Ponzi Schemes Now Legal
I have been doing a little research on Ponzi schemes and pyramid schemes. What I have found is that the legality of both has changed over recent years. Crypto has played a big role in that change and I will explain. Be sure to read this entirely for a full understanding.
Many of you know that I have recently signed up for a game known as drug wars. Many of you have also heard people calling it a Ponzi scheme. This sparked my interest and caused me to research the topic further. What I have discovered may shock some of you.
As much as this game might seem like a Ponzi scheme, it is not by the definition of the law. I am not defending it. I just wanted to point out a few things. It is structured as one but by the Federal Trade commission's definition it is not.
In a Ponzi scheme, investors believe that their gains are coming from an outside investment or sales. In this game they do not . Perhaps it could be called a pyramid scheme but there are a few differences there as well. In a pyramid scheme the gains all come from new recruits. Only difference is that in a pyramid scheme the investors know that they are being paid for finding recruits.
A few things set this apart.
1: new recruits do not have to pay money to sign up.
2: all of the gains are not coming from new recruits.
3: (and this is a big one) The Federal Trade Commission does not recognize cryptocurrency as actual currency. In order for it to be either of the above they require money to be invested. What's going on here is completely legal.
In the end, the pay structure is completely legal. It would definitely be in a gray area if Fiat was being used rather than crypto, but it seems that the United States government, for one, has shot themselves in the foot by not recognizing crypto as currency. Playing with cryptocurrency is viewed about the same as playing with peanuts from a legal standpoint. From a tax standpoint it is a completely different ball game.
Now that being said, let the ponzi's begin. I for one am looking forward to trying out a few. I have an amazing idea for a brand new type of pyramid.
What I would like to see would be a bot set up and coded to the blockchain. This would make it permanent and it could also be anonymous. The Bot could accept payments, and redistribute payments of new participants evenly amongst those already in the system. Just a few simple calculations and some programming skills could make this happen.
If I had the programming skills, I would consider doing it myself. Unfortunately I am not a programmer. I'm not a lawyer either so if you are going to run with my idea, do so at your own risk. I'm not advising anyone to do anything. Just planting a seed in your head. If someone should decide to do this, please make me one of the first to know about it. Just remember, you heard it here first.
Below you will find a link to the Federal Trade Commission website. You will also find my referral link to the drug Wars game. I enjoy the game no matter how the pay structure is set up. How how many games do you play the pay you nothing? It can't hurt to check it out. It is browser-based so there is no download.
Link to the game https://staging.drugwars.io/#!/ref/@big.ock
Ftc https://www.ftc.gov/public-statements/1998/05/pyramid-schemes
Img src https://goo.gl/images/qsbnNe
Nice post.
Calling @drugwars a Ponzi scheme is a bit foolish.
There is no conspiracy. Everything is transparent.
The people at the top of the pyramid have lost the most money.
I'm going to spend the day creating a bot for @drugwars using javascript and dsteem. Looks like it's going to be pretty easy to do.
Yeah. I agree it is foolish. A ponzi scheme is a scheme. People are being scammed. That is not going on here. Everything is 100% transparent. If you know how to create a bot, you should run with my idea in the last few paragraphs. Someone is gonna do it. U might as well be first. Lol
You should maybe have warned that bots are not accepted on DW people using bots to automate the game do it at their own risk
Where is that written?
I didn't realize that. The bot I was talking about was just a simple bot where are you send money to an account and then they send you payouts whenever someone else sends them money
I have a few other ideas for the Bots that I mentioned as well. The account could be locked, password thrown away, 100% payout. If everyone paid $10 to join and that $10 was distributed evenly amongst all current members it would be perfectly fair if they paid $20 to join their percentage would go up and so on. The reason pyramid schemes are illegal is because once everybody is in them there is no one else to recruit and they must fail. Something could be put in place to where this didn't happen. For instance, once subscriptions start declining for a set period of time then the top 1% could be removed from the system. Their money will have already been made and they can decide to rejoin and pay another fee which will then be distributed again amongst everyone else. This would cause a circle rather than a pyramid that will collapse. Everyone will make money evenly rather than the people at the top. The first person will obviously make their money back as soon as two more join. The second person would make there's once 4 or 5 join and so on. Removing the top 1% would have to be delayed until it reached 1,000 members or some other chosen number. If I had the programming skills I would make this happen
Ok but why would anyone send money? If it is to 'make' money someone has to lose.
And saying its not a Ponzi Scheme because crypto is not money is a pretty thin argument. What if I live in a place where crypto is money? Does changing location or definition change the nature of the game?
I agree that its a game, they should continue to further emphasize gameplay aspects.
