Whenever you encounter a website or a platform that invites you to make investments and receive astronomical interests, you must be suspicious that you have confronted a Ponzi scheme. Ponzi scheme has turned into one of the most common forms of scam in the world of cryptocurrencies and anyone who is seeking a profitable investment has probably encountered such a scheme at least once. The good news is that detecting a Ponzi scheme is not difficult. In this article, we will explain a Ponzi scheme in plain language and we will go through some ways for detecting it. So, if you don’t know what a Ponzi scheme is and you are worried that you fall victim to such a scheme, stay with us up to the end of this article.

What is a Ponzi scheme?

A Ponzi scheme is a form of scam in which the scammer invites you to make an investment and receive astronomical interests. Experts at Crypto Desk a Crypto Exchange in Dubai, Added “The amount of interest is too high to seem real. Besides, the scammer will claim that he/she will pay the interest under any conditions”. To make their scam feel real, they may claim that they are going to work with your money, but the truth is that they are just receiving money from newer members and giving it to the earlier ones. In other words, no real work is being done and they are only playing with the money.

At first, for attracting new members and gaining their trust, the interest is paid regularly, but as soon as no new member is added to the network, the whole scheme will destroy, the scammer will run away, and newer members will lose all their investments.

Running a Ponzi scheme using cryptocurrencies is much easy, because these currencies do not need any KYC and their transactions are not easily traced. Therefore, cryptocurrency users need to be aware of these scams and be able to detect them.

Where does the “Ponzi scheme” take its name from?

The name of this scheme is taken from Charles Ponzi, one of the most famous scammers in history. He wasn’t the first person to plan and use this scheme, but the size and scale of his scam were so big that this kind of scam is attributed to him. In 1920, he gathered more than 20 million dollars, which is worth more than 250 million dollars today.

How does a Ponzi scheme work?

All Ponzi schemes are similar in concept, but their forms might be different. In general, a Ponzi scheme is run through the following steps:

Deceptive advertisements

Through deceptive advertisements, usually on the Internet or social media, some people are attracted and they make small investments. Scammers may also use marketing techniques and encourage early members to increase their interests by inviting new members.

Paying interests to win users’ trust

As we previously mentioned, scammers begin to pay the interests, and this way, they assure the members that everything is fine.

Receiving more investments

After the scammers gained users’ trust, they begin to receive more investments and increase their profit. Early members with the assumption that everything is alright and the network is valid, may even invite their friends and family to join.

Destruction of the scheme

There is some time that no new member is added to the network, or the scammer concludes that he/she has gathered enough money. At this time, the scammer runs away and new members lose their money. Pay attention that earlier members of a Ponzi scheme may get back their investments and they may also receive some interest, but that is at the expense of newer members losing their money.

How to detect a Ponzi scheme?

Fortunately, a Ponzi scheme is easily detected. There are some signs which inform you that you have encountered a Ponzi scheme. So, if you are aware of these signs, you can easily avoid Ponzi schemes. These signs include:

Unbelievably high interests

Offering unbelievably high interests is one of the biggest signs of Ponzi schemes. In general, more than 10 percent of interest per month is suspicious and can signal that it is a Ponzi scheme. Don’t forget that the cryptocurrency market is volatile and prices constantly fluctuate, so how is it possible that someone guarantees such an interest?

Anonymity of the network’s owner

In a Ponzi scheme, you don’t have much information about the network’s owner. No contact info is included and you don’t know anything about the team or the person behind the project.

Lack of clarity

A Ponzi scheme usually doesn’t explain to the members what it is exactly doing and how it is earning the money. We seriously suggest that before investing in any project, research thoroughly about its activity and gather enough information bout the team and their background.


In this article, we tried to go over one of the most common forms of scam, and explain its nature and signs. Now you know what a Ponzi scheme is and how it is run. As the final point, we would like to insist that don’t believe deceptive claims and before trusting any project and investing in it, do your own research.

Cryptocurrencies are real money. They have real value and their value is increasing day by day. Don’t lose your hard-earned cryptocurrencies for nothing!

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