With the recent crash of LUNA, you may wonder whether the crypto in which you invested is a Ponzi or not.
At first, let's define what a Ponzi is:
A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors.
Another definition is:
A Ponzi scheme is a fraudulent investing scam which generates returns for earlier investors with money taken from later investors.
We can analyze a few typical examples with those definitions:
- Terra (LUNA) & Anchor Protocol: this blockchain and protocol previously promised 20% annual interest on a stablecoin (UST). We all knew what happened. Was it a Ponzi? Although the answer seems clear, we would have to prove that it was "fraudulent". But it was for sure a risky investment.
- STEPN (GMT): this move-to-earn app generates returns (GST) for earlier investors with money taken from later investors (who buy sneakers), but it is not fraudulent, since everything has been explained from the beginning in the whitepaper. Therefore, it is not a Ponzi but a risky invesment too.
- Bitcoin (BTC): not a Ponzi for sure, since it is not fraudulent. However, the pyramid scheme is there, without new investors it cannot grow further. Frankly speaking, take some distance: one guy proposes you two possible options: take directly 30k$ or only 1 BTC. Which one will you choose?
- Ethereum (ETH): I see many people on social networks talking about the "merge" and the impact it could have on ETH price. It is not fraudulent, since everything is mathematically clear, so it is not a Ponzi. However, it is a pyramid scheme again. ETH price will grow if new investors buy it...
- Binance Coin (BNB): a few days ago CZ himself tweeted "2 years ago BNB price was $16". Nothing fraudulent there, just a fact. What does it mean for the future? Has it already grown so much that you should not expect to see it much higher? Forget Fibonacci... Everything is about trust there.
- Fantom (FTM): Fantom blockchain, which is also EVM (Ethereum Virtual Machine) compatible, progressively became a kind of copy of Binance Chain, but has become less successful since Andre Cronje left and hence FTM has progressively dumped. No Ponzi there, only pump & dump.
We could take many examples showing that most of the cryptos, projects and apps on the blockchains are not Ponzi, although they are very risky. Systematically calling "Ponzi" any project in which one does not believe is harmful to the crypto business and creates a lot of confusion preventing the new investors from identifying the real Ponzi schemes. Before investing your money, it is recommended to Do Your Own Research as we always say, which concretely means (not exhaustively): check the team or founders, read the whitepaper, analyze tokenomics... And then only, invest progressively...
Please find below a few links to earn a few cryptos...
