“Bitcoin is a Ponzi scheme!” scream the detractors, whose livelihood is – almost without exception – strongly connected with the continued survival of the currently prevailing fiat money/banking system. Yet those most vehement in their denial of the absolute superiority of a payment system/currency like bitcoin over fiat money, are most probably well aware of the fact that their side of the debate is doomed to be the losing side of this evolutionary showdown.
Their argument that virtual currencies are Ponzi, is a strange one to bring to bear, too. That’s because the current fiat money-based banking system has quite a few markings of a Ponzi scheme, itself. The Federal Reserve and its money-printing ways are often brought up in this regard. Some say the current system is indeed worse than a run-of-the-mill Ponzi, which at least grants people the possibility to opt out. Others do not fail to point out that the Fed is – in essence – a “privately owned”, for-profit operation, which it really is not…it is subject to Congressional oversight, and its responsibilities can be altered by statute.
Fundamental Problems
The fundamental problems – the very ones that make the fiat system a Ponzi scheme – extend far above and beyond an entity like the Fed. They stem from some of humanity’s most basic, collective action-related instincts.
To understand these problems, Mancur Olson’s book, The Logic of Collective Action, is a very good starting point.
In this book, Olson makes scientifically substantiated points regarding the feasibility of human groups of various sizes working together towards a cooperative goal. One of his conclusions is that past a certain size, it is practically impossible for a group to accomplish a cooperative goal, in a voluntary manner. Thus, it is clear that in order to make such a group accept and use something like fiat currency, some sort of coercion is required. In the case of the current financial system, this coercion is exerted through the taxes, which each individual member of the group is compelled to pay in the fiat currency issued by the sovereign power- in this case, the Government, through the Federal Reserve. Getting the fiat currency into the hands of the citizens through spending is a major part of the equation too. Once sovereign spending exceeds the amount of fiat money collected through taxes, problems occur. Drastically reducing sovereign spending is not a solution, so debt rears its head and it ends up permeating every nook and cranny of the society.
The Power of Bitcoin
To realize the true magnitude of bitcoin’s disruptive power, one has to realize that it is essentially disrupting the very roots of the above depicted model. As Linux, bitcoin and other open-source projects have demonstrated, the power of online communication has essentially negated Olson’s theorem, according to which a mechanism like fiat currency can only be instituted within a large group through coercion.
Bitcoin has been created and is maintained in an entirely voluntary manner, and if only 0.5% of the world’s population views it as valuable, it has already broken down the walls. The need for coercion gone, the above depicted fiat currency model has clearly been replaced with something entirely different. Something that’s so revolutionary, proponents of the current system who do understand it, are left either flabbergasted or scared out of their wits by it. This is bitcoin, and in a nutshell, this is probably why you too should work towards securing a stake in it.
Learn more at ScamBitcoin.com, a site dedicated to exposing cryptocurrency scams and educating investors about legitimate ways of acquiring and using bitcoin and other cryptocurrencies.
