Rumors have been circulating lately that bitcoin pyramid like MMM, which means it is another "scam".
In this case, the question arises, do you need to invest your savings in electronic money, or is it worth remembering the old story and thinking three times before making such a decision? Let's try to figure it out.
The similarity of bitcoin with previously known financial pyramids
Bitcoin is often compared to the once infamous MMM company. It all started in the 1990s. The Mavrodi brothers played on the desire of “easy money” lovers and organized the largest financial pyramid in the last 100 years.
What is the essence of the pyramid? Suppose there is an organization that allows you to earn on your savings if you invest them at a very solid interest rate, for example, 1000% per annum. For this, you become the owner of the company's shares. Stocks are growing relentlessly, interest is simply cosmic. Naturally, the thought of returning the shares does not even arise for you.
It is unfortunate, but MMM is not the first large-scale fraud in the history of mankind. Such games appeared much earlier than electronic money and TVs. Everyone knows the story of tulip mania in the Netherlands. In the 17th century, the cost of tulip planting material reached the point that a few bulbs could buy a fortune. But speculators stepped in and prices collapsed. Many lost not only money, but also estates.
MMM shares grew by 100% in a month. You can see the course for today. Bitcoin is growing at the same rate. To rise in price for a few hours by $ 2,000 - isn't that fantastic? So is it worth investing your savings in a new currency? What is the risk of losing money? Is bitcoin a pyramid or a real reliable currency? There are many questions, and it is very difficult to give an unambiguous answer to them.
Bitcoin is indeed somewhat similar to MMM, but still they are different things.
The financial pyramid represents attracted funds, and the payment of income occurs at the expense of early cash investments.
Cryptocurrency does not have a guaranteed income, as it does not consist of funds that investors have invested in it at an earlier stage. 
However, pyramid schemes involving bitcoin can still take place. Therefore, you should not go to sites where you need to invest electronic money and invite many friends to receive income.
Bitcoin financial pyramid or a reliable investment
Behind any pyramid there are always people who have only one desire - to take your money away.
Things are quite different with bitcoin.
Given that cryptocurrency is decentralized and is of great importance as a means of payment, it can be easily invested. Large firms accept bitcoins as payment for goods or services. They are recognized by world banks.
All these factors bring us to another difference. After all, many believe that electronic money is not secured. This is very reminiscent of the MMM company, in which the value of shares grew simply out of nothing. And if we take the classical understanding, then indeed bitcoin is not backed by any gold and foreign exchange reserve. However, to be fair, buying a gold bar in a bank for dollars is also impossible.
The value of electronic money is that they are accepted as payment for goods or services. We can say that their availability is confirmed by such physical quantities as labor resources, electricity and computing power.
Experts say that if MMM simply swindled citizens for money, then the economy of the future is behind the cryptocurrency. So, the assertion of some skeptics that bitcoin new pyramid highly doubtful. In any case, electronic money will be used for more than a dozen years.
However, it still looks like a pyramid. I also remember the huge speculation on the stock exchange, a very significant growth and a terrible hype around this currency. After all, with an increase in growth rates, the number of people who want to earn money increases, and not always honestly and according to the rules.
There is another fact that makes bitcoin look like a pyramid scheme, and that is risk. After all, many people want not just to invest their money in cryptocurrency and expect, but to earn money on a floating rate. Experts say: “Investing money in bitcoin always carries a lot of risk.” And don't neglect it. After all, any cryptocurrency can collapse in an instant. The course falls sharply and the natural reaction of a person who understands little about this is to quickly sell everything that is available so as not to be left "pennyless".
But, you can also make money from it. Indeed, after a while, the course, as if nothing had happened, will begin to rise. The main thing is to wait and not panic. And even if skeptics say that bitcoin is a pyramid that will collapse, then there is still no reason to assert this.
Based on this, one can answer why bitcoin is not a pyramid
- No guaranteed income.
- The lack of people behind it.
- Security is confirmed by physical quantities.
