Is Bitcoin a scam? Is the fall solely due to the BCH group being investigated? What errors does the NTU professor have regarding Bitcoin from the definition of a Ponzi Scheme?

Professor Zhang Senlin from National Taiwan University’s Department of Finance stated on his personal Facebook that investing in Bitcoin could make one an accomplice to a fraud group. The article points out from the case of the BCH group that fraud groups often use Bitcoin for money laundering, and Bitcoin is a Ponzi Scheme. On the other hand, trader Phoebus also mentioned on Facebook that the big dump of Bitcoin since October may be related to the BCH group being raided by the US government. This article compiles the 2021 article “Bitcoin: Characteristics to Combat Ponzi Schemes” to reanalyze from the definition of a Ponzi Scheme: Is Bitcoin really a Ponzi Scheme?

Analyzing the source of the BCH group case, is the real reason for Bitcoin's big dump that the scam group was raided?

National Taiwan University Finance Professor Zhang Senlin: Bitcoin is a Ponzi Scheme

Professor Zhang Senlin from National Taiwan University emphasized that investing in Bitcoin could become an accomplice to fraudulent groups. He stated: The leader of the BCH group, Chen Zhixiao, arrogantly claimed that the hundreds of billions of dollars in Bitcoin seized by the U.S. is nothing. Indeed, what fraud groups do is a no-cost business; no matter how big the loss, it doesn't matter. According to a report by GASA, this year's international fraud amount reached 1 trillion dollars. How can such a high amount of fraud flow?

He stated: From the incident of the BCH group, it can be seen that the fraud group mainly uses Bitcoin for Money Laundering, and the laundered money is then invested in tangible assets to build the wealth and influence of the fraud group's kingdom. I am very averse to virtual currencies like Bitcoin, except for stablecoins that are backed by tangible assets (. Personally, I believe that virtual currencies like Bitcoin will eventually be a Ponzi Scheme ). I recommend the video by Qu Bo (.

He also candidly stated that those who are currently making money by investing in Bitcoin shouldn't be too happy, as it is indeed impossible to predict when the Ponzi Scheme will collapse. To quote a saying from the underworld: what comes around goes around. Modern financial instruments are already very complete, and the return on investment in Bitcoin from now on is not attractive. The high returns that have occurred in the past will never appear again. If Bitcoin were to rise 100 times, its total market value would far exceed the total market value of all the stock markets in the world. If you are willing to take high risks, then why not invest in the triple leverage of Nasdaq or Taiwan index futures?

He quoted from a metaphysical perspective, stating that the return on these investments is likely not to be inferior to Bitcoin in the future, and that they are beneficial to the real economy. Why not? Isn't there a cause and effect in investment? If not, then why engage in ESG investments? The rampant fraud has a strong causal relationship with the rise in Bitcoin prices, and even if you don't want to admit it, karma still exists.

) “Long-term Buy” Professor Chou Kuan-Nan from the Department of Finance at National Chengchi University increased his holdings in 0050 on a day of massacre in the Taiwan stock market, but it sparked a debate: Does understanding academia mean understanding investment? (

Interestingly, the metaphysical investment method emphasizing the cycle of cause and effect has received the endorsement of Zhou Guannan's “long-term buying” approach. He said, “I couldn't agree more; it's just a Ponzi Scheme. There will be retribution.”

SEC defined Ponzi Scheme: claims of high returns with almost no risk

According to the U.S. Securities and Exchange Commission )SEC( definition: A Ponzi Scheme is a type of investment fraud that pays returns to earlier investors using the capital from new investors. The operators of a Ponzi Scheme typically promise to invest your money and generate high returns with very low or no risk. However, in many Ponzi Schemes, the fraudsters do not actually invest this money at all. They simply use the funds from new investors to pay earlier investors while possibly keeping a portion for themselves.

Due to almost no real profits, a Ponzi Scheme requires a continuous influx of new funds to survive. When it becomes difficult to recruit new investors, or when a large number of existing investors wish to withdraw their funds, these schemes often collapse. The name Ponzi Scheme comes from Charles Ponzi, who deceived investors in the 1920s under the guise of profiting from postal reply coupons.

