What is Bitcoin?
Is Bitcoin really a ponzi scheme? A question that is being asked frequently throughout in India in recent times. Main-stream media already falsely declared it as illegal. Many investors and traders are backing off from Bitcoins. Is it because Bitcoin is really a ponzi scheme? Is it illegal in India?
Bitcoin was introduced in 2009 and is huge gaining popularity worldwide. But all off a sudden, why is it that after almost 8 years of it’s existence, Bitcoin is facing much criticism in India?
Recently BJP MP Kirit Somayia termed bitcoin as a ponzi scheme. In his words, “It is illegal. How can a private person or a few individuals remain behind curtains can develop their own currency? This self-regulation is nonsense. In a Ponzi scheme, all such arguments like multi-level marketing (MLM) and a pyramid structure have been floated.”
This statement in a parliament session caused widespread fear in Bitcoin community and hence Bitcoin came into the lime-light.
So is bitcoin a really ponzi scheme? Lets explore.
Ponzi scheme is a scheme in which a scheme operator or scheme fixer invites investors to invest in the scheme and promises huge returns. Generally these promised returns are paid by collecting money from new investors and then it is remitted to old investors. A concept of Multi-level-Marketing (MLM) or chain marketing is introduced here. In this kind of marketing an investor say Ankit is promised a percentage of commission if he is able to bring a new investor (say Chetan) to invest in the scheme. Also, another benefit which is offered is that if the new investor(Chetan) in turn brings another investor in the scheme, apart from Chetan, Ankit will also get a commission and so on the chain grows and the person at the top of the chain receives more commission, which is generally the scheme fixer or his associates. Ultimately, a major part of investment amount is collected by the scheme fixer and a small amount is distributed among the investors as “promised return” and the fixer runs away with the so called invested amount.
On the Contrary, Bitcoin is just a digital currency which has a monetary value in the market. Bitcoin is the world’s first decentralized peer-to-peer cryptocurrency. A person living in any part of the world can pay another person anywhere through bitcoins as it is a global currency just like Gold. It is a digital currency and is often referred as Digital Gold
Bitcoin is stored in digital wallet just like any currency in any digital wallet and is send through internet. It is as fast as an email and therefore because of it’s several advantages it is continuously gaining popularity and acceptance worldwide.
So why Bitcoin was termed as a Ponzi Scheme?
Bitcoin in itself is not a ponzi scheme.It is just a technological advancement in the field of currencies. As an e-mail has replaced the physical courier/mails, Bitcoin or cryptocurrencies may replace physical fiat paper currencies in future.
But not to ignore a fact, there are several companies existing which offers huge returns in Bitcoins if you invest in their scheme. Again by incorporating MLM like features, these companies encourage investors to bring new investors in the company. Some companies are legit but some may be fraud. An investor needs to verify and invest at it’s own risk.
Perhaps Bitcoin was referred to ponzi scheme because of these companies which are running schemes to multiply your existing Bitcoins by investing in their bitcoin mining. Frauds are increasing day by day and therefore, one needs to be cautious before investing anywhere.
Because of increase in negative publicity here in India , Bitcoin enthusiasts were in a fear where Bitcoin could be banned. Furthermore, higher authorities were being regularly requested to give a verdict with respect to legality of Bitcoins.
Finally a committee has been set up where Bitcoin and Virtual Currencies will be examined and the report will be submitted in July. (Click here to read full article )
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