Is there anything in common between social tokens and the Ponzi scheme? | by Nickolailatyshev | May, 2023

The short answer is no. Social tokens have nothing in common with Ponzi schemes. I suggest that we deal with this question sequentially.

For reference: Pyramids (Ponzi schemes) are illegal financial schemes that depend on recruiting new participants to pay out profits to previous participants. Eventually, when there are no more new participants, the scheme is doomed to fail and everyone who invested in it loses their money.

Can a company that does not pay dividends, but increases in the price of its shares, use a Ponzi scheme? After all, investors in such a case can only count on the fact that there will be other players in the market who will be willing to buy their shares at a higher price. It may seem suspicious and similar to a pyramid scheme, but it is not.

Most often in such cases, companies reinvest all of their profits into business expansion, as a consequence, the company’s revenues increase and it grows in capitalization.

Wall Street example.

Berkshire Hathaway, led by Warren Buffett, has become a stakeholder in many large companies such as American Express and Apple by reinvesting its profits. The company does not pay a dividend, but its stock has risen from $7.50 to $347,400 over the past 55 years because of the growth in the value of the company and its assets. Although it may take years, profitable companies that reinvest their profits can have high potential for value growth and, therefore, are attractive to investors.

Thus, the stock of a company that does not pay dividends can grow and not be a pyramid scheme if investors see the potential for further growth in its value due to its success, investments, and projects financed by the company’s profits.

Social blogger tokens will work on a similar principle. On our platform, a blogger token must have a utility. This means that the token provides real opportunities for its owners. For example, token holders can be in a closed community, be able to call the blogger, arrange personal meetings, get access to closed blogger events, get a % of his income, and so on. Because of the enormous possibilities of blogger collaborations, there can be an unlimited number of options for a really interesting utility. It’s important to understand that the utility can evolve over time and become even more interesting, due to the expansion of the blogger’s own capabilities. But even if the utility doesn’t change, over time the demand for it will gradually increase simply because of the blogger’s increasing audience. As a consequence, as the blogger’s influence in the media grows, the capitalization of his token will increase due to increased demand for utility.

Therefore, answering the question “What affects the price of a token,” there are three main points. The utility of the token, the reputation of the creator, and the dynamics of his development in the media.

One of the bloggers with whom we have agreed to launch on our platform plans to allocate up to 20% of his earnings from advertising contracts to pay dividends to his big investors. However, just like companies in the stock market, other bloggers are not required to pay dividends to their investors. Investors can earn from the rise in the price of a blogger’s tokens, which results from the growth of his or her media influence.

Unlike speculation, the growth of a blogger’s token price is driven by the growth of his real media business and influence on his audience. Thus, blogger social tokens can represent a new way to invest in Influencers, creators and bloggers who can generate income for their investors if their media influence grows.

However, as you can understand, the price of bloggers’ social tokens can be volatile and there are plenty of reasons for tokens to fall as well. For example, the price of tokens can go down if a blogger starts to lose his audience, becomes less active, or if new competitors emerge.

Or take another prime example, the case of Kanye West’s cancellation. If he had his social token, during an active cancellation, the price would be very volatile. On the one hand, his influence declined and he lost some of his audience, causing the price to drop. On the other hand, this situation draws the attention of new people to his persona. In the long run, though, it is more likely that such cases would severely damage the reputation and lead to a decrease in the price of the token.

Bottom line, we understand that social tokens have nothing to do with the Ponzi scheme. A blogger’s success in the social token market depends on utility, personal responsibility, the ability to retain, increase his audience and adapt to changing market conditions.