“Bitcoin still has a variety of risks, it’s going through an adoption period and we’ll see how far it gets, but it doesn’t really meet the definition of a Ponzi scheme more so than any other kind of non-cash flow producing monetary asset,” Alden said.
Alden compared Bitcoin to other non-cash flow assets like gold, fine art, and beach front properties that aren’t for rent in that these assets’ value is determined by their attractiveness to the market.
However, it still doesn’t fit the strict definition of a Ponzi scheme.
“You can break it down into a narrow definition of a Ponzi scheme, which is an outright fraud, to a broader definition of it. From a narrow scope, one of the things I looked at was kind of the the whole launch process of Bitcoin. What we saw for example was that the creator, or creators, Satoshi Nakamoto, they released a white paper pretty much showing how to do it before they launched it themselves,” she said.
Importantly, the creator(s) of Bitcoin didn’t give themselves any pre-mine; they still had to mine the tokens themselves after the launch, Alden noted.
“They had really no inherent advantage,” she said. “That kind of contrasts with how a lot of later tokens launched themselves. A lot of them used pre-mines to their founders and initial investors, whereas Bitcoin was launched as more of a protocol rather than an investment. So, by most metrics, the narrow definition [of a Ponzi scheme] doesn’t really apply.”
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