Bitcoin is a financial crypto-pyramid. _Bitcoin - a new type of financial pyramid or what?

Very often there is a statement that cryptocurrency is a pyramid, cryptocurrency is not confirmed by anything and cryptocurrency and it should collapse soon. We will try to analyze these three statements today. Let's start with the fact that cryptocurrency is a pyramid and this is a true statement, but it is not true only in people's understanding of what a pyramid is, i.e. It fits into people’s understanding that a pyramid means MMM, it means a scam. But the difference between a pyramid and an investment is that when we invest in a pyramid technology, we predict that this technology can take off. We're looking at the technology behind this possible pyramid scheme. If we consider the MMM pyramid, then we consider the possibility of having time to enter and have time to exit this pyramid in order to earn money, and those who enter last will lose accordingly, because there is no technology inside this system. This difference must be grasped in order to invest, but if you see a pyramid in everything that has pyramidal characteristics and refuse to invest, then nothing will ever work out. Speaking from a business point of view, the entire business business is structured like a pyramid. We buy any product or product, if this product goes rotten in the warehouse, then we incur losses. It's the same with cryptocurrency. When we bought a cryptocurrency and it began to fall in price, we incur losses; when it rises, we make money. Those. the stock market and shares are the same pyramid. But someone will say: “Well, there are assets, companies that are damaged by assets.” But if in practice you invest in a company that is confirmed by assets and buy shares for $100 apiece, then if the shares fall to $5, these assets will not save you, you have suffered losses and no one will return anything to you. But this is such a game so that you think that you are somehow protected if the company is confirmed by assets. The main thing to understand is that the stock market is a pyramid that is overvalued, and cryptocurrency is a pyramid that is undervalued. And it is important to understand that there is nothing bad in a pyramid; a pyramid is bad if it does not have technology. Before investing in cryptocurrency, you need to look not at how it grows, but to look deep into the technology and study it. If there is a promising technology behind this cryptocurrency, then you can invest in it, if there are people behind it who shout that it will grow, but there is no technology, then this is a pyramid according to the Mavrodi principle. It is important to distinguish these points. Therefore, if you hear that cryptocurrency is a pyramid, there is nothing wrong with that, because the entire economy works on the principle of a pyramid.

The cryptocurrency is not confirmed by anything.

Now let’s look at the statement that cryptocurrency is not confirmed by anything. On the one hand, this is true, but on the other hand, cryptocurrency is confirmed by technology. That is, for each of these cryptocurrencies, if you do not take into account junk cryptocurrencies, but only those that are confirmed by technology. This technology can squeeze out part of the market from those companies that are now working the old fashioned way. Ripple, for example, can squeeze out part of the bank transfer market. Those. for example move VIZA. Each of these cryptocurrencies has some kind of technology that can push another company out of the market, which means it can bring profit to someone. If we talk about Bitcoin, for example, then its function is more of a savings one, an asset for saving. If we take gold and Bitcoin, then gold is a material product with a long history. Bitcoin has none of this, but the point is that the world is changing and now many, many companies that do not have a material product bring more profit than those that have a product. For example, facebook or google do not have a material product, but they generate profit. It’s the same with Bitcoin, which has so far been accepted only by the community, but more and more investments are being made in it to save large sums, over time it will become generally accepted and then it will be difficult for an ordinary person to enter this area. Now this is just in its infancy, which is why Bitcoin or other cryptocurrencies are struggling.

Cryptocurrency is about to collapse.

And the last statement is that cryptocurrency will collapse soon. This statement is also not true. An entire market cannot collapse quickly, i.e. Cryptocurrency is a concretely formed market where a lot of money is invested and it can’t all collapse in one day, markets don’t collapse that easily. The majority of those who invest money in cryptocurrency do not do it just like that, they study the topic, evaluate its potential and understand how it will grow.

The craze for cryptocurrency mining has encountered its first serious obstacle - a sharp increase in the cost of video cards used in this business. Will millions of homegrown miners survive this?

