In this article I will give you some tips to recognize Ponzi SchemesMatrix Schemes. Both of these schemes are illegal and are based on recruiting other people. To generalize, these are pyramid schemes, in which the top of the pyramid (those who entered immediately) earn. Everyone else manages to earn, until new people enter. Remember that money cannot be produced out of thin air! Remember that these systems are as old as the world and are not only connected to the Crypto world!
DISTINGUISHING LEGIT PROTOCOLS FROM SCAMMED ONES
Protocols can guarantee you an income IF they produce income. A lending platform (loans) can guarantee you an income if you lend your liquidity to someone (the latter must then repay the loan with interest). An AMM (for example Uniswap) can guarantee you an income because the user pays fees to carry out trades (these fees go to the Dex Uniswap and to the users who have provided liquidity). These are systems that work. Ponzi schemes, on the other hand, allow you returns by making you buy anything: packages, memberships, courses, etc. All this is not important. It's just an excuse to take your money, build a treasury and pay off old subscribers. If you are at the top of the pyramid, you will earn but the system is doomed to collapse because new members are not infinite.
DIFFERENCE BETWEEN SCAM, PONZI, MATRIX SYSTEMS
is born with the precise intention of taking your money and running away with the loot (exit scam). Scams can happen day one or be "slow" over time (especially in the crypto world. Think of a dev team that slowly sells its own token over time).
Ponzi Scheme sees an organization promising investors very high returns. The organizer collects money from initial investors and uses this money to pay the promised returns to previous investors. The returns do not come from any kind of legitimate business but are funded by the money of new investors. In other words, new investors' money is used to pay returns to previous investors, thus creating the illusion of a profitable investment. The whole scheme collapses when there aren't enough new investors to pay the promised returns and the developer disappears with the money. As you can understand, in the long run, Ponzi schemes become Exit Scam
Matrix System provides that investors are organized in a "matrix" structure, often represented as a grid or a table. Participants have to pay an entrance fee to join the matrix and can earn money by recruiting new members. New members pay a fee to the investor who recruited them, and part of that fee can move up through the matrix structure. Participants can earn a commission for every new member they recruit. However, these systems quickly run out of new members to recruit and become unsustainable. When the recruitment chain breaks down, participants in the lower positions of the matrix lose money. A variant of this system also provides for the purchase of cars (a very trendy scam in Spain) or low-priced electronic devices (on the web). Basically these schemes allow you to buy goods at low cost through purchases of "useless" objects (with a much lower cost than what you should buy). For example a new iPhone for $400. Investors are "forced" to buy an item worth $400 and then wait for more people to join the scam. A cash register is formed with which those who are at the top of the matrix are paid first and then the others descending. Other systems provide for the payment of a justified monthly subscription. When new revenue dries up, the scheme collapses.
Suppose you get involved in a matrix system with a 3x3 structure, which means there are 3 levels and each level has 3 positions. Also, let's say you have to pay an entrance fee of $50 to enter the system. Every time you recruit someone into the system, you get a $25 commission.
Here's how the system might develop:
Level 1 (First level):
Position 1: You
Position 2: Empty
Position 3: Empty
You paid $50 to enter the system.
Level 2 (Second level):
Position 1: Friend A (recruited by you, earn $25)
Position 2: Friend B (recruited by you, earn $25)
Position 3: Empty
You have now earned $50 from the commissions of the people you recruited.
Level 3 (Third level):
Position 1: Friend C (recruited by Friend A, earn $25)
Position 2: Friend D (recruited by Friend A, earn $25)
Position 3: Friend E (recruited by Friend B, earn $25)
Now you've earned an additional $75 from commissions from people your friends have recruited.
In total, you've earned $125 from commissions from people you've recruited in the matrix system. However, the main problem with this type of system is that it requires a constant stream of new recruits to generate revenue. When the recruitment chain breaks down and there aren't enough new entrants paying entry fees, people lower down the matrix will lose money. Some variants have very low entry costs and payment of monthly subscriptions.
HOW TO RECOGNIZE PONZI AND PYRAMID SCHEMES
1) Too high profits: 0.5%, 1%, 2%, etc per day are unsustainable returns for any activity
2) Offers that are too advantageous (are they matrix diagrams or stolen devices? Why should anyone sell an object significantly below cost?)
3) Every time someone offers you a subscription, the purchase of packages, memberships or (low-cost) items to draw a monthly income are major red flags. This is a simple "treasure" that is used to pay old subscribers
4) Ref links. In this case, a distinction must be made between ref links that allow you to take advantage of fee discounts (exchange) or guarantee you a small bonus from those (illegal) that boost returns. The former are legit. Any ref link used to boost the monthly return is the basic principle of pyramid schemes because they are based on always recruiting new people
5) The promoters of these scam platforms often lower the entry threshold to $20/30 to reach the largest possible user base
6) Any person who contacts you asking to participate in video calls or PowerPoint presentations concerning annuity platforms is a scammer who consciously or otherwise wants to get you into the Ponzi scheme
When you invest in a platform that guarantees you an income, the first thing you should ask yourself is: how does this company generate revenue? If it has a system that guarantees it revenue it could be legit. If the profits come from subscriptions and packages, they are always Ponzi schemes. If the company talks confusing about their revenue generation system it is a very big red flag. Subscribing to receiving courses, making online zoom and video calls is the origin of any pyramid scheme. When you point out to these people that it is a pyramid scheme, they could tell you that if everyone reasoned like you, everything is a Ponzi scheme, even Bitcoin (because the price increases if demand increases and new people enter). Be careful it's not like that! Bitcoin is a protocol that brings value: uncensorable and permissionless payments. ETH has utilities: gas fees, NFT mints, use of thousands of dapps in DeFi. People buy these cryptocurrencies as an investment but also because they have utilities and this drives up the price over the years!
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MISSED THE ARKHAM AIRDROP? TIP OF THE MONTH
Arkham airdrop was from a few thousand dollars to hundreds of thousands of dollars. It was enough to register an email and then the address. Basically, these are intra-chain analysis and intelligence sites (tracking of on-chain movements). Four other similar sites have opened whitelists where you just need to enter your email. Someone is hinting that they could perform an airdrop like Arkham so I suggest you sign up by entering your email (you can also use secondary mail):
Vold (Whitelist, Only Mail)
Scamfari (Whitelist, Only Mail)
Nansen (Whitelist, Only Mail)
Velodata (Whitelist, Only Mail)
Tabi (Social Quests: Twitter, Discord, Reddit). For more info: Will Tabi Be The New Blur & Arkham? Participate In Quests!
Are you interested in ways to earn crypto bonus? Check it out here: Some Sites To Earn Crypto Bonus (Old & New)