What is the risk of investing in cryptocurrencies
No matter what they say, bitcoin continues to grow and breaks all records. Let's remember at least November 17 of this year, when the rate rose to $ 8,000. It has grown by 740% this year.
The balance between supply and demand is always important. If there is such a demand for cryptocurrency that leading companies and investors are willing to pay $8,000 each, then at this stage, the collapse of bitcoin is almost impossible.
Of course, one should not discount the fact that a bitcoin financial pyramid is possible, which someday will collapse with a bang. But you shouldn't dwell on it either.
Investing is always risky and that's okay. The main thing to always remember is that you can invest only those funds that you are not sorry to lose.
And yet, no matter how they think whether bitcoin is a financial pyramid or the currency of the future, its rate is growing, and many will still be able to make money on it.
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Very often there is a statement that the cryptocurrency is a pyramid, the cryptocurrency is not confirmed by anything and the 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. fit into the understanding of people that the pyramid means MMM, it means divorce. But the difference between a pyramid scheme and investments is that when we invest in a technology pyramid, we anticipate that this technology can take off. We're looking at the technology behind this possibly pyramid scheme. If we consider the MMM pyramid, then we consider the possibility of having time to enter and have time to leave 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 pyramid signs and refuse to invest, then nothing will ever work out. Speaking from the point of view of business, the entire business business is organized on the basis of a pyramid. We buy any product or product, if this product goes rotten in the warehouse, then we incur losses. The same is true with cryptocurrencies. When we bought a cryptocurrency and it began to fall in price, we incur losses; when it grows, we earn. Those. the stock market and stocks 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 each, 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 would think that you are protected by something 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 wrong with a pyramid, a pyramid is bad if there is no technology in it. Before investing in cryptocurrency, you need to look not at how it grows, but look into the depths of the technology, study it. If there is a promising technology behind this cryptocurrency, then you can invest in it, if behind it there are people who shout that it will grow, but there is no technology, then this is a pyramid according to the principle of Mavrodi. These points are important to distinguish. Therefore, if you hear that cryptocurrency is a pyramid, there is nothing wrong with that, because the whole economy works on the principle of a pyramid.
Cryptocurrency is not confirmed by anything.
Now let's analyze the statement that the cryptocurrency is not confirmed by anything. On the one hand, this is true, but on the other hand, the cryptocurrency is confirmed by technology. That is, each of these cryptocurrencies, if you do not take into account the garbage 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 force another company out of the market, which means it can bring profit to someone. If we talk about Bitcoin, for example, then it has a more savings function, an asset for savings. If we take gold and Bitcoin, then gold is a material product with a long history. Bitcoin has none of this, but the thing 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. So for example facebook or google do not have a material product, but they generate profit. It is the same with Bitcoin, which has so far been accepted only by the community, but more and more investments are being made into it to save large amounts, over time it will become generally accepted and then it will be difficult for an ordinary person to enter this area. Now this is only in its infancy, which is why Bitcoin or another cryptocurrency is sausage.
Cryptocurrency will soon collapse.
And the last statement is that the cryptocurrency will soon collapse. This statement is also not true. The whole market cannot collapse quickly; Cryptocurrency is a market that has already been specifically formed where a lot of money is invested and cannot collapse in one day, markets do not collapse so easily. The bulk of those who invest in cryptocurrency do not do it just like that, they study the topic, assess its potential and understand how it will grow.
12.10.2017
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There is a lot of skepticism about cryptocurrencies in general and bitcoin in particular. What happens that under the next news about the success of bitcoin, someone writes an angry comment that bitcoin is a financial pyramid, and you need to be a complete fool to invest your money there. They say that the bitter experience of MMM and others like it taught nothing to anyone, and they again shamelessly profit from gullible investors.