The emergence of a new reality associated with blockchain and cryptocurrencies has become a broad field for earning money for hundreds of thousands of people around the world. For some time now, Russians have also joined the race for virtual currencies (which can easily be converted into real money). Mining - the extraction of cryptocurrency using available computing power - is very popular among our compatriots today.

For many, the mining mania that has swept Russia is reminiscent of the numerous “pyramid schemes” of the early 90s, when small groups of those who “were at the origins” earned big money at the expense of everyone who joined the process later.

Ekaterina shares a similar opinion. “Blockchain and cryptocurrencies are not going anywhere, on the contrary, they have a good future. But it will become impossible to make money from “home” mining by purchasing 6 video cards and installing the necessary software,” she says. - The volume and complexity of calculations will grow, placing ever higher demands on equipment. And in parallel, the risks of the cryptocurrency market itself will increase, which in their properties and habits will become more and more similar to fiat (ordinary) currencies.

At the current cost of video cards, any more or less significant collapse or correction in the cryptocurrency rate (and they will certainly happen) will immediately knock thousands of “home” miners out of the market, whose owners have donated their last shirt to them.

Now many miners around the world are uniting in pools, trying to resist changes in the market situation; for some, this even helps to maintain income. But pools are not a panacea. As the situation gets tougher, the requirements for getting into the pool will also get tougher, primarily regarding productivity and quality of equipment. And here, for many, everything again comes down to money. Ultimately, only professionals with good financial resources will remain in the game, and they will earn a lot for a long time.

In the early 90s, almost everyone “traded” computers, and where are all these “businessmen” now? But, as we see, computers have not disappeared since those times and trade in them is still thriving. Only not everyone is doing this at the same time, but only a few who have the necessary knowledge and money. The same thing awaits cryptocurrencies, I have no doubt about it.”

The perfect crime is one that no one will ever know was committed.
An ideal financial pyramid is a financial fraud at the end of which none of its participants will consider themselves deceived...

The newly-minted cryptocurrency “Bitcoin” is simultaneously gaining popularity in the world of ordinary people and discontent (even bans) among the governments of several countries.

On the Internet, I have more than once had to enter into polemics with people praising Bitcoin as the most democratic, ideal currency and condemning the “dictators” who are strangling the freest and most honest money. They explain that the system is ideal, absolutely open (the algorithm has open source code), controlled by all participants in the system, anonymous (like a deposit in a Swiss bank), ideally protected (using the most complex cryptographic methods), etc. and so on. And the “stranglers of freedom”, hungry for power and “understanding nothing about cryptography” (I especially like this), simply cannot oppose anything to it except a ban.

I will not go into complex technical terms and mathematical calculations and will not talk about cryptography, but will try to explain the essence of this so-called. “currencies” in the simplest words and I will show that cryptography, “openness”, democracy and “ideality” of the system Bitcoin - just a smoke screen, dust thrown into the eyes, but the dust is not ordinary, but very generous, “diamond.”

So, briefly about what it is Bitcoin:

1. No one knows anything about the person who created the software algorithm for the system except his “name”: Satoshi Nakamoto. This can be either the name or pseudonym of one person, or a group of people, or a private company, or a secret government service.

2. The system is open source, i.e. every programmer can break down the work of the program and make sure of its “honesty”.

3. The unit of “currency” is a digital code that meets a number of specific requirements.

4. Any person with electronic computing power and Internet access can “get” such a code. The more powerful the computing tool is and the longer it runs on the system, the more code variants it will produce. This process is called "mining".

5. For each code mined, the system pays the user a reward (bitcoin(s)).

6. The system algorithm gradually reduces the amount of reward for mined codes in proportion to the total number of codes already mined. Thus, the total number of issued bitcoins cannot exceed 21 million - this is the maximum size of the “emission”.

7. The mining process supports the operation of the entire network, since the user conducting mining provides it (the network) with his computing power.

8. Movement and emission data Bitcoin are stored in a distributed database, i.e. do not have a single information storage center, but are distributed throughout the network. All transactions are publicly available to every participant in the system.

9. “Bitcoin rate” is determined ONLY by the level of demand for it.

