someone comes along and is willing to pay me more than what I paid for my investments!
After writing this though...I think I need to buy more gold!
PS: This is just my opinion... in no way do I mean to offend anyone. Hope you enjoyed... Thank you for making it all the way down to here! Tell me the "meaning of life" in your reply so I know who actually read everything - I want to avoid responding to the trolls! ;)