Well, let's figure it out. First I will give definition of a financial pyramid, which gives the US Securities and Exchange Commission (SEC):
“Pyramid scheme (Ponzi scheme) is a form of investment fraud that involves the payment of alleged profits to existing investors from funds collected from new investors. Ponzi scheme organizers often attract new investors with promises to invest the funds raised in projects with a high return on investment and minimal risk. In many Ponzi schemes, instead of full-fledged investment, the scammers are busy raising new funds with which they will make the promised payouts to early investors and appropriate some of these funds for personal use.”
From this definition it follows that the important factor for the pyramid is that the past participants receive money not from an objective increase in value, but just money for new members. In addition, there is a certain central link in the pyramid - scam beneficiary which ultimately reaps the maximum benefit.
I would also expand this with the thesis that the most important thing in identifying a pyramid is total mass of liabilities and total mass of value.
Let's take MMM as an example. New people enter there, who are promised that they will receive some millions of interest on their deposits - accordingly, the total number of obligations of this pyramid to the participants is growing. And the value of MMM is zero, because the money there is not multiplied in any way, but only redistributed among the participants within the system. Thus, the value does not grow, and the imbalance between commitment and value becomes more and more, as the commitments 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 collapses because it becomes unprofitable for the beneficiary. Judge for yourself: he has access to the money supply, 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 moment, it makes no sense for the organizer to continue playing the pyramid, as his money disappears before his eyes. Therefore, he simply collapses it and runs away with the money, and 99% of depositors, in general, are left with nothing. Here all the 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 profit from the popular topic by building pyramid schemes or fraudulent schemes under the guise of revolutionary new companies that develop fantastic technologies of the future. Most often, the price of such cryptocurrencies is based solely on speculation and deception.
However, this does not mean at all 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 only driven by pure speculation.
As for bitcoin- the fantastic increase in its value recently, of course, does not cease to excite the minds of critics, but in fact, everything is quite simple with it.
The first and most obvious difference between bitcoin and a pyramid scheme is no central beneficiary. Theoretically, of course, there are very old wallets with a very large amount of bitcoins, which in a sense can be considered such a beneficiary. However, there was not and is no official central beneficiary, and without his presence, the pyramid does not make sense.
The second important difference is in bitcoin with the growth of the user base and with the growth of the uploaded money. growing value, because in 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 the number itself, the value of bitcoin is growing much faster than the user base is growing, and there is no need to talk about inflating some kind of bubble.
And, finally, another factor is that Bitcoin has no obligation to anyone. That is, bitcoin never promised anything to anyone, so bitcoin as a pyramid, in general, cannot collapse. Bitcoin is just a financial protocol for making, validating and storing information about transactions among network participants. The bitcoin code is in the public domain, each participant can explore the logic of the entire network, and some participants cannot simply appropriate the bitcoins of other participants.
Considering all of the above, it can be concluded that bitcoin does not fall under the definition of a pyramid scheme. It is, in fact, a form of digital currency that is used by network members, and the number of virtual ones to store it today already exceeds 11 million worldwide. There are many factors that shape 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 this currency. Therefore, it is only natural that with the expansion of the network of users, the price of bitcoin continues to grow. This is natural for any currency, and bitcoin should not be considered some particularly suspicious anomaly.
Bitcoin is a relatively new payment unit, modestly introduced to the Internet community in 2009 by a certain mysterious character with the pseudonym Satoshi Nakamoto. Having posted a description of the system with the first version of the client program on the bitcoin.org website, the developer completely pulled away from the project. Further coordination was undertaken by Gavin Andresen with a group of programmers, including Mike Hearn (formerly a Google specialist) and foundation chairman Peter Wessensen. Literally a year later, the scientist personally presented a report to the CIA headquarters on how “Bitcoin can change the world” - the potential of the currency was so highly appreciated by criminal structures and the largest financial organizations.
The main essence of the system
A lot of specialized terms inject into a stupor the average user interested in the hype around Bitcoin. Electronic, virtual, decentralized, cryptocurrency - one of the many definitions is not enough to characterize the means of payment. The most accurate name "digital currency" for Bitcoin is used on its own website. In fact, one coin is a certain number (not a face value!), Which is stored in the database. It is easier for users who are proficient in P2P IT technologies, programming and cryptography to quickly understand the principles of the system functioning.