And now to the point:

“Like any limited resource, Bitcoin can act as a value in itself or a unit of value (like gold, for example)” - this is the wording of the mantra that proclaims Bitcoin a currency. There is no emission center, which means there is no possibility of manipulating the exchange rate in anyone’s interests.

HOWEVER:

Any real currency is backed by a commodity. If we are talking about the gold standard, then gold acts as the collateral commodity, and the issuing state acts as the guarantor of this collateral. If we are talking about gold coins, and not about paper money, then here gold simultaneously acts both as a currency and as a commodity that provides it. A guarantor as such is not required in this case, therefore even the illegal minting of such coins (from gold) cannot undermine the stability of this currency.

T.N. virtual currencies (webmoney, Yandex, etc. money) are backed by the currency for which they were originally purchased, which, in turn, is backed by the economy of the issuing state.

With Bitcoin, the situation is completely different.

Bitcoin is backed by absolutely NOTHING except demand for it. This is how securities acquire value in financial pyramids (for example MMM).

But Bitcoin is not just a pyramid, but, as we have already said, an ideal pyramid. The fact is that any inflated securities have an issuer, i.e. a company or a group of people or a person who produced and sold them on the market. These are the citizens who are ultimately presented with bills by angry depositors. In the case of MMM it was Mavrodi.

In the case of Bitcoin, such an emission center does not exist in principle and there will be no one to “present” it to. But the most interesting thing is that there will be no one willing to present it, because... financial bubbles like MMM “burst”, i.e. collapse instantly, because in principle they are “programmed” for such an end. Bitcoin is “programmed” for a slow, gradual death (depreciation). Let me remind you: maintaining the system in a stable operating condition is ensured by “gold diggers” - users engaged in mining, providing the resources of their computing power for the operation of the system. With a decrease in the amount of reward for found codes, the number of “gold diggers” will steadily decrease, which will entail a drop in the information and computing power of the entire system, and consequently a decrease in security and stability. At the moment when the amount of reward for the found codes reaches zero (this will happen in the 30s of the 21st century), mining will become meaningless and the distributed data system will lose its information carriers, which means it will cease to exist.

There's a trick here.

All sources of information about the Bitcoin system say that the reward will not stop, it will simply be paid not at the expense of new ones, but at the expense of already issued ones. Bitcoin...STOP!!!

A simple question: “Which particular user of the system (Vasya, Petya, Michael, Julia) will give away their bitcoins?” After all, there is no system control center and “emission” is essentially the appearance of new coins out of thin air with the general consent of all users. But the reward with already issued coins must be carried out by someone specific.

CONCLUSION:

Option #1- this is a lie!

Option No. 2— at this moment, someone will have to openly manage the system and make decisions.

Let's consider option No. 1.

If this is a hoax, then the system, although it is a soap bubble, does not look like a fraudulent scheme since all participants play and win, and then are simply removed from the game as having lost its relevance. Although the law of conservation of energy tells us that it cannot be that everyone wins, because The “prize” cannot appear out of thin air. The way it is. Only those who participate in mining definitely win – that’s true. The “prize” is provided by those who buy bitcoins on the network - suckers, without whom the system, in principle, is not functional (without a sucker, life is bad). However, we note that the seemingly random process of emission is not so random, since the algorithm provides not only the quantity, but also the dynamics of the appearance of new Bitcoins:

And the “openness” and “controllability” of transactions to all users of the system in fact turns out to be a fiction, since each user actually SEES the very FACT of executing all transactions, but information about their real participants is NOT AVAILABLE TO ANYONE!

This means that at the time of the collapse of the system, someone (let’s call him Satoshi Nakamoto) can, in front of all users, become rich many times more than all other participants, but at the same time remaining invisible in the most democratic and most secure system, having hundreds, thousands or millions of separate names

Option #2.

Well, here the remark will be short: If option No. 2 is possible in 20 years, then everything that is stated today about the Bitcoin system is a LIE!

We’ll look into the accusations of cryptocurrencies in building pyramids: what arguments do Bitcoin’s opponents give, whether Ethereum is a cunning pyramid, how PR people and marketers promote blockchain projects, and what the history of BitConnect should teach us.

