TL;DR
This paper provides an in-depth empirical analysis of Forsage, a large-scale smart contract pyramid scheme on Ethereum, revealing its mechanics, participant gains and losses, and promotional strategies using blockchain transparency and social media analysis.
Contribution
It is the first detailed study of a smart contract pyramid scheme, combining blockchain data analysis with social media insights to understand its operation and community dynamics.
Findings
Top participants gained multi-million-dollar profits.
Approximately 88% of users incurred losses.
Forsage activity is concentrated in a few national communities.
Abstract
Pyramid schemes are investment scams in which top-level participants in a hierarchical network recruit and profit from an expanding base of defrauded newer participants. Pyramid schemes have existed for over a century, but there have been no in-depth studies of their dynamics and communities because of the opacity of participants' transactions. In this paper, we present an empirical study of Forsage, a pyramid scheme implemented as a smart contract and at its peak one of the largest consumers of resources in Ethereum. As a smart contract, Forsage makes its (byte)code and all of its transactions visible on the blockchain. We take advantage of this unprecedented transparency to gain insight into the mechanics, impact on participants, and evolution of Forsage. We quantify the (multi-million-dollar) gains of top-level participants as well as the losses of the vast majority (around 88%)…
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