Cryptocurrency is a type of digital currency that exists in a decentralized, peer-to-peer network.
One of the biggest questions around cryptocurrency is whether it’s just another pyramid scheme or not.
In this post, we’re going to explore some reasons why people think it might be and also why they don’t.
Cryptocurrency is often described as a pyramid scheme. The idea is that when you invest in cryptocurrency, you are trying to make money from the people who invested before you.
This is not true!
When an investor buys into a cryptocurrency, they buy coins and then hold them for profit. It can be argued that this is similar to investing in shares of stock; therefore it’s NOT a pyramid scheme.
We shall dig in deeper on how Cryptocurrency works.
Why Cryptocurrency is NOT Pyramid Scheme?
Many people believe that cryptocurrencies are pyramid schemes.
This is not accurate at all for a number of reasons, the first being it is very easy to judge someone as a scammer simply because they can make money off of something without doing much work in return.
There is also the matter that there are actual “pyramid scams” out there which involve recruiting peers and having them pay an upfront fee or other such cost before seeing any returns on their investment.
The idea behind making money with Cryptocurrency is basically simple: you buy low and sell high.
You can also “mine” for new coins by setting up your computer to do calculations and solve complex mathematical equations in order to create more money supply.
This is how Bitcoin was created, as well as most other digital currencies out there today.
Lets buttress on some few points why Crypto is a nice form of trading, investing and means of value exchange.
5 Reasons Why Cryptocurrency isn’t a Pyramid Scheme
Wondering how is bitcoin not a pyramid scheme?
You don’t know what you don’t know.
Here are 5 solid reasons why cryptocurrencies isn’t and will never be a pyramid scheme:
1). The Supply of Cryptos (i.e. bitcoin) is Fixed
No one can make money by creating a new cryptocurrency and convincing people to invest in it.
In an example:
Pyramid schemes like the “Ponzi Scheme,” early investors profit from their investment as long as there are more entrants joining into the system.
As time goes on, this becomes unsustainable because of how much effort is required for each new entrant coming in, which leads to high turnover rates where not enough newcomers keep up with those who leave.
With Cryptocurrency being limited in its supply (at least until 21 million Bitcoins have been mined), it’s impossible for any individual or group of individuals to benefit from another person simply by accepting Bitcoin – they must be able to provide real value through whatever service they offer.
2). Pyramid Schemes Tend to be Illegal
Pyramid schemes are illegal in the United States; it is a form of securities fraud.
Cryptocurrency, on the other hand, is legal and has been recognized by governments. And in some industries accepted as an official mode of payment.
It’s important for people who have invested in Bitcoin to know that they can’t make money by convincing others to invest too – so what do you need from cryptocurrency? Value. Value my friend!
What value does Bitcoin provide consumers? It provides them with a digital currency which many businesses now accept as legitimate payments for goods and services.
That is actual value that crypto investors get out of their investment.
3). Pyramid Schemes are Advertised as a “Great Opportunity”
Pyramid schemes advertise themselves as investments with great payouts for the people who get their friends and family to sign up first, which is something that cryptocurrency investors don’t do.
And will never do.
Cryptocurrency is advertised because of its availability on exchanges, not because it’s an opportunity to make money off other people.
This is why we say no – cryptocurrencies aren’t pyramid schemes!
Crypto has become a legit asset class in today’s economy like stocks or bonds so you should be paying attention without fear if you want to invest wisely.
4). Cryptocurrency is NOT Built on a “foundation of paying your friends”
Cryptocurrency is an asset class that is based on mathematics and cryptographic principles.
This means the truth about cryptocurrency is available to anyone who wants it – no one has to ask their friend for money in order to invest in crypto.
The only thing you need, really, is a computer or mobile device with internet access (which most people these days have).
In other words: No pyramids. Honest math & cryptography = safe investment.
Pyramid schemes rely on deception which always fails eventually.
5). Cryptocurrency is Seen as the Future Currency
Cryptocurrencies are a type of digital, decentralized currency.
They’re created and stored electronically on computers all around the world using Blockchain technology.
These currencies use cryptography to control transactions and create new units of a particular cryptocurrency. Cryptocurrency is changing how we do business because it has no centralized authority that can manipulate or change its value at will (unlike fiat money).