Why are cryptocurrencies equated to pyramids?

We have heard a lot from the media and from opponents of cryptocurrencies that these are all well-thought-out financial pyramids or bubbles. Like, for example, the tulip mania of the Dutch golden age.

At the peak of tulip mania in March 1637, some bulbs were selling for 10 times the artisan's annual income. It all started with the proposal of new varieties with variegated petals, and ended with widespread speculation.

Another famous example of a pyramid in history was the South Sea Company (1720s). It gained a monopoly on trade in South America, but was unable to actually trade due to the war. The share price rose in one year from £100 to almost £1,000. The company's success attracted crowds to invest. People were misled and advertised in every possible way. Even Isaac Newton suffered from the collapse of the company, who did not have enough knowledge to calculate the madness of the crowd.

Isn't this like the crypto market, where different people participate in speculation without always having an idea of ​​how the underlying technology works?

Typically, pyramid schemes are characterized by the promise of large unrealistic returns on investment, such as monthly income of ~40%. The promise of this type of income is viewed as suspicious and impossible even under the most aggressive market conditions. Cryptocurrencies can give more than 100% in a month.

Intrinsic value

This term is often used as a reproach for cryptocurrencies, especially Bitcoin. It cannot be compared with gold because it has industrial value, used in medicine, in design, as jewelry to satisfy the aesthetic needs of society. This gives it some value.

But is gold's current value a reflection of its intrinsic value? As Warren Buffett said:

Gold is mined in Africa or somewhere else. Then they melt it down, dig another hole, bury it again and pay people to stand by and guard it. It does not make sense. If someone looks at us from Mars, he tears out his hair in confusion.

The billionaire is talking about bullions that are melted and put into storage. But comparing cryptocurrencies with gold is not entirely correct. This is not a means of payment in the modern world. Fiat currency, for example, also has no intrinsic value: it is not worth the paper it is printed on.

But the demand for currency is created:

• by law, people must accept payments in national currency,
• the government requires you to pay taxes in the currency produced by the central bank.

Of course, if someone could print or copy money themselves, the system would be useless, so the currency has artificial scarcity and is protected from counterfeiting.

Bitcoin and its value

The banknote is printed in a complex manner, making replication difficult, while Bitcoin is protected from copying through cryptography.

The central bank limits the supply of currency, while the Bitcoin mining process limits the supply of coins.

But so what? These conditions do not make BTC valuable on their own. Yes, and other things have value without these conditions.

For example, a player's autograph is worth more than paper and marker. Works of art also cost something: people pay for the pleasure they receive from contemplation.

Also, the great value of a work of art stems from its exclusivity. A perfect copy will cost only a fraction of the original, even though the viewer sees the same thing.

Therefore, there is no objective way to determine value. Things are worth what people think they are worth.

The value of BTC is its utility: people feel the need to make anonymous (pseudo-anonymous) payments, not depend on banks and send money across borders without checks or high commissions. Depending on the demand there will be some value.

But of course, much of Bitcoin's value is determined by speculation. People buy it in the hope that its value will increase.

Speculation is not entirely useless, of course, as it creates liquidity for those who want to use BTC for payments.

But why is Bitcoin more valuable than any other cryptocurrency? I can take the source code and create my own currency (which is what they do).

The advantage of BTC is primacy. It has already been tested by time, it works (although very little on the scale of history), competitors do not. There are already a huge number of companies and services that work with bitcoins. There are applications, exchanges, processing. Infrastructure is developing. Bitcoins are transferred across borders, the exchange rate is chosen by the recipient (not as is the case with PayPal).

Why not a pyramid?

As we found out, BTC has value. But pyramids can also produce some kind of product, for example, in the case of network marketing. These products are simply not worth the money.

But in the pyramid there is a central organ, a structured scheme: someone brings money to someone. The entire referral system is built from the bottom up. Whoever was the first and most arrogant really gets rich.

