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|User Info||Tickerguy on F.A.C.E.....; entered at 2017-12-06 12:05:20|
I have a slightly different take on what happened with the original Ponzi scheme. Ponzi thought up an arbitrage system, where the International Reply Coupon could be bought cheaply in one country, and sold at a higher price in another. Now, this is an asinine idea in many ways, but in theory the idea does, in fact work.|
A IRCs and stamps are credit instruments; you pay today for the delivery of mail some time in the future. There is nothing wrong with this. But there was something that Ponzi didn't realize: there is no limitation on the number of these things that can be sold. No reasonable person would see the need for such a regulation.
The demand for sending mail is at any given point in time is roughly finite, and grows at a slow rate. So we have an infinite supply of IRCs being used to purchase a service with finite demand. So as the supply of these things is unwittingly being hyperinflated by the postal services, their value on the secondary market, on which this arbitrage scheme relies, plummets and plummets fast. The profit disappears.
This is where Ponzi's fraud begins. Lacking the integrity to admit to his investors that he has ****ed up and returning what is left to investors, he pays them off, probably at this point with the motive of not disappointing them. He probably thinks at this point that the market will recover, and all will be made whole. As you know, the problem with lies is that they often require ever bigger lies to cover them up. Same with Ponzi's lie, and it requires ever more money and investors to cover the lie.
You see a similar pattern, at least with the initial lie, with non other than Bernie Madoff. The Ponzi began likely the same way. From what I understand, Madoff started of legitimately. He's showing good returns, but then he has a bad month. Not wanting to disappoint his investors, he fudges the return, believing he'll make it up. The same thing happens. He doesn't recover, and then the Ponzi begins in earnest. The initial idea was not fraudulent, but the lack of integrity to admit failure. You can sort of see this with Madoff: for a man alleged to have stolen 16 billion dollars (or whatever it was), he lived quite modestly. Assuming the 16 billion were fraudulent returns, he himself would have been "entitled" to $3.2 billion of it, assuming he was using the common 2 and 20 system for hedge funds.
Now, let us consider Bitcoin in light of my analysis of the original Ponzi. The supply of the IRC's was infinite, but the demand was finite. In Bitcoin's case, the supply of Bitcoin is finite, but if the market accepts it as money, the demand becomes infinite.
Consider also how Bitcoin came to be. It's founder created it, mined a million for himself, and announced to the market "here is this thing I have created, let us see what happens to it". Ethereum, which I believe to be the second crypto created, started differently. They crowdfunded approximately $16 million dollars to start. Now, explain to me how creating something that mimics something created by a dude, or a group of dudes, needs 16 million at the outset? At this point, I think you have fraud. This is the work of greedy people, taking advantage of a gullible and greedy public. The ICOs that have happened since, have taken ever more Bitcoin (apparently in few cases, cash) to start off.
No doubt the creator of Bitcoin has sold some off, and is likely very wealthy. But he did not collect money at the outset; he started off knowing that he could become either very wealthy, or that he may make nothing at all. His motive, in a way, was curiosity. I think greed was only a secondary factor.