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Why Do Ponzi Scheme Creators Love Bitcoin?

be-in-the-loop - Why Do Ponzi Scheme Creators Love Bitcoin?

History of Bitcoin is closely linked to the word Ponzi. In a certain way it is the history of several ill-conducted scams. This is not about the cryptocurrency, and Bitcoin enemies should not jump on the “Bitcoin is a scam” bandwagon. The problem is that Bitcoin is vulnerable to these type of scams. A cryptocurrency is just a tool for immoral people to deprive others of wealth.

Tyler Moore and Marie Vasek, a pair of computer science researchers from the Southern Methodist University in Dallas have analyzed a lot of Bitcoin scams and grouped them in four categories: Ponzi schemes, mining scams, scam wallets and fraudulent exchanges.

be-in-the-loop - Why Do Ponzi Scheme Creators Love Bitcoin?

 

According to their study “Tracking the Popularity and Profits of Virtual Currency Scams”, there are several reasons why Bitcoin and other cryptocurrencies often become a tool in the hands of Ponzy scammers.

1. First of all, most people do not properly understand the essence of cryptocurrency. Since Bitcoin is not easy to grasp, many of the technicalities might confuse people who are too eager to invest and get the generous returns that some — who understand better — are making. Anyone convincing others of how legit his Ponzi is will surely take advantage of this.

2. Many other bitcoin investments have generous profit.   Cryptocurrencies are a modern solution that may change the economic landscape permanently: it would be stupid to think that there is no big money to be earned from this.

3. A cryptocurrency always has the excellent cop-out. Bitcoin has a magnificent and legitimate scapegoat story when things go awry: ‘’WE HAVE BEEN HACKED!’’

Like all fabrications, the Ponzi promise has no way of materializing. As with constant population growth and oil drilling, these scams are unsustainable and thus condemned to implode miserably — simply because there is no such thing as free lunch.

“Ponzi surfing” is the risky activity of moving money into and out of a HYIP. It is radically different from plain investing, in that the surfer actually acknowledges the fraudulent nature of the activity. The goal then, is to try and anticipate when the Ponzi will blow up, and get out of it with a positive balance. A good Ponzi surfer must then catch the wave as soon as it starts, to cash in on the money of the newcomers’’, stated in the report.

According to Vasek and Moore, the median life of a Bridge HYIP (i.e., a traditional Ponzi) is about 125 days. Bitcoin-only HYIPs accelerate this to 37 days. In addition, many Bitcoin Ponzis are transparently Ponzis. Yes, they are “entertainment venues” catering the Ponzi surfers.

Thus, Ponzi surfing is an activity akin to gambling, and is best left to inquisitive and otherwise impetuous minds. It is unknown to what extent this is plain nonsense or actually smart.

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