Sunday, December 4

Oxford Scholar Says Bitcoin Is Worse Than Ponzi Scheme

In Publication in Future Times on Wednesday (22), Oxford academic Robert McCauley said Bitcoin is worse than the Ponzi scheme, like the one run by Bernard Madoff for decades.

In his publication, McCauley cites a document entitled “Bitcoin is a Ponzi” by the Brazilian computer scientist, Jorge Stolfi, a professor at Unicamp. Going further, the scholar says Bitcoin is even worse than a Ponzi scam.

Meanwhile, McCauley must be content with the dollar experiencing the biggest period of inflation in three decades. Not to mention the likely migration to a CBDC, a central bank’s digital currency, where we will live in a period of greater censorship and less privacy.

Bitcoin is Ponzi scheme, according to Oxford scholar

The views, both of McCauley and Stolfi, only show the lack of knowledge on the subject when they believe that Bitcoin is a Ponzi scheme where old investors profit from the entry of new ones. Below are the five points covered by them.

  1. People invest because they expect good profits and
  2. this expectation is supported by such profits being paid to those who choose to withdraw. Yet,
  3. there is no external source of revenue for these payments. Instead,
  4. the rewards come entirely from new investments, while
  5. operators take away much of that money.

First, it is important to note that most people look for bitcoin because it is a finite asset and controlled printing, serving as protection for the monetary policies carried out by all countries that, when printing money, make it lose its purchasing power.

As Bitcoin is only 12 years old and is still not widely accepted as a currency, it is often necessary to convert it to a local currency to spend it. Despite this, the ultimate goal is to make it become a currency, as is already being seen in El Salvador, that is, there is nothing different between Bitcoin and the Dollar, Real or Euro, except for the aforementioned points above (and a few others, all in favor of the BTC).

Bitcoin as a payment system aside, it’s important to note that even card giant Visa is working with bitcoin as a form of cash. In other words, it is already possible to use this solution to spend BTC in 80 million establishments around the world.

Finally, to claim that Bitcoin is a Ponzi scheme because speculators seek to protect their capital is like calling any other asset a Ponzi, such as gold, silver, land and anything else you can think of.

A brief comment on point five, bitcoin has no operator, anyone can mine new coins, currently limited to 6.25 BTC per block.

worse than ponzi

Although it is already a lack of knowledge to call Bitcoin Ponzi, McCauley goes further and says he is even worse. According to the academic, while Ponzi schemes are a zero-sum game, Bitcoin can have a negative sum.

The reason for this, McCauley says, is that while Madoff (or any other pyramid trader) took investors’ money, everyone will lose out on Bitcoin if its price falls.

The fact is that we are already losing, a lot, with fiat currencies as governments print more currencies, infinitely, and few benefit from it. The currency issued by the Central Bank of Brazil, the Real, for example, has slowly lost 83% of its purchasing power since its creation.

Devaluation of the Real throughout its history. Source: Fernando Ulrich / Twitter

Not even countries with strong economies like the US are safe from their own monetary policies. After printing 21% of its entire money supply in 2020, the country now faces a period of inflation not seen in 30 years. So imagine what is happening in Turkey, a country that has seen the power of the local currency slide sharply in the market.

In other words, if the academic still doesn’t understand Bitcoin’s appeal in the middle of late 2021, it’s likely that he never will.