Since the aforementioned reasons mean Litecoin has no future potential, it effectively functions as a pyramid scheme, rewarding those who get in sooner at the expense of those who adopt it just before it finally fails (and are left with nothing). This is not the case for Bitcoin, since it has significant potential to become a long-term currency and continually be beneficial to adopters no matter when they begin using it.Seems like an inaccurate statement, but despite seeing multiple requests in the discussions section to remove this criticism, it's still there. Litecoin neither qualifies as a Pyramid Scheme nor as a Ponzi Scheme:
As its name indicates, the pyramid scheme is structured like a pyramid. It starts with one person - the initial recruiter - who is on top, at the apex of the pyramid. This person recruits a second person, who is required to "invest" $100 which is paid to the initial recruiter. In order to make his or her money back, the new recruit must recruit more people under him or her, each of whom will also have to invest $100. If the recruit gets 10 more people to invest, this person will make $900 with just a $100 investment.Litecoin doesn't promote itself as an investment opportunity, nor does it require people to recruit other people in order to secure "residual income." There is no recruiter and there is no kick-up to the top. Ultimately, even if Litecoin is a bad idea, it still does not qualify as a Pyramid Scheme.
Bitcoin describes itself as an experimental digital currency. Reuben Grinberg has noted that Bitcoin's supporters have argued that Bitcoin is neither a security or an investment because it fails to meet the criteria for either category. Although it is a virtual currency, some people see it as an investment or accuse it of being a form of investment fraud known as a Ponzi scheme. A report by the European Central Bank, using the U.S. Securities and Exchange Commission's definition of a Ponzi scheme, found that the use of bitcoins shares some characteristics with Ponzi schemes, but also has characteristics of its own which contradict several common aspects of Ponzi schemes.So let's be intellectually honest and not label Litecoin a Pyramid Scheme or a Ponzi Scheme simply because we find it inferior to Bitcoin. Please stand up for intellectual honesty and expect a higher standard of intellectual discourse from the Bitcoin community.
For insight on the regulatory issues Bitcoin exchanges might encounter, Ars talked to Reuben Grinberg, a recent graduate of Yale law school and the author of a new paper on the legal questions York Life and the New York Stock Exchange invested $1 billion in blockchain related startups. Jose Pagliery, Record $1 billion Invested in Bitcoin So Far , CNN Money, Nov. 3, 2015, Reuben Grinberg Bitcoin is a digital, decentralized, partially anonymous currency, not backed by any government or other legal entity, and not redeemable for gold or other commodity. Bitcoin: An Innovative Alternative Digital Currency Reuben Grinberg Follow this and additional works at:https://repository.uchastings.edu/ hastings_science_technology_law_journal Part of theScience and Technology Law Commons This Article is brought to you for free and open access by the Law Journals at UC Hastings Scholarship Repository. Mining bitcoin, Holding Bitcoin, Using bitcoin, — as currency for the purchase of goods or services, — as a token representing the sale of other assets, — as a smart contract, Buying, selling and otherwise exchanging bitcoin. Notes: See Vartanian et al., supra, n. 8, and Reuben Grinberg, “Bitcoin: An Innovative Digital Currency,” 5
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