Some have described Bitcoin as being a Ponzi scheme. To see if this is true, you first need to become familiar with what a Ponzi scheme is. Made famous by Charles Ponzi
, according to Wikipedia, A Ponzi scheme is:
“...a form of fraud which lures investors and pays profits to older investors by using funds obtained from newer investors. Investors may be led to believe that the profits are coming from product sales, or other means, and remain unaware that other investors are the source of profits. A Ponzi scheme is able to maintain the illusion of a sustainable business as long as there continues to be new investors willing to contribute new funds and most of the investors do not demand full repayment and are willing to believe in the non-existent assets that they are purported to own.”
It should be clear to see that such a scheme requires charlatans to entice investors and promise them rewards. The scheme continues as long as new investors keep supplying fresh funds to the charlatans, who are able to make payouts to older investors.
Although the proposition of buying Bitcoin may resemble a Ponzi scheme, as many people buy for the promise of future riches, the defining difference is that the investor is enticed into the investment by their own greed or fear of missing out rather than being enticed by a charlatan personally offering high returns for a small outlay.
Bitcoin is an open and voluntary network. Its blockchain, which displays every transaction in its entire history is open for anyone to scrutinize. The Bitcoin network does not make any profits, and no Bitcoin holders make Bitcoin profits as there is no product or service being sold. This means that no profits can be promised to anyone. The only way people profit from investing in Bitcoin is if they are able to sell it at a higher value than what they purchased it for. They sell it on the open market and people voluntarily and willfully buy it.
It is true that investors that got into and purchased Bitcoin in the early years managed to buy it at an extremely low price relative to its current value - but that is also true of real estate investors that purchased decades ago - that doesn’t make it a Ponzi scheme.