The Bitcoin system works precisely at the expense of peer-to-peer network participants who create new base blocks on their PCs using cryptographic methods. By solving complex mathematical problems, where the computer is engaged in the selection of code numbers, you can get a certain amount of BTC as a reward. The block reward is currently 25 BTC, a number that has halved since November 28, 2012. Any user who has:
Bitcoin software on a fully equipped mining PC. Downloading a large amount of data requires a lot of time and traffic.
Appropriate hardware that needs to be regularly upgraded for the growing difficulty of mining: multiple graphics cards or an ASIC device (optional) and a powerful power supply.
Cheap, and better free source of electricity.
To learn more about the generation of bitcoins, numerous guides on the network from experienced participants in the system allow. True, the new “miners” should not be very hopeful: the short-term profitability of such an activity is zero. The amount of BTC received practically does not justify the cost of iron and energy consumption. The technical idea of Bitcoin was initially far from financial pyramids, therefore it does not guarantee either easy money for the participant or a quick increase in funds for investors. But the popularity of a brand with long-term potential is used by intermediaries by speculative methods to earn money, from there there are commissions for transactions, payment of electronic benefits, rates on the course.
What justifies the unrealistically high rate of Bitcoin?
Of course, not only the efforts of the yellow press inflated the popularity of a new means of payment, which is not unreasonably called "electronic" or "synthetic gold". There are definitely similarities:
The main feature is the decentralization of Bitcoin, i.e., the absence of a single emission (generating virtual coins) center and supervisory authority. The system as a whole resembles the extraction of valuable minerals.
The second common property of Bitcoin with the precious metal is the exhaustibility of the resource, its limited quantity. The creators of the currency have programmed a total maximum of 21 million currency units, and it is not possible to increase this figure.
Another common characteristic of "synthetics" and natural gold is the difficulty of mining (extraction). Bitcoin mining, like gold mines, becomes more complicated over time: to decrypt each subsequent BTC block, you need to increase computing power. Every 4 years, the number of coins in the block is halved. In the short history of Bitcoin, the difficulty of mining has increased 50 million times. At the same time, the price of each coin is also growing, which does not exclude the possibility of deflation with division of one to the eighth decimal place.
Global Outlook for Bitcoin
Only in the last two months of last year, the rate of one coin rose from hundreds of dollars to $1200 on some exchanges. True, in December, the Central Bank of China halved quotes on the BTC China exchange by completely banning the exchange of cryptocurrencies for Chinese yuan. For Bitcoin, this is far from the first fall. Moreover, in 2011, an account hack that stole the data of 60,000 users led to a complete halt in the activities of the well-known Japanese exchange Mt Gox. But this catastrophe did not become the collapse of the digital currency. Despite the obvious dependence on demand, experts predict a rate of $10,000 at the beginning of next year. Analysts at the British investment company Wedbush Securities announced the possible price of one BTC coin up to $98,000 in the near future, presenting the cryptocurrency as a “powerful alternative to banking networks.”
The outlook didn't look so bright in 2010 when BTC was worth $0.05. A year earlier, "IT specialist" James Howells from the UK threw a hard drive into a landfill, which had accumulated 7,500 virtual Bitcoin coins with a current price of about $8 million. .
Another generous spender of precious bitcoins was an Internet user from Florida under the nickname Laszlo, who gave ten thousand coins in May 2010 for two pizzas. In fact, his story became the first transaction in the history of Bitcoin. Three years later, for this amount, Lazlo could buy a confectionery factory.
Dozens of such incidents in the short history of Bitcoin are heating up the interest of Internet users around the world. Potential investors are held back only by the historical experience of numerous victims of financial pyramids. There are thousands of real participants, including those in Russia, whose names it is impossible to find out now. It is only known that the largest stake ($11 million) on Bitcoin was made by the Winkelvoss brothers, who at one time tossed the idea of creating Facebook to competitor Mark Zuckenberg.
