A: No. Like any other currency, BitCoin is designed to be used as money, not as an investment.
A Ponzi scheme is a type of confidence scam where people who think they are earning unusually high returns on an investment are actually being paid from their own money and that of later investors. If investors try and withdraw their original investment from the Ponzi operator, the scheme collapses because no actual profits exist and there is not enough money to return the deposited amounts. Alternatively the Ponzi operator may simply leave and take the investors' money with them.
Similarly, a pyramid scheme is a type of confidence scam where people who "enroll" by paying a certain amount of money are made to believe they can make a large return on their investment by recruiting other people and receiving some portion of their enrollment fee. The scheme collapses because it requires exponential growth, so it quickly runs out of new people to enroll. The person starting the pyramid scam, who didn't have to pay an enrollment fee, makes money off of all their referrals; while the people at the bottom parts of the pyramid, who cannot find anyone new to refer, are left with no return.
Unlike either of these situations, BitCoin has no person "at the top" who collects money paid for bitcoins, or has to pay out when bitcoins are sold. Neither is there any kind of scheme in BitCoin to harvest money off of unsuspecting people in complicated ways. Instead, bitcoins are bought and sold on public exchanges amongst members of the general public who must all obey the same rules. If someone has told you that BitCoin is a moneymaking scheme, they have misconstrued it--bitcoins follow the same economic model as any other finite commodity and over time will tend to approach a price that reflects the value people ascribe to being able to use them. People who have made money off of buying and/or selling bitcoins are either lucky or have correctly predicted an increase in demand for them. People who earn bitcoins through "mining" are being paid for verifying and securing network transactions in a highly competitive market. In neither case is any kind of fraudulent activity or confidence scam happening. For more details on earning money through BitCoin, see the "Where do I get the free money?" thread (coming soon).
Despite the fact that BitCoin itself is not a scam, caution is strongly advised when entering into transactions with untrusted entities. As with any other valuable commodity, there are many people willing to separate your bitcoins from you in sneaky or fraudulent ways. Remember that for all practical purposes BitCoin works just like cash. Bitcoin Ponzi and pyramid schemes do exist and if you fall prey to them you will suffer the consequences.
In addition, bitcoins are a very new and unproven type of money. Because their value depends on how widely they are accepted, they are susceptible to the same types of economic bubbles as any other commodity that is surging in popularity. The Bitcoin software is still in beta, and bitcoins should be considered "high-risk" from a financial perspective. You should not invest money into bitcoins or BitCoin-related technologies unless you can afford to lose it! Even firm believers in BitCoin tend to think it will take a while for the value of bitcoins to stabilise, and no one knows at what value that stabilisation might occur. Trade and transact safely!
Note:
- This is a newbie-friendly thread--do not post in this thread unless you are either a newbie with questions or are willing to patiently help one out. All other activity will be moved or deleted by moderators as off-topic. DBTN! (Don't bite the newbs!) There is a thread for general feedback, commentary, etc.
- Before posting in this thread, ensure you have read the Introduction to BitCoin, the answer above, and as much of this thread as possible. There are many helpful people here, but please respect the time they have already invested.
As an experiment in improving feedback, please send tips for this post to 1PJkDqDJEN9gFPdsWUitkZrhEnJ9MtWQCQ , not the address in my signature below.