Accordingly, if you are looking for arguments in a dispute regarding whether Bitcoin and other popular cryptocurrencies are a pyramid scheme, it is better to change the thesis: you can rather compare it to a bubble. And such signs exist precisely due to speculation. But compared to a pyramid scheme, Bitcoin doesn’t even have a central authority where the money goes. And if you take mining expenses as contributions to the pyramid, then the difficulty is regulated by the network, because Bitcoin could be mined on a processor, practically for free.

But this happens with small projects. First, we’ll quickly present the arguments for Ethereum and Ripple, which are also accused of building a Ponzi scheme, and then we’ll talk about real examples of “abuse.”

Ethereum

Ethereum takes a big step forward and allows almost any financial transaction or contract to be executed. You can use it for home title verification, movie ticket sales, escrow services, crowdfunding-style project financing, and so on.

Ethereum is a general platform for running smart contracts. Ethereum has its own virtual machine. Running the program will cost ETH/

But how do you calculate how much ETH you need?

There is an on-demand price regulator that prevents nodes from being overloaded. The cost will be expressed in gas, its balance must be maintained and purchased with ether.

Which begs the next question, who exactly pays the ether to run the program?

Contracts operate for a short period of time in response to events. This is essentially an API with a set of supported operations.

Ethereum offers transparency and decentralization. The network creates demand for Ether. Thus, the internal currency becomes necessary for society and acquires value. The more people use these applications, the more Ether is needed.

Ripple

Ripple works with its own cryptocurrency, XRP. The project offers a system for money transfers that works quickly and cheaply.

The transaction also requires some XRP. Ripple becomes an intermediary for banks. Its value becomes clear.

Thus, we looked at popular cryptocurrencies and did not notice any signs of pyramids in them. About arguments.

Gray Marketing and Ponzi Schemes

The Internet has dramatically expanded possible business models that leverage fast, low-cost communications with many potential customers. Many unscrupulous marketers have proliferated who are seeking to profit from financial pyramids and MLMs.

Governments are struggling with this phenomenon. But then cryptocurrencies appeared, which are not yet regulated. Accordingly, a new field for activity arose.

The growth of cryptocurrencies gives success to scammers.

Ponzi schemes are based on the business model of “Swindle Vasya to pay Sasha.” They promise to return their investment. How long the scheme will last depends on the influx of new money.

A more common business model is MLM, also known as a multi-level referral or membership system, in which new members of the organization pay a fee for the right to sell goods or services and then receive a share and commissions from the new members recruited.

With cryptocurrencies, dubious projects offer investment contracts. They promise a return on investment (which is easy in a bull market). Naturally, investment opportunities are not registered with regulatory authorities.

They sell packages of varying profitability and use a referral system.

But these are completely outright pyramids. Unscrupulous crypto projects often ask to invest in them using language that is prohibited by the US Federal Trade Commission:

1. income will allow you to quit your job, send your bosses,
2. cryptocurrency will allow you to get rich quickly, pictures of cool houses, cars, photos from luxury vacations are used,
3. using misleading phrases and reviews that do not reflect real capabilities,
4. show unrealistic hypotheses: “If...” Even after “if” there will be adoption of cryptocurrency by aliens.
5. use the referral system as the main source of audience growth.

For example, MerchantCoin launched in 2014 as a payment service that issued tokens (XMC) with the goal of incentivizing consumers, attorneys, and businesses to purchase and use Bitcoin. In the MerchantCoin program, participants who use the network to transact in BTC are rewarded in XMC.

MerchantCoin also introduced a “Social Media Program” that “allows you to earn XMC tokens by alerting your friends, family and business partners to share interesting MerchantCoin news via social media.”

History of BitConnect

Some incentive models in cryptocurrencies have been subject to analysis and criticism. Potential pyramids have been discovered.

One example is the now defunct Bitconnect.

Before it was shut down in early 2018, it was an anonymously run site where users could give their cryptocurrency to a company in exchange for profits based on the term of the loan. For example, a $10,000 loan for 180 days supposedly yielded ~40% return each month with a daily bonus of 0.25%.

Bitconnect allegedly used its own Boteting software to invest in Bitcoin. To participate, users had to purchase Bconnect's native currency, BCC (at one time trading at $400 per coin).

