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What is a Ponzi scheme in cryptocurrencies?

AlanC Other Views: 389

What is a Ponzi scheme in cryptocurrencies?


 

Ponzi scheme is a special kind of fraud. It is based on a fake investment that one schemer or group of schemers, get other people money.

 

In Ponzi schemes, the schemer basically says, I found a great way to make money fast. The more you give me, the more I can invest in that cause, and the more I can earn for us all. But a Ponzi scheme doesn't actually "earn money".

All of the scheme's money comes from the investor. Once a Ponzi scheme gets too many investors, the system will always crash.

 

These schemes always stop one of three ways:

  • The schemer runs away with the money they got.
  • They will be unable to promise money back right away.
  • Authorities find out about the scheme and stop it.
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