Ponzi Scheme

Bitcoin And Ponzi Scheme: How Are They Similar And Dissimilar?

Around 14% of the US population, which is about 21.20 million, own cryptocurrencies such as Bitcoin or Ethereum. Despite several hassles and doubts regarding the authenticity of digital money, why has this form of investment seen a spurge growth in recent years?

This is so because several digital currency enthusiasts believe that investment in these digital investments can result in much greater benefits than any other investment scheme, which might also result in the country’s new set of millionaires.

It’s like the ocean; once you dive in, it’s almost impossible to find ashore as it keeps pulling you deeper with the occasional spotting of pearl shells.

But with treasures and gold coins comes the peril of great white sharks and the high chances of sinking forever.

Undeniably cryptocurrency has been described as a transformative technology that revolutionized and potentially will change several industries in the future. 

The biggest reason crypto has seen a rise among people and high chain investors is their feature of being a long-term store of value. They are limited in supply guarded by mathematical algorithms, making it impossible for any government body to dilute their value through inflation.

One of these aspects of cryptocurrency comes with liability. Without any intermediary involvement, it is on the user to safely store the cryptographic keys that control their blockchain address. Thefts and frauds remain one of the highest concerns of crypto users, which results in the loss of billions of dollars.

Several schemes have tricked the user into giving up their tokens, and one of them is Cryptocurrency Ponzi Schemes.

What is a cryptocurrency Ponzi scheme?

The Ponzi scheme is a kind of fraud whereby the crooks steals the money from investors and hides it by transferring the amount from the new investors to the old clients. The money is never invested; they manipulate the investors into believing that they are being benefited. 

What is the relation between Bitcoin and Ponzi?

The Bitcoin network relies on new people that buy it, but when the new buyers are exhausted of their funds, this market tends to collapse. This one feature that makes it relatable to Ponzi schemes is a matter of concern for many investors.

Ponzi schemes require a constant flow of money to survive, but when it is hard to rope in new investors and the exiting do not or could not invest anymore, the schemes collapse. 

The concept of bitcoin was not to offer high returns. Satoshi never claimed any return since it is highly speculative.

Bitcoin was launched with a fair scheme, unlike the Ponzi scheme. From the beginning, Bitcoin has remained an open-source and fully transparent project and has the most organic growth trajectory in the industry. Given the available information, the market has priced it as it sees fit, out in the open. 

The reg flags to how Ponzi schemes work differentiates it from other cryptocurrency dealings. 

Overly Consistent Returns: It is a general characteristic of an investment to fluctuate over time. Any investment that generates too positive results regardless of the market conditions is not a matter of pure luck; it is a watch-out signal. 

Non registered investments: The investments are not registered with the SEC or with state regulators. Registration is important since it provides access to information about its management, products, or services. 

High Returns And No risks: Sounds too dreamy, but actually, it isn’t. Every investment carries a sustainable amount of risk, and investments that derive higher returns equally mark higher risks. Any guaranteed returns that offer high gains without any risks is a red flag.

Account Statement Errors: An error in the paperwork can reflect an error in the promised investments. 

Difficulty In Receiving Paperwork: If cashing out becomes problematic, it’s a sign that this investment might be a fraud. Ponzi scheme promoters sometimes try to prevent participants from cashing out by offering even higher returns for staying put.

It’s important to read all the schemes-related documents carefully. Always be alert, diligent, and careful with your investments and securities. It is important  for everyone who deals with cryptocurrencies to maintain a lineal deal of understanding and precautions. Cryptocurrency-related scams are becoming much more frequent. So, don’t forget to introduce as many preventive measures as possible.

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