Bitconnect also had a tiered referral system that rewarded members for using social media and signing up friends. In November 2016, the UK registrar of companies threatened to shut down the company, and only the Texas Securities Board and the North Carolina Securities Division issued warrants.

Shortly thereafter, Bitconnect announced it would cease its lending and exchange programs with immediate effect. Some users, judging by the messages left, invested 500 thousand dollars (borrowed) or all their family savings into the project. These are amounts sufficient to invest in large sustainable companies!

They also launched XRPConnect and NEOConnect, which are now closed. But EthConnect, based on Etherium, continues to exist.

We have developed a model in which investors can make profits in different ways. Investors can store their coins in wallets and earn large amounts of money over a period of months or more by holding and staking coins. Our coin will also allow miners to mine it. Investors will then be able to trade coins across multiple exchanges and see their investment grow as demand increases. Finally, our new volatility software will allow our current and future investors to buy directly from exchanges to be able to leverage their ECCs (EthConnect Coins) to earn rewards that will be paid out every 24 hours on a percentage basis. Investors will have the option to choose how long to grant their ECC, from 60-200 days, and will also have the option to reinvest their daily earnings to increase investment and growth.

As we see, in the financial pyramid of this cryptocurrency, income is promised simply from everything.

Another model used by some projects involves launching a cryptocurrency using funds raised by selling the currency at a significant discount (e.g. 75%).

The promoter makes more money by offering currency at lower discounts. As long as early buyers are free to dispose of their inventory and new buyers continue to arrive, early investors receive an almost automatic payout. The validity of these models has not been proven/proven but, in addition to the potential problems with unregistered securities, warrants careful investigation.

conclusions

Some argue that cryptocurrencies are essentially pyramid schemes or Ponzi schemes. But it is difficult to find legal precedent that supports this approach. Despite their novel structure, ephemeral nature and lack of attachment to any valuation system, cryptocurrencies are in many respects a simple speculative vehicle, perhaps similar to traditional bubble-prone assets.

However, certain features of cryptocurrencies and derivative products are particularly susceptible to fraud. These include:

1. decentralized structure of cryptocurrencies, without central management or reporting;
2. free access of ordinary people, possible thanks to social networks;
3. the ease with which unlicensed investors can invest money;
4. a long bullish trend and colossal growth in at least some coins;
5. the relative lack of regulation of cryptocurrency trading and marketing;
6. -culture that has arisen around crypto in general.

We can recommend that both projects choosing a promotion method and investors who want to avoid financial pyramids answer the following questions. They were formulated by Robert Reznick and Evan Brewer.

1. How is the profit opportunity described?

The promise of excessive returns is common among both pyramid schemes and is a "red flag" for regulators, especially when returns are characterized as certain or guaranteed. Risk factors should not be minimized to the extent that they are misleading.

2. Will participants get paid by selling the underlying cryptocurrency or product or will they focus on referrals?

Apparently, programs that "focus" on recruiting new members rather than profiting from sales are more likely to violate laws against pyramid schemes. Referral programs are certainly not illegal, but the structure of such programs must be carefully reviewed. Organic demand should be the basis of a company's profitability.

3. Does the business depend on an ever-increasing influx of new capital to remain solvent?

Any business that becomes insolvent without an ever-increasing influx of new investors raises serious questions. With cryptocurrency in particular, the need for an influx of new capital will likely be required in order for the currency to reach an acceptable level of adoption and scale. But this is not the same as the need for an ever-increasing influx of funds when using misleading statements.

12.10.2017

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There is a lot of skeptical talk about cryptocurrencies in general and Bitcoin in particular. What happens is that under the next news about the success of Bitcoin, someone writes an angry comment that Bitcoin is a financial pyramid, and you have to be a complete fool to invest your money there. They say that the bitter experience of MMM and others like it has taught no one anything, and they are again ungodly profiting from gullible investors.

