Recently, I saw someone fall into it again in the crypto community, so I want to talk about the ponzi shēma topic. To be honest, although this kind of scam has a century-long history, it remains active in today’s crypto market and is becoming increasingly covert.

First, let’s talk about the background. The ponzi shēma was first created by Italian con artist Charles Ponzi in the 1920s, simply put, using the money from later investors to pay returns to early investors. It sounds very foolish, right? But with such a simple trick, it has harmed countless people over the decades.

How does this scam operate? Usually like this: someone claims they can give you high returns, possibly through an investment project or business opportunity. You invest a sum of money, for example, $10k, and they promise to give you a multiple of that return within a certain period. Then they will ask you to recruit more people, offering you commissions or extra profits as bait. Early participants do make money because the funds from newcomers keep flowing in. But this pyramid will eventually collapse because there are always limited new recruits, and the last batch of investors will lose everything.

Why is this ponzi shēma especially rampant in the crypto market? I think mainly for two reasons. First, crypto investors are all chasing high yields, and their risk awareness is often blinded by profit. Second, the anonymity and decentralization features of the crypto market give scammers more space to operate. Many people see others making money and blindly follow without thinking about where that profit comes from.

My advice is, if an investment opportunity sounds too good to be true, it’s probably not reliable. Remember the principle of high risk, high reward, but can you get high returns with no risk or low risk? That’s definitely a scam. In the crypto market, always ask yourself three questions: What is the business model of this project? Where does the money come from? Why are they offering me such high returns? If you can’t answer these, don’t invest.

And another very important point: don’t invest in things you don’t understand. Many people get pulled into ponzi shēma without even understanding what they’re investing in. Do your homework, verify information, and stay skeptical. Remember, your money is always the most important. No investment opportunity is worth risking so much. Wishing everyone successful investments, but more importantly, protect your principal.