Is Bitcoin Mining a Ponzi Scheme?

No, the Bitcoin mining is nothing similar to the Ponzi scheme. When you mine Bitcoin you provide service and get the proposed value in return.

Ponzi scheme is a fraud first pulled by an American named Charles Ponzi. Also, similar scheme is depicted in one of the novels by Charles Dickens so there are reasonable presumptions that young Ponzi at the time got the idea that way. So, Ponzi scheme operates by attracting investors through great profit and than paying them by revenue gained by newer investors.

At the time, confidence is gained at older investors and they keep investing. There is no legitimate business activity that would guarantee any profit, but only the new value. Ponzi scheme operates only by attracting new investors and it is doomed to fail after certain period of time. Background can be different – original was related to the post stamps, but there are never any real activity included. Schemes like this one never last long since they are ceased in three ways. Often, authorities stop the fraud, or the organizers run away with money.

Still, if they don’t, it never lasts long since the further progress requires more resources and the investments stop. Interesting, market drop or global economy crisis make investors redraw their assets. Bitcoin market survived global economy declines and its own market crashes multiple times. No Ponzi scheme would ever last for almost ten years now.

Bitcoin mining is an entirely different concept. It is all about the computational power. Individuals share their hardware to the network and get Bitcoin or any other coin in return. The real service is provided and there is real profit. Computational power is necessary since it is the foundation of the network, it is used for solving math problems that are in the base of the algorithms, and the transactions are made that way.

These are the facts and the key differences between the Ponzi scheme and Bitcoin mining. The actual service is made and as such it results with the actual profit.


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