Well, let's find out. First I'll give you financial pyramid definition, which gives the US Securities and Exchange Commission (SEC):

“A pyramid scheme (Ponzi scheme) is a form of investment fraud that involves paying purported profits to existing investors from funds collected from new investors. Ponzi scheme organizers often attract new investors with promises to invest the collected funds in projects with a high return on investment and minimal risk. In many Ponzi schemes, instead of making a full-fledged investment, the scammers are busy raising new funds with which they will make promised payments to early investors and pocket a portion of these funds for personal use.”

From this definition it follows that an important factor for the pyramid is that past participants receive money not from an objective increase in value, but just money from new members. In addition, there is a certain central link in the pyramid - scam beneficiary which ultimately benefits the most.

I would further expand this with the thesis that the most important thing when identifying a pyramid is total mass of liabilities and total mass of value.

Let's take the same MMM as an example. New people join there and are promised that they will receive millions of percent interest on their deposits - accordingly, the total number of obligations of this pyramid to the participants grows. And the value of MMM is zero, because money is not multiplied there in any way, but is only redistributed between participants within the system. Thus, the value does not grow, and the imbalance between obligations and value becomes greater, since obligations are constantly growing and more and more new participants must be attracted to cover them.

As a result, there comes a time when the pyramid is destroyed because it becomes unprofitable for the beneficiary. Judge for yourself: he has access to a supply of money with which he can escape. This money supply becomes more and more, and then the influx of users ends and the money supply begins to become smaller. At this point, there is no point for the organizer to continue playing the pyramid game, since his money is disappearing before his eyes. Therefore, he simply collapses it and runs away with the money, and 99% of investors, in general, are left with nothing. Here all factors converge: the mass of obligations has grown to enormous proportions, no value has appeared and the beneficiary is interested in escaping.

If we talk about cryptocurrencies in general, it would be more correct to immediately separate Bitcoin and all other cryptocurrencies, the so-called altcoins.

So, one cannot deny the fact that Many ICOs for alternative cryptocurrencies today are forms of financial pyramids. The cryptocurrency market is still largely unregulated, and there are plenty of scammers who are cashing in on the trending topic by setting up pyramid schemes or scams under the guise of revolutionary new companies that are developing fantastic technologies of the future. Most often, the price of such cryptocurrencies is based solely on speculation and deception.

However, this does not mean that absolutely all alternative cryptocurrencies are a scam. Some altcoins have a very clear and transparent pricing model. And in fact, today, in my opinion, cryptocurrencies like Ether do create value, and their price is not just driven by pure speculation.

Regarding Bitcoin– the fantastic increase in its value recently, of course, never ceases to excite the minds of critics, but in fact, everything with it is quite simple.

The first and most obvious difference between Bitcoin and a financial pyramid is no central beneficiary. Theoretically, of course, there are very old wallets with a very large number of bitcoins, which in some sense can be considered such a beneficiary. However, initially there was and still is no official central beneficiary, and without his presence the pyramid does not make sense.

The second important difference is that Bitcoin has a growing user base and an increase in pumped money. value increases, because for any economic system this value is directly related to the number of participants in this system. Moreover, given the fact that the size of the economy is always proportional to the square of the number of participants, and not to the number itself, the value of Bitcoin is growing much faster than the user base is growing, and there is no talk of inflating any kind of bubble.

And finally, another factor is that Bitcoin no obligations to anyone. That is, Bitcoin never promised anything to anyone, so Bitcoin, like a pyramid, in general, cannot collapse. Bitcoin is just a financial protocol for completing, validating and storing information about transactions among network participants. The Bitcoin code is publicly available, each participant can examine the logic of the entire network, and some participants cannot simply appropriate the bitcoins of other participants.

Taking into account all of the above, we can come to the conclusion that Bitcoin does not fall under the definition of a financial pyramid. This is, in fact, a form of digital currency that is used by network participants, and the number of virtual ones for storing it today already exceeds 11 million around the world. There are many factors that determine the price of a currency, but one of the main ones is the volume of demand for the currency and the number of users of the currency. Therefore, it is only natural that as the network of users expands, the price of Bitcoin continues to rise. This is natural for any currency, and Bitcoin should not be considered a particularly suspicious anomaly.