This instance is a straightforward comparability to focus on the distinction between a Ponzi and Bitcoin. There’s the narrative that Bitcoin follows a Ponzi due to the “Larger Idiot Idea”. This states that like a Ponzi, Bitcoin depends on new folks to place cash so nobody is left holding the luggage.
Allow us to evaluate when investing cash utilizing a theoretical instance. We are going to evaluate two traders, Alice and Carol. Every investor can have $1,000 to take a position. Alice will put money into a Ponzi scheme whereas Carol will put money into Bitcoin.
Funding Comparability — Ponzi Scheme (Instance 1)
Allow us to say that Alice has $1,000 to take a position. She was approached by an funding analyst at firm XYZ to put money into their holdings with yields of 250% every year (APR). She would have an important $3,500 return on funding after 1 yr, relatively than have money idle on the aspect.
The funding analyst tells her an unbelievable story, that sounds unbelievable at first. Then they resort to “superstar” endorsements with ensures of earnings from testimonials by early traders who’ve made insane positive aspects.
She is raring to earn these earnings, so she provides an preliminary cost of $1,000 to the funding analyst and in return obtain a bond certificates that “proves” her declare. This creates…
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