What is a Ponzi Scheme?

We all seen them asking us to invest our money and offering us massive gains, especially now with all this cryptocurrency movement making it a lot easier to scam people that don’t know anything about bitcoin or other cryptocurrencies but what exactly is a Ponzi scheme?

A Ponzi scheme is fraudulent operation of investments (named after Charles Ponzi who did this operation in the 1920s, which was based on arbitrage of international reply coupons.) that consists of using the money of the new investors to basically give back the money to older investors, and they basically do this by attracting new investors by offering big returns in short periods of time, so if the money stops flowing the whole scheme collapses.

Similar Scheme

There are other schemes, the most common one would be the pyramid scheme which is not the same as a Ponzi scheme but it’s pretty similar and most times confused, the biggest difference is that in a Ponzi scheme the individual or organization behind the Ponzi scheme will only ask you to invest in something and later return it to you; basically just shuffling the money around, in a Pyramid scheme however besides the initial investment they offer you some kind of opportunity to make money for yourself by recruiting more people and more people for you to make some profits.

How to Spot Them

Ponzi schemes are hard to spot, however there are some ways to identify them.
Massive Returns: Most Ponzi schemes would offer big returns in short periods of time to make it more attractive for someone to invest in it.
Check for details: Always read and research in everything you invest, examine all the information that the organization is providing.
If you are not sure about the organization your investing in just research for people that have and ask them how’s it been for them, but you won’t know for sure unless you try it so if you really want to know make a test with low amount investment.

Nowadays there are schemes of any types making it harder to spot one, so be skeptical and always research everything you invest before you do it and never invest all your money on it.

Im new in steemit and this is my first post which is pretty short but hope I brought you guys some interesting information about this subject and maybe some information you guys didn’t knew already, thanks.

Sources
If you’re interested on learning more about Ponzi schemes be sure to check out the sources
https://en.wikipedia.org/wiki/Ponzi_scheme
http://www.telegraph.co.uk/business/0/bernard-madoff-ponzi-scheme-does-work/
http://money.howstuffworks.com/ponzi-scheme.htm
http://money.howstuffworks.com/pyramid-scheme.htm
http://www.diffen.com/difference/Ponzi_Scheme_vs_Social_Security