Bitcoin is a Con

Last modified: July 30^th, 2023

You might have heard it before, and have read 'debunking' of the claim that bitcoin is a Ponzi scheme, a 'Con' (Confidence Game), a Scam, but actually bitcoin is a scam, con and Ponzi. It is not a classic Ponzi scheme, but it has all the basics of a Ponzi, except it is all in the open and for everyone to see.

Unfortunately greed makes people blind, and like Fox Mulder (X-Files), they want to believe. It even has an excuse factor why bitcoin is so 'good', because the banking system is being promoted as flawed (FUD?), and bitcoin is presented as an innovation of money. So even if the banking system is flawed, that does not make bitcoin any better, but maybe more on that later. This is the excuse factor!

Let me explain, it's like charities that are used by lotteries, so people can convince themselves that they join the lottery because that way they do charity. But only a tiny amount goes to charity, a larger amount is often the price money, and there is a big payday for the lottery creators. The people participating in a lottery would do more charity if they spend half the amount of the lottery on charity, and most of the time have a better outcome for themselves, if they keep the other halve. But charity is the excuse factor, or as psychologists call it 'a rationalization' for lotteries, so you don't think that it's greed that drives you, and you don't stop if you lose some money.

It's exactly the same thing with bitcoin, with the anti-bank sentiment and feeling of being part of an innovative movement, you have an excuse, that is the reason why you 'invest' (actually speculate) in bitcoin, you want to be independent of the banking system and to be part of the movement, it's not the greed (yeah right).

Personally I think that bitcoin has been setup as a Ponzi, and not that it became a Ponzi along the way, like many others have thought. In a classic Ponzi the creator of the scheme always gets caught, so how about making the Ponzi public and decentralizing it, and using a pseudonym like 'Satoshi Nakamoto' as the creator? This will ensure the creator to be kept anonymous, and it will share the load of maintaining the Ponzi with the next layer(s) of this pyramid scheme, while the creator joins in as one of the 'unsuspecting' 'innovators' (PLC). These innovators, then having interest themselves to promote bitcoin so they can gain profits by raising demand and therefore the prices. This almost seems like a Multi Level Marketing (MLM) scheme (excluding the kick-back fees to higher up), amazing isn't it?

So why do I think it was created as a Ponzi. Well, who wouldn't be proud of having created the 'first digital currency'? A lot of the early people involved are known, possibly/probably one of them being the creator. I think this is strange and could be an indication that this person knew it would blow up like any other Ponzi, and didn't want to be held accountable. Then there is the whitepaper, where greed is promoted (in mining), and bitcoin is linked to gold mining: "analogous to gold miners expending resources to add gold to circulation" and so creating a link to gold to make it appear valuable. Then a limited amount of bitcoin that is created, this to produce an effect of scarcity, although scarcity does not imply value, it is a simple trick to influence people (Cialdini). And also, the excuse, the message in the genesis block: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.".

OK, so maybe you are still not convinced it was setup as a Ponzi. There is another reason why I think it was setup as a Ponzi. The way bitcoin was setup was never going to work as 'digital currency'. This was clear from the beginning, as one transaction on the blockchain every ~10 minutes is just silly. Then the usage of PoW, making it so that it will eventually blow itself up, as the cost of mining (processing transactions) will eventually become to high to be profitable and/or mining will fall below a threshold so that the blockchain can be manipulated. This threshold is what makes the adjustment (lowering) of the mining difficulty a problematic solution for this problem. Technically bitcoin is flawed this way, and this will eventually end in blowing itself up. I am amazed that this didn't happen before, but every halving will become a greater challenge. I guess that due to the still high price bitcoin achieves on exchanges (yeah, those centralized, bank-like (especially if they issue stablecoins) and unregulated organizations, that bitcoin lovers will trust more with their 'money' than regulated banks), bitcoin is still around, and I personally think that is due to market manipulation.

Then there is this, something that I can better make clear using an image:

That's right, from the beginning these two pyramids where clear. The first upside-down pyramid represents the creation of bitcoins, starting at 50 and halving approximately each 4 years, so it is even worse than this pyramid suggests. The second pyramid represents the costs of mining, these where really cheap at the start, and it was clear that using PoW these would increase quite substantially, that also being even worse as the pyramid suggests. How the hell would the creator not be aware of this? Or is this a hindsight bias of mine? Well, considering the clearness of this, I don't think so.

And think of this, the anonymous person who created bitcoin, would join with one or more extra wallets, mining in the early stages at 50 bitcoin each ~10 minutes, with little competition and at almost no costs. Then this person just needed to wait, until people started paying for bitcoin, and slowly sell the cheaply mined coins. Of course not touching the Satoshi wallet, as that will get the creator of this scheme caught. So now you know how this con works.

In addition, just think about it, why else would 50% of the bitcoin creation be located in the first 4 years? This only makes sense when you understand how this con works, as I just explained.

Personally I thought of bitcoin as a scam at least before 2017, when I first heard of colleagues investing in bitcoin, and when I looked into it a bit more. I never had any desires to invest (speculate) in bitcoin, because of this. So yeah, that's why I think bitcoin was created as a Ponzi scheme.

So why call it a Ponzi? Well, consider this, the most important aspect of a Ponzi scheme is that profits are payed from new investor money. This is true for bitcoin, as any coin purchased is done so by new investor money. A second aspect of a Ponzi is, that the investment is just some registration of a supposed investment, no actual money is ever invested. This is also absolutely true for bitcoin, what you get by buying bitcoin is a registration of the bitcoin on your wallet address on the blockchain, nothing more than that, no money is ever invested, and no, the costs paid for the bitcoin and transactions are not investments in the network, as you will not get any part of the proceeds of the miners (the network), these are only costs that are making bitcoin a negative sum game.

Yeah, the strange thing, it is not hidden, that is quite an innovation. Also, the MLM aspect, of using investors (including miners) promoting the Ponzi scheme for the scammer, so they can benefit from it themselves, that is also quite innovative. It all exploded to a giant Ponzi, where multiple large parties had great interest to milk out the greed blinded bitcoin buyers. I do think the initial scammer did not foresee that bitcoin would become such a huge scam. But hey, that can happen if the scamming has been decentralized.

All of you who are still saying bitcoin isn't a Ponzi, don't come up with definitions, saying that bitcoin does not have a property of a Ponzi that is 'generally' associated with a Ponzi. You know 'generally' does not mean always, so that does not invalidate bitcoin as a Ponzi. Yeah, this modern day Ponzi has some new features, but it clearly is a Ponzi, as I think I have sufficiently proven. Although, arguing if it should be called a Ponzi or not, based on details of definitions used, that is not helpful, it's just the name for the type of 'Con' used, and maybe this con deserves it's own name, but for now I will be calling it a Ponzi. Anyway, bitcoin is a con, a confidence game, a scam, arguing about the name does not invalidate that.

Additional resources

Below you will find some additional resources on the issues with bitcoin and/or other cryptofancies, and as you can see, it has been known for a long time. And yes some have thought that bitcoin would have collapsed by now (as I also thought), I did mention above why I think this didn't happen yet.