If you live in a place where crypto is considered money, it changes nothing. It is not a Ponzi scheme either way. In a Ponzi scheme, investors believe that their gains are coming from somewhere else. Stock investments, sales, etc. Everything is hidden and they have no idea that their gains are coming from new investors. This it's completely different due to the fact that it is 100% transparent. Nobody is being schemed or scammed. Everybody knows exactly where everything is coming from. There is nothing hidden.
As for the first question. People would send money so they can make it themselves. In America we are forced to do this anyways. Most government programs are set up this way. The one that I have mentioned above is actually a model taken from a program known as Social Security. The one percent dropping off the top can be compared to people dying of old age on Social Security, although in Social Security that percentage would be a lot higher. When they raise the age at which you are able to draw Social Security, what they're actually doing is Raising that percentage.
New investors come of age, get there first jobs, pay into this program and see nothing in return. The money from new investors is used to pay the old investors. Once those investors get to a certain age they get paid from more new investors and so on. If they should die before they reach that age however, their money is gone. There is nothing illegal about this nor is it hidden.
I for one, would definitely buy into a system like this if it was 100% payout. Social Security unfortunately is not yet we are forced to pay into it. In a system where the top people drop off and are replaced by those beneath them, nobody loses. In fact, most of the people who have dropped off would probably buy back into it because they will have made money. This new money will then be paid to the others forming a Perpetual Circle that will grow in size.
Thank you for taking the time to write this. I will try to also explain my views here.
Social security is a scam. How you present it, was not the way it was supposed to work. A proper pension plan saves the money you put in, with compound interest, and uses it to pay you back. You have only explained why social security is a ponzi or perhaps pyramid scheme since we 'know it'.
So, I am changing to pyramid scheme, if indeed ponzi means you don't know, in a pyramid scheme, you know. The money making aspect of Drug Wars is a Pyramid Scheme, and no amount of knowing will change the fact that it will not be profitable to the vast majority of players, probably starting from here on forward. Please note that I want to see them turn the narrative to game play not money making. I believe I have their best interest in mind. I am not saying these things because I am bitter or hate anyone.
They can use other income streams, like from posts, to add to the pool, this will improve the situation but the math currently is not looking good, mostly because of how successful it was at first. I am the first one to say to people that it is a game and should be enjoyed as such. This is because the money making aspect is a pyramid. If it was an investment vehicle, that would be different. It is not. It is currently a game with a pyramid attached.
Talking about your circle scheme. Let's do some math. Again, I am not bitter, its just math. Let's say we all put in 100 dollars together. Combined, we can divide up 100 dollars however we want, but we are never getting more that 100 out of the circle. So if anyone makes 1 dollar, someone has lost one dollar. No amount of new recruits is going to change the fact that money in cannot be greater than money out.
So if we are not making money, why would we put money in? In fact, as long as the opportunity cost of money is not negative, rationally we should avoid this circle. That is the case with steem. Let's say the next best thing to do is power up into steem power (this is probably not true, because there are many more profitable things to do with steem, check this article). Just by having the steem powered up I earn interest. Why then would I feed it through the circle for zero return? Your circle scheme is mathematically a money losing operation.
I agree that money in does equal money out. If we all put in $100 combined then that would surely be a $100 paid put to us. If we were the only people in it and no one else joined then this is the way it would stay .
If other recruits join during that time and put in another hundred then that would be 200 out split amongst us. If the circle starts to shrink during this time the top 1% would be forced out (us), leaving the rest to find new recruits.
While the circle is growing however, everyone is making money. It is only when that starts shrinking that money will start being lost. The bot would be attached to the blockchain as a permanent fixture so it would surely go through phases of growing and shrinking.
This would leave it up to the people within the system to ensure its growth and maintain their profits. If a group of people did not work to make it grow by even 1 recruit per week or any set number, then they would flatline or maybe even loose a small investment.
The bot could possibly sit dormant for months or even years after a flatline while users are making nothing or breaking even. One recruit could come in and recruit many others which would then bring up a spike due to their hard work. No, of course everyone won't win in the end. But not everyone will lose either. When you are amongst hard workers it could be a winning situation
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!bookkeeping drugwars
Hi @big.ock!
drugwars
Received:
Spent:
Total:
First transfer was before 31.78 days.
Your ROI per day is 2.67 % and you are earning approx. 0.04 STEEM per day.
Break even in approx. 5.7 days.
ROI when taking only the last 5 days into account
Your ROI per day is 3.74 % and you are earning approx. 0.06 STEEM per day.
Break even in approx. 4.0 days.
!bookkeeping drugwars
Hi @big.ock!
drugwars
Received:
Spent:
Total:
First transfer was before 33.63 days.
Your ROI per day is 3.16 % and you are earning approx. 0.05 STEEM per day.
ROI when taking only the last 5 days into account
Your ROI per day is 6.46 % and you are earning approx. 0.10 STEEM per day.