HN Explorer

Ask HN: Is a Ponzi scheme ethical if everyone knows it’s a Ponzi?

3 points by panarky ↗ HN
Bitcoin has been a real education for me. I’m convinced that the virtual currency itself is legitimate, but some of the biggest bitcoin ‘businesses’ are gambling and Ponzi/pyramid schemes.

Here’s an example of a self-described pyramid, where early participants double their ‘investment’ from the deposits of later participants. At some point the pyramid will collapse, and those on the bottom will lose their money.

http://forum.bitcoin.org/index.php?topic=20087.40

This is a pretty honest and transparent Ponzi, since all deposits and payouts are logged on a public Google Spreadsheet:

https://spreadsheets.google.com/spreadsheet/ccc?key=0AiID-eW4QPZ_dF8ya3VvQVYzSHpIbzJKVWlMeUxYcnc&hl=en_US&authkey=CPOghYEL#gid=0

Since the game continues until there have been no deposits in seven days, it could go on a long time.

Q1: Is it moral to start a game like this as long as everyone knows how it works?

Q2: If you’re an early ‘investor’, is it ethical to play this game even though you know you’ll profit at the expense of others?

Q3: Does it make any difference if you’re playing for dollars, euros or bitcoin?

Bonus Q: If any business relies on unsustainable growth to survive, is it legitimate?

10 comments

[ 3.0 ms ] story [ 35.3 ms ] thread
btilly
As http://urbanlegends.about.com/od/internet/f/chain_letter.htm points out, there are laws against chain letters soliciting money. Which, in some sense, is exactly the "business model" that you're describing.
panarky
It may be illegal in many jurisdictions (not sure since nobody's playing for legal tender).

But regardless of legality, is it moral or ethical?

If all players know that the schmucks at the bottom of the pyramid lose their money to enrich those at the top, is that OK?

Or is there something fundamentally wrong about a 'business' that produces no new value and systematically transfers and concentrates existing value from the bottom to the top?

petervandijck
It's not very ethical.

The line between moral and not moral is fuzzy, and this is definitely somewhere in the fuzzy zone, not in the clear white zone.

mchusma
If everyone understands the terms, then it is gambling, not a Ponzi, so I think it depends whether you consider gambling unethical. I don't, so gamble away!
rajat
Isn't this illegal?
dstein
If bitcoin freaks you out, I suggest reading up on the history of fiat money, and the federal reserve.
panarky
This isn't about bitcoin per se.

> I’m convinced that the virtual currency itself is legitimate,

> but some of the biggest bitcoin 'businesses' are gambling

> and Ponzi/pyramid schemes.

It's about the legitimacy of 'honest and transparent' Ponzi/pyramid models.

If you strip out the deceit that usually accompanies these things, are they OK?

Or is there something fundamentally unethical or anti-social about this model?

Zumzoa
It becomes unethical when someone who doesn't know about Ponzi schemes are gets involved. If someone has to tick a box saying that they read the wikipedia (for example) page on Ponzi schemes, they assume responsibility for any loss... assuming that they own the resources being staked, and that they are of sound mind.

It's the kind of thing that will attract smug dicks as early investors, though, and you'll get some desperate people at the bottom of the pyramid.

icebraining
If it's transparent, it's not a Ponzi scheme. In Ponzi schemes, like any other scam, there must be deception.

This is gambling, pure and simple. Is it honest to play in the Lottery? You know that if you win, you'll profit at the expense of others.

Personally, I don't see how this is dishonest (and therefore immoral) in any way.

kellyreid
In a vacuum, sure. But most governments would consider it something like gambling and stop it.

Ethically, as long as all the participants know the rules of the game, there's no trouble. Some people like games where there's an element of total catastrophe.