For this reason, many people believe cryptocurrencies should replace fiat currency like dollars and euros someday.
On the other end:
A pyramid scheme is an unsustainable business model where participants make more investments than they get out for their own personal gain without any interest in growing what was originally invested by those below them.
The Drawbacks of a Pyramid Scheme & Why You Shouldn’t Invest
Everyone is scared of a pyramid scheme because they know that the bottom level will be left with nothing.
Been there. Done that. Seen all.
Lets face it, Pyramid schemes rely on deception which always fails eventually.
There is no oversight or regulation to protect people who invest in these types of money-making opportunities.
A pyramid scheme is a form of investment fraud in which people are persuaded to invest money, typically through an attractive offer or high rate of return with little risk.
The problem is that such schemes can never be profitable for everyone who gets involved and the only way they make money is by recruiting new investors.
The basic principle behind these schemes is “paying old investors’ profits from their investments using funds collected from new recruits.”
Pyramid schemes always eventually collapse because no matter how many layers there are in a pyramid, it’s impossible for them all to get paid at once without running out of someone on top first–it’s a mathematical certainty.
Benefits of Cryptocurrencies
Cryptocurrency is a type of digital currency that is designed for use in the peer-to-peer (PTP) ecosystem.
It is also decentralized, meaning there are no third parties involved and it cannot be controlled or manipulated by any government body or bank.
A huge benefit!
This makes it ideal for investors who want something stable but with potential growth opportunities.
There are many reasons why people choose to invest in crypto:
Personal privacy, protection from inflationary risks, low transaction fees, ease of transferability across borders… the list goes on and on.
Cryptocurrency is seen as risky only because people don’t understand it well enough yet.
In reality, many experts believe cryptocurrencies like Bitcoin could outpace stocks over time! They’re actually not so different: both promise an opportunity for exponential growth if used wisely.
Besides looked upon as the future of money…
Cryptocurrency is a decentralized, peer-to-peer network. This means that no one controls the currency and it cannot be manipulated by any single party.
It also provides benefits such as convenience with transactions and anonymity of users which allows for privacy.
The most important thing to remember is that investing in cryptocurrency does not guarantee success because prices can fluctuate quickly depending on market demand – just like stocks do.
So if you’re looking for an investment strategy where money will grow automatically without much input from yourself, cryptocurrency might not be for you.
To get started trading, investing, and buying Crypto – you can do that our favorite crypto exchange – Coinbase.com.
How is Bitcoin not a pyramid scheme?
Bitcoin is not a pyramid scheme because it is limited to 21 million coins and cannot be created or distributed by existing members of the bitcoin community. There are no people at the top of this system who get commissions as more people join, that’s just how money works! Peer-to-peer cryptocurrency transactions are also much less likely than MLM
Is Coinbase a pyramid scheme?
Coinbase is not a pyramid scheme. Pyramid schemes are illegal in the United States and most of the world, which means any company claiming to offer such an opportunity would be unlawful.
As the world’s leading cryptocurrency exchange, Coinbase is a staggeringly successful company and its credibility speaks for itself.
They went public on Wednesday, April 14, 2021 in a direct listing that opened at $381 per share, valuing the company at $99.6 billion.
What is the best Cryptocurrency to invest in?
Here are my favorite Crypto list (with potentials) to invest:
- Bitcoin (BTC)
- Ethereum (ETH)
- Litecoin (LTC)
- Ripple (XRP)
- Bitcoin Cash (BCH)
- Stellar Lumens (XLM)
- Cardano (ADA)
- DogeCoin (DOGE)
- Binance Coin (BNB)
- Polkadot (DOT)
Cryptocurrencies are not pyramid schemes for a few reasons.
One is that cryptocurrencies aren’t marketed to other people; they’re advertised on exchanges.
And secondly, because of how the companies operate, you cannot make money off others with crypto – there’s no “duping delight” moment when everyone can cash out at once and leave investors high and dry like in a scheme.
The fact is: cryptos offer too much opportunity if it were a scam!
They have multiple use cases, open-source code which means anyone could lead the project (unlike centralized fiat currencies), decentralized networks to avoid manipulation from one group or government, etc.