Recently, while examining investor issues in the crypto market, I found that many people are still falling into ponzi shēma traps, which makes me think it's necessary to have a good discussion on this topic. Many may not realize that this type of scam has been around since the 1920s and is still active in the crypto space today. What does that indicate? It shows that it has resilience.

The story of ponzi shēma begins with an Italian con artist named Charles Ponzi. This guy in the United States devised a classic scam model, with the core logic summed up in one sentence: use money from later investors to pay early investors' returns. It sounds simple, but this straightforward scheme has harmed hundreds of thousands of people.

How does this type of scam operate? Usually like this. First, a project team appears, claiming there is an investment opportunity, such as investing $10k, promising high returns within one month or three months. Then they tell you that if you refer two more investors, you can get a share of the money from the new investors. It sounds very tempting, right? The first batch of investors indeed receives high returns, which convinces them that it’s real, so they continue to invest more money.

The key issue arises here. This entire ponzi shēma has no real business operation or product; all the money comes from subsequent investors. When the rate of new investors joining cannot keep up with paying old investors, the whole system collapses. By that time, the project team has long disappeared with most of the funds, leaving the remaining investors with nothing.

Why are these scams still so rampant in the crypto market? My observation is that many people enter this market with the initial goal of making quick money. They focus excessively on ROI (return on investment), ignoring risk management. When someone promises high returns, greed overcomes rationality. Plus, the anonymity and rapid liquidity of the crypto market make it easier for such ponzi shēma to hide and escape.

How can you protect yourself? My advice is straightforward. First, any investment opportunity claiming "zero risk and high return" should be immediately passed on. This violates basic financial logic—high returns must come with high risks. Second, understand where the money is going. If a project’s income source is opaque or mainly relies on new entrants, be cautious. Third, always remember to "only invest what you understand." If you can’t understand how the project makes money, don’t invest.

In summary, the reason ponzi shēma can persist is because of human greed. The best way to protect yourself is to stay alert and learn to question opportunities that sound too good to be true. This is especially true in crypto investments.