A Pyramid Doesn’t Define Bitcoin

The argument that Bitcoin is a pyramid scheme is one that newcomers to Bitcoin may use when they either don’t understand what a pyramid scheme is, what Bitcoin is, or both. It takes one hour, or less, of research to understand that Bitcoin is not a pyramid scheme. I will provide the logical argument in less than five minutes of reading.

In my personal experience, the way Bitcoin has been described as a pyramid scheme is that since people bought earlier and at lower prices than others, they disproportionally are advantaged by new people and new money entering the Bitcoin economy.

The latter part of this statement is true.

However early adopters having a lower cost basis than newcomers does not equal a pyramid scheme.

If that were the case, anything capable of being purchased “early” by investors could fit this definition of a “pyramid” scheme.

But we know this isn’t true.

No one tells early investors of Microsoft, Nvidia, Apple, Tesla, or any other successful company on the stock market that they benefited from involving themselves with, and being early to a “pyramid scheme.”

No one tells land speculators who purchased prime real estate in Manhattan, Beverley Hills, Austin, or any emerging market that they achieved wealth by being the head of a “pyramid scheme.”

In investing, it pays to be early but it pays to be right.

I have highlighted successful cases of people who could have achieved wealth by being early and right with their investments but there are many other examples of people being early, yet wrong, about their investments and ultimately losing money.

Being an early investor in ANYTHING brings about inherent risk and levels of uncertainty. As a result, if they are right, there is a higher upside but the flip side is also true.

This statement reigns true with Bitcoin.

Being early to Bitcoin was like trailblazing to the western frontier and trying to carve out a life for you and your family in the Wild West. There was opportunity, and an allure of “gold,” but to realize that opportunity you had to overcome years of hardships and opposition.

I believe hardships and opposition are still here, and I continually argue to people that you would still be early to Bitcoin, but today’s landscape is nothing like that of 2014, 2017, or even 2020. Early adopters of Bitcoin did not have it easy. There were numerous cataclysmic events and bear markets that shook out countless people. Those who stuck around weathered storms that others couldn’t fathom. In these cases, conviction brought them to the present moment.

All this to say, it doesn’t make sense to think that since early adopters have lower cost basis and higher ROIs on their investments than newcomers, that Bitcoin is a pyramid scheme.

The first part of this debunked the fallacy in the argument through an improper understanding of what a pyramid scheme is. If the above argument were true, all forms of investments could be deemed as a pyramid scheme by this standard. The next part will explain more intricately the true definition of a pyramid scheme and why Bitcoin does not satisfy these requirements.

1. A pyramid scheme requires that early entrants get rich at the expense of later entrants.

Bitcoin doesn’t enable early entrants to gain wealth at the expense of later entrants. Rather, Bitcoin enables early entrants, and everyone involved, to gain value through the compounding impact everyone and everything has on the total network.

I am quoting myself from a prior post titled “Bitcoin’s Circular Nature,” when I say, “There is no system, product, corporation, or country in the world where the workings of individual people, groups of people, companies, and countries all compound upon each other like what happens with Bitcoin.”

Bitcoin’s goal is not to enrich early adopters and most certainly isn’t to provide value to some at the expense of others. Bitcoin’s goal is to bring monetary power back to everyone and everything involved. It is the only form of money in the world with a fixed total supply, meaning it offers anyone a lifeline to opt out of a system that perpetuates the loss of purchasing power.

As the hardest form of money in the world, Bitcoin has the potential, and ability, to usher in a new golden age for humanity.

Bitcoin’s true outcome is as a one-for-all system, not as an all-for-one.

Everyone wins in the Bitcoin industry.

2. A pyramid scheme requires investors to bring in newcomers to continue operating, or else it collapses like a house of cards.

On a technical level, Bitcoin doesn’t need anyone to operate. The code is set up to run for a millennium with no changes. In this way, Bitcoin operates on a system akin to the laws of physics and mathematics. It is set in stone. There is no structural house of cards operations that will come tumbling down if newcomers don’t adopt Bitcoin.

On an operational level, Bitcoin also isn’t a company selling a product that needs new customers to turn a profit. Bitcoin isn’t a company with a board of directors planning on how to market and grow.

Bitcoin is a network. As a network, it will either expand or contract based on how the world views it.

Discussing currency, the world, and economic markets naturally move toward the best source of money. Without a common currency or rate of exchange, purchasing becomes close to impossible. Since Bitcoin’s use case is as a currency and means for peer-to-peer exchange, I do believe people will naturally continue gravitating toward the hardest form of currency, which is Bitcoin.

If there exists a better currency in the future, then people will move toward that. That is the natural and logical progression of currency and does not mean that Bitcoin is a house of cards with no substance.

My bet is that Bitcoin will continue to be more widely adopted and eventually the world will use it as a standard for currency like how gold was used in generations prior.

The only house of cards operation I see is that of fiat currency, not Bitcoin.

3. For either of the above arguments to successfully define Bitcoin as a pyramid scheme requires that Bitcoin be nefarious or imaginary in nature with no redeeming value.

Parker provides a succinct explanation of what value Bitcoin brings to the world. There is nothing imaginary about this. Bitcoin offers the world a solution to constant money printing and currency debasement. Bitcoin is the light at the end of the tunnel in a world where currency debasement is the norm.

The world is better off in a system running on sound money. The most innovative, productive, and peaceful periods in the history of humanity have been under systems where currency was backed by hard assets. As more people adopt Bitcoin, the world pushes back to this system of operation.

The potential reach of Bitcoin’s utility is clear.

Everyone is entitled to their own opinion about Bitcoin but on a logical and factual level, Bitcoin isn’t a pyramid scheme.

Understanding this may allow you to form other opinions about Bitcoin based on other research you do.

Remember, “Everybody gets Bitcoin at the price they deserve”

Stack SATs.

The views and opinions expressed here are for entertainment purposes only and should, in no way, be interpreted as financial or investment advice. Always conduct your own research when making an investment or trading decision, as each such move involves risk. The team members behind Triana are not financial advisors and do not claim to be qualified to convey information or advice that a registered financial advisor would convey to clients as guidance. Nothing contained in this e-mail/article constitutes, or shall be construed as, an offering of financial instruments, investment advice, or recommendations of an investment strategy. If you are seeking financial advice, find a professional who is right for you.