Grassroot Crypto Education | Series 2 Volume 7- Scams in the crypto Ecosystem [part1] - Ponzi and Pyramid scheme| #burnsteem25

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Hello Crypto kids,
It is an honor to be here again this week to make a post before this great community.

This week, we shall be learning about some scams in the crypto ecosystem.
We have had dealings with the crypto ecosystem for some time now, and we have earned from the crypto Ecosystem, and many of us have lots of savings in the ecosystem.
This makes it proper for us to learn about scams in the ecosystem.

Many individuals have fallen victim to scams on the ecosystem due to ignorance and this is one reason why individuals on the steemit platform needs to complete their achievement tasks, most especially the Achievement 2 which lay emphasis on security.

Join me as we begin our fun-filled and educative adventure into this topic of discussion.

SCAMS IN THE CRYPTO ECOSYSTEM

In a literal sense, scam can be explained to be an illegal/fraudulent scheme aimed at dishonestly taking away useful resources from individuals.

There are different forms of scams and different method in which they operate.
Scams can be done online and offline and through many other means.

This link shows a live experience of how a user's account was hacked and 0.1ETH was almost lost, and this happened because he was ignorant of the information I'm about to share.

As we keep advancing technologically, so also does this scammers, they keep leveling up and improving the format and rate at which they scam.

Today, being the 1st part of our discussion, we shall be discussing basically on two forms of crypto investment scams; Ponzi scheme and Pyramid scheme

MY UNDERSTANDING OF PONZI SCHEME

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Ponzi scheme can be explained to be a form of fraud in which investors are lured into, and early investors are paid with the funds generated from late investors.

It can also be explained as a fraudulent investment which promises high rates of profit with little/no risk to it's investors.

The term "Ponzi scheme" was named after a swindler known as "Charles Ponzi" in the year 1920s.
Ponzi scheme is usually very easy to detect and only the greedy ones fall victim to this schemes, a very good example of a popular Ponzi scheme in Nigeria is 'MMM'

HOW TO DETECT PONZI SCHEME

• A guaranteed promise of higher returns
• Little/no risk involved with investment
• A regular flow of returns despite market conditions
• Investment aren't registered with SEC
• Possession of secretive investment strategies etc.

An example of a Ponzi scheme is a platform that tells you to invest a minimum of 10usdt and mine 5% of your rewards daily. They also promise that the higher the investment, the higher the rewards. This is how the activities of most Ponzi is done, and from this we should stay away!

MY UNDERSTANDING OF PYRAMID SCHEME

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Pyramid scheme can also be explained as another form of scam in the crypto ecosystem, whereby investors are attracted to the promised higher returns on investment.

This is a form of fraudulent scheme that is based on recruiting more investors.
The initial investor brings in more investors, who in turn bring in more and more investors.
In our literal language, this is known as referrals.

This scheme is known as a pyramid scheme because it only grows as the number of recruits grows.

For example, @jueco establishes a pyramid scheme and he reefers/recruits 10users which will pay some funds to him for joining, this 10 recruits have automatically become the downline of @jueco, forming the second level of the pyramid

Then these 10users will also recruit 10 users each, which will pay them for joining, of which some percentage will be forwarded back to @jueco, this newly recruited 100 members will form the third level of the pyramid.

This 100 members being the 3rd level of the pyramid will also refer 10 individuals each, which will form the 4th level of the pyramid.

A percentage of money gotten from the 4th level will be given to the 3rd, 2nd and 1st level respectively. This is how a pyramid works.

As it is illustrated above, as the scheme grows, the number of investors increases.

1st level = @jueco
2nd level = 10members
3rd level = 100 members
4th level = 1000 members and so on.....

SIMILARITIES BETWEEN PONZI AND PYRAMID SCHEME

• They are both schemes aimed at defrauding individuals
• They both offer attractive returns to investors
• They both rely on the cash inflow of new investors
• They both pay former investors from the funds generated from new investors

DIFFERENCES BETWEEN PYRAMID AND PONZI SCHEME

PYRAMID	PONZI
It involves more of networking	It involves more of re-investment
It funds flow through levels, that is from new investors to oldest investors	It funds are used to pay older investors
They sometimes come in form of a business opportunity	They appear in form of investment opportunity.

As to how I would adopt to them, I will rather stay away from them than fall victim to their fraudulent act.

One reason I'll stay away from them is that I can't read the minds of the managers as to when they will shut the site.

Many might choose to adapt but I'll rather choose to focus my time on something more important and yielding.

Cc
@ngoenyi
@steemkidss
@fredquantum