Ponzi Schemes usually have the following characteristics:

Claims of high returns with almost no risk

Excessively consistent returns. Investment targets usually fluctuate with market conditions. If an investment can provide stable positive returns regardless of market conditions, skepticism should be maintained.

Unregistered investment products

Unlicensed seller

confidential or complex strategies

Document issue: If there are errors in the account statement, it may be a sign that the funds have not been invested as promised.

Withdrawal difficulties

Is Bitcoin a Ponzi Scheme? Analyzing the Differences Through Four Key Points

Next, let's take a look at the origin of Bitcoin. In August 2008, during the aftermath of the financial crisis, a person claiming to be )Satoshi Nakamoto( established Bitcoin.org. Two months later, in October 2008, Nakamoto published the Bitcoin white paper, explaining how the technology works. Three months later, in January 2009, Nakamoto included a news headline about bank bailouts from The Times in the genesis block. Subsequently, Bitcoin was handed over to the open-source community, and Nakamoto's address has seen no activity since. Below, we will explore the definitions of the problems one by one.

Bitcoin has never promised returns.

Satoshi Nakamoto never promised any investment returns, let alone high returns or fixed returns. In fact, Bitcoin was known for its extreme volatility during its first decade. After decades of navigating cautiously, Bitcoin finally became a recognized asset in the public eye, yet it is perceived by certain individuals as an investment that claims to be risk-free with high returns.

Satoshi Nakamoto's online posts still exist, and he rarely talks about wealth. He mainly discusses technology, freedom, issues with the modern banking system, etc. His writing style is mostly like that of an engineer, occasionally resembling that of an economist, but never like a salesperson. He occasionally mentions that Bitcoin may become valuable, but always discusses supply, demand, inflation, and deflation in a technical manner, rather than promising rewards.

Seeing phrases like “Bitcoin will reach 200,000 by the end of the year” online are just analysts, financiers, and signal providers making their own predictions. You wouldn't think that because an analyst says Berkshire Hathaway will reach a thousand dollars by the end of the year, that Buffett is running a Ponzi Scheme, right?

Bitcoin open-source code, information is completely transparent.

Most Ponzi Schemes rely on secrecy, just like Elixir misappropriates user funds for high-risk lending. But the design principle of Bitcoin is completely the opposite:

Fully Open Source

All code is open source.

There is no centralized authority that can secretly change.

can be freely verified

Everyone can run a full node to audit the supply.

Do not rely on any third party or company.

Therefore, the “document issues” and “withdrawal difficulties” mentioned by the SEC do not apply to Bitcoin. As long as you have the private key, you can freely transfer Bitcoin, and no one can stop you. Of course, there are bad actors in the Bitcoin ecosystem, such as:

The custody center has closed down.

The exchange was hacked or scammed

The user was deceived into handing over their private key.

But these are not Bitcoin itself, but rather caused by users neglecting self-custody.

The Bitcoin community that moves forward without pre-mining and without centralized leaders.

Satoshi Nakamoto mined with others after the software was made public, and he did not reserve any exclusive mining advantages for himself. He had to mine using a computer just like everyone else, and the white paper was even published before the software was launched, which is quite unusual if profit was the goal. In contrast, most later cryptocurrencies are not as fair; for example, Ethereum reserved 72 million coins for the team and investors before the mainnet went live (more than half of the current supply).

Bitcoin is one of the few truly decentralized digital assets that can thrive without a centralized leader. After creating Bitcoin, Satoshi Nakamoto only operated for the first two years before disappearing, and then other developers took over, but no one has a key monopoly on its development. Many early figures even later invested in other projects. Bitcoin gradually formed its own life, determined by the community, users, miners, and nodes.

Bitcoin has become a popular investment target in the US stock market through ETF and DAT.

Some of the SEC's warnings were indeed applicable in the early stages of Bitcoin, for example:

Not Registered

The risk is extremely high.

One needs to have technical and economic knowledge to understand.

