NO, crypto is not a Ponzi scheme.

Crypto closely follows the stock market, when we see the stocks dive, crypto follows.

With the recent downturn in cryptocurrencies, there has been a lot of talk that crypto is a Ponzi scheme, a pyramid, or some other type of scam.

What is a Ponzi scheme?

Pon·zi scheme

/ˈpänzē ˌskēm/ – noun

  1. a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.” a classic Ponzi scheme built on treachery and lies”

So what is that makes people think that Crytpo is a Ponzi Scheme? Probably all the altcoins that don’t offer a specific service like DOGE, SHIBA, etc.

Crypto alert, Hold on for dear life!

What is an Altcoin?

In simple terms, an altcoin is a cryptocurrency that is not Bitcoin. The term altcoin comes from the idea that Bitcoin is the “main” currency or the one that will predominate in market value. As such, all other cryptocurrencies are “alternatives” to Bitcoin. The vast majority of altcoins are forks of the Bitcoin protocol. Some are little more than test networks designed for developers to play around with the code for future updates. There are other altcoins that pursue additional goals, usually through their own innovative use of blockchain technology. For this reason, a great number of altcoins can be categorized as “appcoins.” A notable example is Ethereum, which is essentially a blockchain-based distributed computing platform, which aims to provide decentralized applications (dApps) in a way that does not require trust in a central server.

There are plenty of altcoins and meme coins (we will refer to the questionable projects as meme coins from here on out) that are questionable and offer little to no functionality. They seem to go up and down at the click of the mouse and a tweet from their creator. If the projects don’t have a white paper explaining what they do, or the service they enable, can loosely fit the definition of a Ponzi scheme. These coins are risky, especially during a downturn.

We’re frequently asked about exchange platforms and their utility to both individuals and businesses. One of the more controversial conversations that regularly comes up is the subject of “meme coins and altcoins,” better known as alternative cryptocurrencies. After all, there have been some high-profile scams that have been associated with such altcoin exchanges.

However, for every meme coin, there are 10 other blockchain-based projects that are deemed altcoins that actually offer, or are building infrastructure to offer, something that current services don’t. Projects that have robust white papers that explain every detail of their proposed platform or service do not fit the definition of a Ponzi scheme. These projects offer value in the form of the service that their coin enables. Hardly a scam.

Projects like Stellar (XLM), Loopring (LRC), and Avalance (AVAX) are offering faster transaction speeds, decentralized exchanges, and cheaper cross-border currency exchanges.

The fact is all financial markets are currently suffering major losses. From the Dow Jones to the S&P to markets outside of the US. Everyone is suffering losses. Investing in anything is risky, and as David Bromberg said “a man should never gamble more than he can stand to lose”.