Ponzi comes from a man called Charles Ponzi who set up the first of these schemes although I would have thought there were many before him. There are a LOT of them running in the Bitcoin world due to the fact Bitcoin is (largely) unregulated. Freedom sometimes has a price. Yes, I’ve been caught by Ponzi Schemes.
The Ponzi scheme typically offers amazing returns for little investment (sound familiar?), they use the deposits of new members to pay the earlier depositors, these depositors get most excited because f of the money they are making and then proceed to promote the scheme, however, at a point, the payments will stop and the person running it will disappear. (or get arrested!).
How to Spot a Scheme
- They offer ridiculous returns – Double your bitcoin is almost guaranteed to be a Ponzi, anything where you don’t put in a receiving address is probably a Ponzi or at best a scam
- There is ALWAYS a recruitment bonus, because the scheme will not grow without them
- There is rarely any way to contact support
- If you can’t work out how they make money, then it’s probably a Ponzi
Examples on this site
Newage Bank – this one was really quite lovely and elaborate, it has a great website and claims to sell deposit cards. Except that it doesn’t pay out
Bitminer.io (and a whole pile of sites) – this is an ongoing scam, especially if you upgrade, they basically put everything as “pending”
BTCDoubler – well how are they going to double your money?
Can you make money from such a scheme?
Yes, get in early on, don’t join late in the day. However, for me I struggle to promote such things because I know they will come to an end as the scammers disappear with your Bitcoins. It’s better to stick to Bitcoin mining with Genesis or SplititMining, or perhaps your own Mining set up at home.
Everything has risk, so high risk as a rule = high returns, that’s why if I’m even slightly suspicious I will invest a tiny amount and look for a return. Often times I go no further than that but keep re-investing the original capital’s profit. That way I end up not losing anything WHEN it goes belly up.
e.g.
0.001 investment
0.002 return
0.001 investment (taking back my principal)
0.002 return
0.0015 investment (keep 0.0005 profit)
Eventually I know it will break but I’ve made a profit from the Ponzi scheme.
The earlier you start the better and remember they are run by criminals and thieves.
What about Network Marketing?
The main difference between Network Marketing is simply products, they have products to sell and the people in the network can make profits from the products. This means that although it is in structure like a Ponzi scheme, because everyone can technically make money just by selling products. However, the problem they have is the products are generally quite high priced because they need a big profit margin with which to pay people in the network, this makes it difficult to sell the products unless they are something very unique, also, when a local network is built it becomes almost impossible to recruit new people from your friends and family because they are all saturated and often times they start keeping out of your way because they really don’t want to be hassled with your wonder washing powder.
Remember Bitcoin is unregulated, do what you like, you’ll win some, and lose some.
More Information
- Ponzi Schemes FAQ Information and advice from the US Securities and Exchange Commission
- Fraud Awareness and Prevention Information about spotting fraud from the US Commodities Futures Trading Commission
- Ponzimonium Free e-book about Ponzi schemes from the US Commodity Futures Trading Commission
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