However, these are not enough to constitute a Ponzi Scheme. There are now multiple Bitcoin ETFs listed, and Bitcoin asset reserve companies have also become popular targets in the US stock market. Fidelity, JPMorgan, and major banks are actively exploring more related technologies. The US government is even considering Bitcoin asset reserves, and American citizens can purchase Bitcoin through compliant exchanges in North America such as Coinbase. If one does not understand the crypto industry, most people might confuse all “cryptocurrencies” together, but for investors, distinguishing Bitcoin from other tokens is extremely important.

Comparison of Bitcoin and Gold: Is Bitcoin a broad Ponzi Scheme?

Since the narrow definition of a Ponzi Scheme clearly does not apply to Bitcoin, some people have adopted a broader definition of Ponzi schemes to assert that Bitcoin is a Ponzi scheme. Bitcoin is, in a sense, like a commodity: it is a scarce digital object that does not generate cash flow but has utility. The total supply cap is 21 million divisible units, and according to a pre-programmed schedule, more than 18.5 million coins have been mined. Every four years, the number of newly generated Bitcoins in each 10-minute block is halved, and the total amount asymptotically approaches 21 million.

Like any commodity, Bitcoin does not generate cash flow or dividends; its value is solely dependent on how much others are willing to pay for it or what they will exchange it for. More precisely, it is a monetary commodity whose utility is entirely about storing and transferring value, which makes gold its closest comparison. Some believe that Bitcoin is a Ponzi Scheme because it relies on an ever-growing pool of investors to continue buying so that early investors can sell to later investors. However, this does not constitute a Ponzi Scheme.

Using the same logic, gold, a commodity with a history of five thousand years, can also be described as a Ponzi Scheme. Most uses of gold are not industrial, but rather for wealth storage and display. It does not generate cash flow by itself, and its value depends on the price that others are willing to pay. If people's perception of gold's aesthetics or its role as a store of value changes, the network effect of gold may also weaken.

Gold possesses characteristics such as scarcity, beauty, malleability, substitutability, divisibility, and is almost chemically indestructible. Throughout generations, it has still been regarded as the best choice for long-term wealth preservation and jewelry: when fiat currencies rise and fall and the quantity increases rapidly, gold supply is relatively scarce, growing only about 1.5% each year. Bitcoin relies on network effects: it needs a sufficient number of people to view it as a good holding tool to maintain its value. However, the network effect itself is not a Ponzi Scheme.

Comparison of Bitcoin and fiat currency, is the banking system a Ponzi Scheme?

From the broadest definition of a Ponzi scheme, the entire global banking system can be viewed as a Ponzi scheme. Fiat currency, in some sense, is an artificially created commodity. The US dollar itself is merely a piece of paper or a number on a bank statement. It does not produce cash flow on its own, although holding certain financial instruments or deposits may pay interest ) or negative interest (. We exchange for dollars based on its massive network effect (including legal/government), believing that we can exchange these pieces of paper for something of value.

The fractional-reserve banking system is more like a Ponzi Scheme. If about 20% of people want to withdraw cash at the same time, the banking system will collapse. Or the bank will tell you that you cannot withdraw because they do not have enough cash. This happened with some banks in the United States in early 2020 during the pandemic. This is exactly one of the red flags that the SEC identifies as a Ponzi Scheme: difficulty in withdrawals.

The banking system is like a game of musical chairs. When the music stops and the system encounters problems, some people are bound to be unable to withdraw their money. This is because banks collect deposits from account holders and use the money to lend out or purchase securities. Only a small portion of the deposits is available for immediate withdrawal as reserves. The bank's assets consist of loans, securities such as government bonds, and cash reserves; its liabilities are deposits and other debts (such as issued bonds).

Taking the United States as an example, the overall cash reserves of banks are about 20% of total deposits. This ratio was below 5% before the global financial crisis, but after quantitative easing, new regulations, and self-discipline, it is now about 20%. People accept this arrangement because they believe it will not end. The fractional reserve banking system has been in operation for hundreds of years (originally based on gold, later converted to pure fiat currency). When a crisis occurs, the Federal Reserve may print new money to buy assets to restore market liquidity, resulting in a continuous decline in the purchasing power of fiat currency.