The control of the largest wallet (144,000 BTC), “confiscated” from the illegal site Silk Road (Silk Road), was assigned to the FBI. The online platform was closed for intermediary drug sales, and its owner, Ross Ulbricht, lost more than $100 million.
At the end of 2013, there were approximately 12 million BTC in circulation - a little more than half of the total Bitcoin gold reserves put into the mining program by developers.
Risks of using and legal status of cryptocurrencies in the global market
Soaring quotes, on the one hand, are perceived by experts as the formation of the cost of a real equivalent, and on the other hand, as an artificially inflated financial bubble. However, disagreements between expert opinions do not prevent the development of the brand, which led to the formation of forks: Litecoin (LTC), Namecoin (NVC), Novacoin (NVC), Terracoin (TRC), etc. Alternative cryptocurrencies, along with the parent Bitcoin, are actively used in the field speculation by users around the world and on Russian exchanges.
In general, the gambling interest of Russians in Bitcoin is quite predictable. Vague legislation regarding the circulation of virtual means of payment in Russia allows the use of bitcoins in e-commerce. On exchanges like BTC-E, the volume of unorganized trading with high commission percentages breaks all world records. To manipulate participants, the latest technologies are involved, so there is a high risk of an increase in cybercrime: hacking wallets, hacker attacks, closing Internet platforms.
The legal status of virtual currency is not defined in most countries, and only Germany has officially recognized BTC as a private money option. The topic of legislative regulation is being vigorously discussed in the US Congress, as well as by government officials in a number of countries in northern Europe. But the legalization of Bitcoin will deprive it of its main attraction and income from turnover. Both the criminal accounts of illegal goods dealers and the privacy of the data of all participants in the system will fall under the scope. It is clear that in the same Russia, the benefit from the use of an expensive cyber-currency will postpone the solution of a similar task for a very indefinite period.
However, despite all the refuting facts, Bitcoin may well turn out to be one of the most spectacular financial pyramids, which one day will collapse without the help of government agencies. But even if the system changes drastically, cryptocurrencies have a much better chance of surviving than fiat money in today's economic space.
Cryptocurrency mining craze hit the first serious obstacle - a sharp rise 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 the widest field for earning hundreds of thousands of people around the world. For some time now, Russians have also joined the race for virtual currencies (which can be easily converted into real money). Mining - the extraction of cryptocurrency using improvised computing power, is very popular among our compatriots today.
For many, the mining mania that swept over Russia resembles the numerous “pyramids” of the early 90s, when small groups of those who “stand at the origins” earned big money at the expense of everyone who joined the process later.
Catherine is of the same opinion. “Blockchain and cryptocurrencies are not going anywhere, on the contrary, they have a good future. But it will become impossible to make money on "home" mining by buying 6 video cards and installing the necessary program, she says. - The volume and complexity of computing will grow, placing ever higher demands on the equipment. And in parallel, the risks of the cryptocurrency market itself will also increase, which, in their properties and habits, will become more and more like fiat (ordinary) currencies.
At the current cost of video cards, any more or less significant collapse or correction of the cryptocurrency exchange rate (and they will certainly be) will immediately knock out thousands of “home” miners from the market, whose owners donated their last shirt to them.
Now many miners around the world are joining pools, trying to resist the changing market situation, for some it even helps to save income. But pools are not a panacea. As the situation worsens, the requirements for getting into the pool will also become tougher, primarily regarding the performance and quality of equipment. And here, for many, everything again rests on money. Ultimately, only professionals with good financial opportunities will remain in the game, and they will earn a lot more for a long time.
In the early 90s, almost every first one “traded” computers, and where are all these “businessmen” now? But, as we can see, computers have not gone away since then and their trade is still flourishing. Only not everyone is doing this at the same time, but only a few with the necessary knowledge and money. The same is true for cryptocurrencies, I have no doubt about it.”
