A Ponzi scheme, or “ponzi” for short, is a type of investment fraud with these five features:
- People invest into it because they expect good profits, and
- that expectation is sustained by such profits being paid to those who choose to cash out. However,
- there is no external source of revenue for those payoffs. Instead,
- the payoffs come entirely from new investment money, while
- the operators take away a large portion of this money.
Investing in bitcoin (or any crypto with similar protocol) checks all these items. The investors are all those who have bought or will buy bitcoins; they invest by buying bitcoins, and cash out by selling them. The operators are the miners, who take money out of the scheme when they sell their mined coins to the investors.
Eulogy made by Jorge Stolfi