If you have been watching some of the more popular YouTube crypto channels, than you might have noticed that they often will be promoting some of “lending platform”. Most of the time these Youtubers will be getting kick backs from the schemes in the form of affiliate commission.
The most well know of these Ponzi schemes was Bitconnect which claimed to offer around 1% per day interest. The Bitconnect Ponzi was heavily promoted by Youtubers and Redditors. As with every Ponzi scheme Bitconnect closed down on the 16th January 2018, leaving many investors out of pocket as when Bitconnect closed, the investors where paid out in Bitconnect coin which lost almost all of they value straight away as the coins’ value was based around its’ trading platform.
Why has crypto been such a big target for Ponzi schemes?
For normal Ponzi schemes involving fiat currencies, the vast majority of people will understand that any investment that guarantees high returns are unrealistic and are probably a scam.
In understanding the reason why cryptocurrencies have been such a big target for Ponzi schemes, you need to understand that in the year 2017 the value of bitcoin rose 1324%. Compare that 1324% return to the US stock market’s which grow around 24% in 2017.
So with the value of bitcoin growing by over thirteen times in 2017, the average person will not see the couple of percent per day investments as Ponzi schemes as at the time the price of bitcoin was shooting for the stars, as such a couple of percent per day does not sound unrealistic.
Seeing the excitement for cryptocurrencies, scam artists have started to redesign their Ponzi schemes with a crypto coat of paint to trick the general public into letting their guard down and giving the scammers money for non-existent investments.
What about those YouTubers who promote these cryptocurrency Ponzi schemes?
People in general are very selfish, this leads to people that are prepared to screw others over for financial gain. As a lot of these cryptocurrency related get-rich-quick schemes have affiliate systems’ that allow someone to earn a small percentage of the “investment” that anyone who signs up though their affiliate links.
The reason why YouTube is commonly used by these scumbags is because Google has made sure that videos with more watch time get a higher rank, which makes the 30 minutes to 1 hour hour terribly made videos by over excited presenters to rank highly. Making videos where you show how much money you have “earned” from the “investment” (aka mostly affiliate commission), is really easy to do and when you combine that with the point made previously, these videos are attractive to make because they are both easy and really profitable to make.
What should the cryptocurrency community do about these Ponzi schemes?
If you are somebody who wants cryptocurrencies to be adopted worldwide, you need to help to make these scams unprofitable as if the community keeps ignoring the danger of these scams, governments will use it as an excuse to try to shut down cryptocurrencies. In order to help make these scams less profitable the community needs to take the following steps;
All forums and subreddits related to cryptocurrencies should prominently display a warning to warn people who are looking into investing into cryptocurrencies, the common scams that attempt to deceive noobies out of their money.
Call out any YouTubers who promote these Bitcoin Ponzi Schemes and report them to the authorities for the fraud they are helping to promote.
Report these Ponzi schemes themselves to the financial regulators’ in your country and hope they do something about it (In my experience they don’t care).
If all else fails, than may want to contact the media about any potential Ponzi schemes as Google loves the mainstream media and will promote any articles they write to the top of the search results.