Bitconnect founder indicted in global $2.4B cryptocurrency scheme

Alternatively, con-artists pose as upsetting technologies to convince people to get in on the "ground floor" of the exciting hyped tech (doesn't necessarily apply to crypto).

> Bitcoin/Ethereum/etc actually do /something/

Big if true.

Names are hard, because it is common to name something with what looks most like it, even when there are differences.

There are two separate phenomena that give it the appearance of a Ponzi.

First, a Ponzi works by taking the money of new investors, and distributing it to past investors that cash out with “profit”. Similarly, BTC investing (as in, intending to make a profit from the difference between the buy and the sell price) works by taking the money of new investors (in an exchange) and distributing it to past investors that cash out, yielding a profit that, from a systemic perspective, will eventually cause someone’s loss. From that viewpoint, successful investors are unwittingly taking the money of people that may not afford the loss.

Second, a Ponzi works by making up assets (typically financial instruments) out of thin air, and selling them to victims (some of which will profit, many will lose), making a profit out of thin air. Similarly, the creator of a cryptocurrency typically puts itself in a position where they either premine the coins, or create an algorithmic schedule where most of the coins are created in the first few years, making them out of thin air, and giving themselves a significant advantage, as they will give themselves a generous chunk. They then sell those coins to victims, making a profit out of thin air. Even Nakamoto famously was flagged as an intensive miner in early years, and clearly did not expect to be deanonymized by the coinbase counter, since they changed it once it was found out.

It is true that there are dissimilarities as well. The largest one is the failure mode. A traditional Ponzi fails because people that did not get their “guaranteed profit, whisper past performances is not a guide for future performance”, are unlikely to reinvest, leading to a breaking point where everyone takes their money out until none is left. In the types of cryptocurrencies described above, people are often willing to reinvest even when they lost substantial amounts.

The failure mode typically comes many decades later, when lost keys (deaths etc) cause a slow deflation until no coin remains in use.

From Wikipedia:

A Ponzi scheme (/ˈpɒnzi/, Italian: [ˈpontsi]) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.[1] The scheme leads victims to believe that profits are coming from legitimate business activity (e.g., product sales or successful investments), and they remain unaware that other investors are the source of funds. A Ponzi scheme can maintain the illusion of a sustainable business as long as new investors contribute new funds, and as long as most of the investors do not demand full repayment and still believe in the non-existent assets they are purported to own.

Do you need to crack it if the government can be a majority hashrate of the miner pool? One need not crack it to control it. You'd be able to double spend, mine empty blocks, orphan blocks from other miners, etc. Just need to get to and sustain 51% of the hash pool, which sounds trivial considering nation state compute resources.