Well Madoff funnelled it into lifestyle.

Technically you are correct. A ponzi is a single entity paying returns from new marks. It is a straight con.

But some systems can be ponzi-like in that they require more and more investment and people get rich by selling into that. Bitcoin is an example.

Not sure what you mean by "wasted"? Like a regular Ponzi scheme, there are many opportunities for the people at the top to extract value out into cash, while people who "got in" on the scheme later are left holding the bag when the bubble bursts.