In a tweet that has been celebrated by the Bitcoin community worldwide, Stephen Palley (who is a lawyer and knows a lot about crypto, inside and out), ruled: Bitcoin is not a Ponzi.
Bitcoin is “literally” not a Ponzi scheme. Ponzis are an investment fraud where fraudsters pay old investors w/ new investor $$, unknown to either. Also, $25 million a day in investor cash “literally” does not go to miners.
And of course, I have to agree. I will also continue to say that “Bitcoin is a Ponzi”, of course, because that’s what describes best Bitcoin as an investment, and that’s what anyone who is considering “investing” in Bitcoin should know about it.
But for those who think of Bitcoin as more than a magical chart rising from zero to infinity where you just can’t lose, Bitcoin isn’t a literal Ponzi scheme. It’s much more than that, and its Ponzi-like part is just one piece of the machinery.
Ripple Labs likes to boast about its growing network of clients - financial institutions that supposedly use xCurrent or xRapid. Ripple claims this network of clients, the RippleNet, counted over 100 members by the end of 2017.
Ripple Labs has been advertising its new solution, xRapid, hand over fist. It’s supposedly much cheaper, faster and better than the competition, namely SWIFT. This is hard to believe, since xRapid itself needs to use SWIFT.
In mid-2017, Ripple Labs finally had the wind in its sails. A few months earlier, it had secured a $50 million Series B funding round, and was starting to get high on the crypto vibe. But most importantly of all, it had finally come up with its master plan for disrupting banking.
After the release of JP Morgan’s JPM Coin, Brad Garlinghouse, Ripple Labs’ CEO, was quick to criticise the new cryptocurrency for being closed-ended and for JP Morgan’s internal use only. Ripple Labs, on the contrary, prides itself in having established an open standard, with a network of users they call “RippleNet”. In reality, RippleNet is everything but a network, and will never be, because Ripple Labs doesn’t understand KYC and AML requirements.
Ripple Labs is fighting a legal battle to prevent XRP being labeled as a security, trying to dodge the long arm of securities law. If it were to fail, Ripple would become a poster child for securities fraud class action lawsuits. However, lawyers could get Ripple’s ass served to them even without resorting to securities fraud - simply because Ripple’s methods for promoting the virtues of its XRP coins look shaky at best.
XRP, the coin that Ripple Labs created and then gave to itself (and its founders), posted spectacular returns in 2017, going from $0.006 to over $2. The coin rose in parallel with an aggressive PR campaign from Ripple Labs. Let’s see what were the claims that they made throughout the year, and compare them to what was really going on.
Ripple is notoriously secretive about its revenue model. Many suspect that the only way it makes money is by selling its stash of XRP coins. The company never bothered to dispell this suspicion. In fact, it never even revealed how much its products and services cost.