Source: St. Louis Fed SWIFT Slaps Zhang Senlin: The Vast Majority of Money Laundering Still Occurs Through Cash.

As for the fraud group mentioned by Zhang Senlin, it mainly involves Money Laundering through Bitcoin, with the laundered money then used to invest in real assets to build the wealth and influence of the fraud group kingdom, claiming that investing in Bitcoin will have repercussions, etc. Let's let the data speak: the SWIFT report indicates that the vast majority of Money Laundering activities are still conducted through cash.

On the contrary, the use of cryptocurrency is the least among all channels. Moreover, the tool itself is neutral; a doctor can use a knife to save lives, while a criminal can also use a knife to kill. Would you then conclude that knives are harmful? While Bitcoin is anonymous, all transaction data can also be checked on the blockchain.

)SWIFT Research Report: Compared to cryptocurrencies, fiat currencies are still the criminals' preferred channels for Money Laundering(

Why is Bitcoin falling? The raid on the BCH group may not be the main reason.

A few days later, the author of “Philosophical Thinking”, Phebus, stated that the most likely factor for the big dump of Bitcoin since October is related to the raid on the Cambodian BCH group. From the history of the BCH group's rise, it can be seen that a significant source and demand for virtual currency comes from illegal businesses and Money Laundering. The United States has seized a large amount of Bitcoin from Chen Zhi, totaling 127,000 coins, which is currently worth 340 billion TWD.

Considering that the amount not in circulation accounts for about 0.8% of the market value circulation, this batch of seized 比特幣 is like a guillotine hanging in mid-air; when it falls, it will certainly cause a bloodbath. The core demanders are busy avoiding the storm, and there is also a guillotine that could fall at any moment. It's no wonder that since October, it has fallen from 120,000 to a fair price of 81,000. 麻吉大割 is madly liquidating and cannot take over the spinning mansion. The plunge of 比特幣 has also indirectly caused panic in the overall market, which might also be one of the key factors for this wave of decline.

This all goes back to the BCH Group case. How did the U.S. government seize the Bitcoin of the BCH Group? In fact, the transfer of 120,000 Bitcoins happened as early as 2020, but it wasn't until October that the U.S. Department of Justice announced the confiscation of the BCH Group's Bitcoins, which linked the two events.

)Behind the largest 15 billion cryptocurrency seizure in history, 200,000 Bitcoin addresses may be leaked! The named wallet has responded (

At that time, the mining pool called Lubian had Bitcoin transferred away due to the fact that the pool used a flawed pseudo-random number generator )PRNG( for convenience, resulting in the generated private keys not being truly random. This means that the private keys for these wallets could be mathematically deduced. The U.S. law enforcement agencies identified these weak private key addresses and brute-forced to crack these wallets. In other words, the real problem lay with the cryptocurrency wallet of the mining pool, not that Bitcoin was hacked.

On the other hand, is it really a bad thing for the coin price that the Bitcoin of the scam group was confiscated by the US government?

In fact, this March, Donald J. Trump) signed an executive order to officially establish the “Strategic Bitcoin Reserve” and the “U.S. Digital Asset Stockpile.” This executive order regards Bitcoin as a national reserve asset and requires the U.S. Treasury to manage this reserve. The Bitcoin in the reserve will primarily come from assets obtained by the federal government through criminal or civil forfeiture procedures. In other words, the Bitcoin seized by the U.S. government is akin to locking it up (. Of course, Trump's song nature is quite unpredictable ).

(Detailed explanation of Trump's Bitcoin executive order: The United States establishes a strategic Bitcoin reserve, and the Treasury Department and the Department of Commerce have the authority to purchase Bitcoin)

Is Bitcoin a scam? Is the fall all due to the BCH group being copied? What misconceptions does the NTU professor have about Bitcoin from the definition of a Ponzi Scheme? First appeared in Chain News ABMedia.