(FOR BEGINNERS) - PONZI, PYRAMID AND CRYPTO MODELS
I see a lot of you comparing crypto with Ponzi, or a crypto project with Ponzi, but don't really understand what Ponzi is, so the argument is a bit incorrect. I'll add more for those new to the market to gain more knowledge. wake up before the uptrend
1. What is the original Ponzi?
- This model is named after the founder of the fraud industry Charles Ponzi (born in 1882) - an Italian fraud boss who defrauded tens of thousands of customers of $15 million, causing 6 banks to go bankrupt.
- This model essentially calls for investment, paying high interest in a short time, those who come in first call on those who come in later to invest, earning a commission on the investment capital of the latter.
2. How does the Ponzi scheme work?
- Schemer (system owner) calls for investment opportunities to take $1,000 from another investor and promises to return the principal along with 50% interest within a predetermined period (for example, 90 days)
- Schemer will appear to be a highly reputable individual/company, showing that it has a lot of money, and calling for investments with high profits, extremely safe, promising a commitment to repay interest & principal.
- Money from those who invest later will be taken to pay interest to those who invested first to create trust and greed, then Schemer calls on those who have profits to reinvest.
- With this model, they can let first-timers try to withdraw money in small amounts to build trust, while withdrawing large amounts will create many reasons for not being able to withdraw.
- And this model collapses when there is no money to pay investors because there are no new people to deposit money (In Vietnam there are many famous deals such as Shark Thuy's E-Group, Nhat Nam Real Estate,...)
3. Pyramid model
- There is a model similar to Ponzi which is a pyramid, this model often has the guise of sales, marketing, investment and requires participants to recruit new members to make money.
- In this model, Schemer will call for stratification of F1, F2, ... Fn
- Schemer promises F1 with high interest rates eg 50% in 90 days (or hides under the shadow of affiliate marketing)
- Then Schemer tells F1 to go call F2 with the promise to pay F1 20% commission for the capital raised by F2, F1 will go and promise F2 50% investment profit in the same 90 days.
- After calling for 10 F2 to earn $10,000, Schemer pays F1 $2k, along with taking investment money from F2 to pay the initial promised interest to F1 (50% in 90 days from the initial $1k). After that, we will invite F1 to reinvest in the system again because it feels so good
- At the same time, they will tell F2 to invite F3s to invest, and take F3's money to pay interest to F1 and F2,... the further away the Fs are, the lower the commission will be, only the Schemer is the beneficiary. is the biggest because it holds the majority of money. This means that the Fn behind must have more and more to shoulder the profits paid to the Fn in front
- This model will collapse when there will not be enough participants at Fn, and one day there will be no more new participants. Schemer takes the money and runs away while the Fs definitely lose money (This model was previously very popular in Vietnam such as Thien Ngoc Minh Uy,...)
4. Relationship with crypto
- For my personal opinion, the financial market in general (including Stocks, Real Estate, Crypto,...) can be considered somewhat a large casino, not a ponzi or pyramid.
- In casinos, gamblers deposit money to play with each other, and play with the house, rather than offering money according to such a system (this is in general, but crypto also has ponzi projects like One Coin ,...)
- Of course, if we invest in a casino and as it grows, our assets will also grow (this can be called growth investing, value investing,...)
- Because ponzi can collapse because the last person has no money to pay the first person, but the casino still exists forever because those who lose money keep losing, those who come in to play keep coming in, no one commits to paying. give anyone anything
5. Should you invest in a Ponzi project?
- First, you must clearly identify which project is a ponzi or a pyramid.
*CEO:
+ Projects showing signs of calling for investment and committing to high profits
+ Projects that are difficult to withdraw capital from: Initially, it is possible to withdraw a small amount of capital to build trust, but then it is very difficult to withdraw capital from this model.
+ Projects with multi-layered profit models and multi-layered referral commissions
- We definitely DO NOT INVEST in such projects
- As for gamefi projects that are highly fomo, they actually attract greed for people to bet on casinos, but they are NOT PONZI MODEL
- The nature of the financial market is that it still operates with the money investors deposit and win against each other, but Ponzi and financial markets are different!
