Is Bitcoin a Ponzi Scheme?
Written by Ed Whitfield
An Article from WARTIME Issue No. 4 // Video from BMB Mass Meeting
I’m not qualified to give investment advice. So this is not advice on what you should or shouldn’t invest in. DO NOT decide any investment based on anything you read here. I was asked to comment on Bitcoin because some positive and some negative claims have been made about Cryptocurrency that relate to some things I do know about, namely transformative change, the nature of money, Ponzi schemes, and technology.
A recent article, by Sohale Andrus Mortazavi, appeared on Portside, reprinted from JACOBIN (https://portside.org/2022-01-25/cryptocurrency-giant-ponzi-scheme) entitled, “Cryptocurrency Is a Giant Ponzi Scheme.” It asserted, “Cryptocurrency is not merely a bad investment or speculative bubble. It’s worse than that: it’s a full-on fraud.”
The article denounced Bitcoin and other digital currency as Ponzi schemes and not at all revolutionary. I agree that it will not transform social, political and economic power relationships leading us toward utopia. On the other hand, claims that it is merely a Ponzi scheme seem to be exaggerated, as is some of the information on Bitcoin’s volatility. The U.S. government has a keen eye for Ponzi schemes and has been paying attention to the development of digital currency. While some people are clearly interested in the speculative possibility of riches, whether digital currencies are a good idea or not, they have potential and current use that go beyond speculation.
Family and friends circles with a get rich quick pyramid approach is a Ponzi scheme. It was fully funded by newly recruited friends and family members and rapidly collapsed after a few cycles because of the rapid exponential growth of the number of people required to keep the scheme growing. Proponents of those circles falsely claimed that they were merely susus or savings circles that were traditional and legal. They were neither. When those circles collapsed after a few weeks of wild growth, the early adapters made a killing with many thousands of times their initial contribution, if they made an investment at all.
Not speaking for all cryptos, I will claim that at least some of them are different. They are rooted in an effort to provide a secure means of assuring the integrity of internet based transactions using advanced coding and cryptography.
Bitcoin is a currency. It checks the boxes of what is required to be money. It is a measure of value, a means of storage and a means of exchange. Although it is not completely accepted as a means of repayment of debt.
All assets, including all currencies, are open to speculation. No doubt there are people buying Bitcoin only for that reason, but others are finding other ways to use it for transactions where local currencies are unstable.
All currencies have costs associated with their maintenance and all currencies can be subject to speculation, including precious metals.
Bitcoin’s energy usage, in the process of maintaining its security and integrity (Bitcoin mining), is high at this time. Perhaps new tech processes will reduce these costs in the future. There is transparency about these processes for those who are tech savvy enough to follow along.
But Bitcoin is absolutely not revolutionary. It will not, in itself, transform power and wealth relationships. It is not a magic bullet. Only collective struggle and collective building has that potential. Whether you choose to participate in buying crypto or not, you still have a responsibility to stand with community, build power and try to make change.
There are many compromises we make in this capitalist and individualist world. Many of us who don’t believe in capitalism and the sanctity of the marketplace still have retirement plans that are heavily invested in Wall Street speculation. Whether you think there is benefit from engaging bitcoin according to your acceptable risk profile and your goals or not, we still need you in our common fight for liberation through acting together for change.