Pyramid, Ponzi and Crypto Scams

I’ll start off with crypto currency. First of all yes, many crypto currencies are no more than scams created by conmen to steal your money, they create a coin, hype it up and then have an ICO (this is the new way to do it) get as much money as possible and then disappear leaving you as a bag holder holding coins that are worth nothing, in other words you were a sucker, don’t worry this happens to about everybody. 

But are all crypto currencies scams?  First of all what is a crypto currency.Decentralized crypto currency is produced by the entire crypto currency system collectively, at a rate which is defined when the system is created and which is publicly known. These coins are mined by individuals. The security of crypto currency ledgers is based on the assumption that the majority of miners are honestly trying to maintain the ledger, having financial incentive to do so. 

Ok, but what value does this currency have? Well we have seen it is quite safe, but it can only have value if it can be used, so you have to be able to buy something for it to be of any value. There are many crypto’s that fit this category especially Bitcoin, you can buy multiple things with it and even exchange it for fiat currency. But what is backing it? Well to me it is the same as any other monetary system, it is backed by the faith that it has some value, gold has value only because we have given it value, if all of a sudden nobody wanted gold it’s value would plummet. The same with fiat currency, for example the US dollar, if all of a sudden the US were to be Balkanized the dollar would have absolutely no value, so everything including crypto currency is backed by the belief that it has a certain value.

So to round it up I would say Bitcoin and the many other alt coins which you can exchange for Bitcoin are definitely not scams as long as enough people have faith in them. 

                                                  

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Now we move on to Pyramid Schemes, as the name implies it is structured like a pyramid with the creator at the top, then after him comes a second person who has to invest some money to get in on the scheme, this person in turn has to recruit some more people who have to also pay some money, the original person gets a percentage of all sales, the second one also gets a percentage of his downlines sales and this goes on and on, each person having to fill his quota of members to receive his profit, of course even if every step is filled eventually you will run out of people to sell to and the ones in the lower levels will lose all their money, with the one at the top getting rich the second layer getting a nice profit and the third level getting even, the rest all lose. 

Some of these schemes are called multi level marketing where you are actually selling a product, perhaps a nutritional supplement, which is sold by the company so you are actually in a legit business but in the end there are only so many people who will buy the product so again people lose their money. Of course in MLM if you buy the product and are able to sell it you are actually doing business but I doubt you are going to make much money off of it, only the top layers make a nice profit. 

Ponzi schemes on the other hand require you to hand over your money to someone as an investment with guarantees of a huge return, this never happens and you lose your money. Of course for these to work the conman first has to have some huge successes to prove he has made a lot of money for people so you will actually invest your money.