Ethereum based Ponzi schemes

As a Financial Literacy advocate, I received questions and messages regarding a new investment scheme roaming around social media and the internet. I've seen a lot of people 'investing' in a crypto-app and most of them don't know how these market works.

This is nothing but a Ponzi Scheme, you earn profit from the new recruit who just entered in the pyramid structure. The difference this time is that they use Ethereum as the compensation.

These people maybe your friends or family members and may have been misled themselves especially because a lot of people are struggling economically, financially and may be driven out of desperation.

This is the same thing over and over again, you are enticed by buzzwords such as 'extra income' and they also use a lot of jargon and fancy words, motivational quotes or reference to business risk to convince anyone para mag 'invest'.

What is a Ponzi scheme

“A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for early investors by acquiring new investors. This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers. Both Ponzi schemes and pyramid schemes eventually bottom out when the flood of new investors dries up and there isn’t enough money to go around. At that point, the schemes unravel.” — Investopedia

Why Crypto?

Crypto-currencies, smart contracts and the like enable a perfect breeding ground for a new wave of fraudsters. While traditional financial scammers have the law, 3rd party institutions and their public image to worry about, crypto doesn’t have the same issue.

These schemes can be deployed by any token address, ensuring (almost) complete anonymity. No central authority can shut the smart contract down. Because of security claims, investors may develop a false sense of trust.

How the Ponzi works

The pyramid Ponzi scheme is exactly what you’d expect: one owner at the top with, let’s say, 5 investors below. Each investor is incentivised to get 5 more investors below them, and so on and so on until it can no longer continue.

The investors at the top of the pyramid make money by bringing in new investors to pay back their original investment, and then some. Every time a new layer is added, everyone already in the pyramid makes loads of money.

Conclusion

Please stop joining those fixed-earning crypto groups. There is no such thing as guaranteed earnings or interest in crypto--that's like telling people you will always win in a casino.

If you want to get into it, learn to trade. Learn the hard way. That's how you will know that nothing is guaranteed. Trading is a skill. Most of your best bets come with experience and with time.

Ethereum alone is good, you don't need to join to any company in order to buy ETH. All you have to do is to find a credible business that can give you an opportunity to create a digital wallet, in the Philippines we have COINS.PH. From there, you can deposit your Peso money & convert to Ethereum then convert it back when the exchange rate is raising.

Forsage is the word on everyone’s lips at the moment, and it’s easy to get caught up in the excitement. New ‘products’ & variations are popping up every now and then all the time.

Invest in yourself first, embrace hard work and long term investments have been tried and tested.