Dissecting Ponzi schemes on Ethereum: identification, analysis, and impact

TL;DR

This paper provides a comprehensive analysis of Ponzi schemes on Ethereum, examining their behavior, impact, and the ways they exploit smart contract platforms for fraudulent activities.

Contribution

It offers the first detailed survey of Ethereum-based Ponzi schemes, highlighting their mechanisms, evolution, and the risks they pose to users and the platform.

Findings

Ponzi schemes on Ethereum have evolved with smart contract technology.

They exploit trust in smart contracts to deceive users.

These schemes have significant financial and reputational impacts.

Abstract

Ponzi schemes are financial frauds which lure users under the promise of high profits. Actually, users are repaid only with the investments of new users joining the scheme: consequently, a Ponzi scheme implodes soon after users stop joining it. Originated in the offline world 150 years ago, Ponzi schemes have since then migrated to the digital world, approaching first the Web, and more recently hanging over cryptocurrencies like Bitcoin. Smart contract platforms like Ethereum have provided a new opportunity for scammers, who have now the possibility of creating "trustworthy" frauds that still make users lose money, but at least are guaranteed to execute "correctly". We present a comprehensive survey of Ponzi schemes on Ethereum, analysing their behaviour and their impact from various viewpoints.