The growth and scale of blockchain technology certainly brings with it many benefits and some mishaps. Despite being a technology that seeks to restore confidence in human transactions, blockchain technology is not exempt from being exploited for illicit purposes, taking advantage of the technical ignorance of the general public.
An investigation by specialists in the Department of Mathematics and Informatics of the University of Cagliari, Italy, has demonstrated the existence of pyramid schemes that operate on the basis of Ethereum's intelligent contracts.
Already present in the cryptomoneda ecosystem because of its attractiveness in the market, the researchers defined that the fraudulent businesses based on the intelligent contracts of the network of Ethereum and its criptomoneda, the ether, have found success in this niche of technology by three Reasons, starting with the fact that smart contracts endow their owner with absolute anonymity, allowing him to withdraw the money received without revealing his identity.
On the other hand, particularly with intelligent contracts that are executed in open and public channels, these can not be arbitrarily detained by a third party, nor can they be modified, which makes it very difficult for a regulatory institution to intervene to protect the participants Of this process.
Finally, users rely on these Ponzi contracts because their scheduling codes are open and public, so they ensure that their owners "can not" get the taxpayers' money, nor can they modify the automatic behavior of the contract, Making one think that the scheme will be executed forever ; And therefore, there is an acceptable percentage of risk to invest in these contracts.
Blockchain platforms and smart contracts may actually be the next disruptive technology, as many companies, media and researchers are beginning to believe in it. However, it can also offer new opportunities for tax evaders, criminals and scammers, who can take advantage of anonymity and decentralization.
Department of Mathematics and Informatics
University of Cagliari
Scholars Massimo Bartoletti, Salvatore Carta, Tiziana Cimoli and Roberto Saia , allege that this document is the first scientific contribution on the Ponzi schemes based on the platform Ethereum :
This paper is the first comprehensive research on Ponzi schemes in Ethereum, the most prominent platform for smart contracts so far. We have constructed a collection of Ponzi schemes, analyzed them, and measured their impact on Ethereum from various perspectives.
Department of Mathematics and Informatics
University of Cagliari
The methodology of the study consisted of carefully examining all existing contracts with certified code, and those associated with a name, using the tools etherscan.io and etherchain.org, then doing searches on Google and contrasting those codes with others that have already been verified Are fraudulent, were able to detect 191 potential Ponzi contracts , which were reflected in a data table . However, it is noted that some financial schemes listed on BadBitcoin.org, such as ethtrade.org and ethereumlitemining.org , were not included because they could not determine which Ethereum addresses they used.
When doing the study on the code used by the developers of these Ponzi contracts, it was determined that most have serious security flaws, easily exploitable by those who wish to attack to steal cryptones, and that they also keep many things in common with each other, doing Between seeing that they develop these contracts from other older ones.
Also, regarding the profile of investors, they point out that Ponzi schemes work better with many small investors, than with few people who make big contributions to the scheme. In addition, they advertise on social networks, blogs and reddit, so they are hunting down unwary internet users who could be potential victims.
TYPES OF PONZI CONTRACTS
Starting the list, are the schemes in order of arrival . This is based on paying users prioritizing their order of arrival to the scheme, adding to each new income a commission that is increasing according to the level at which it is.
A contract receives a sum of money and charges 1 ether of commission, while it sends 10% of the investment, and with the rest it is distributed among those who are in queue. To receive the full investment again, plus the promised profit, you must wait for more participants to join the scheme.
Another system of common fraud is called a tree scheme , where each user is referred by a promoter, who invited him to the scheme, and this one in turn has another until reaching the "root" of the tree, which is the owner of the contract. When a user enters, his investment is divided among his predecessors, decreasing this amount by each level that ascends. It should be noted that the gain received is not related to the investment made, but to the amount that lower investors decide to contribute.
Also, there are transfer systems, which imply that each new user entering the scheme must pay the investment of the last user to participate , plus an extra amount for interest; So that the amount set to enter increases with each shift.
There is also the so-called "cascade system" . This Ponzi contract has a structure in 'cascade', or descending, in which with the money of each new investment is paid to all the participants starting from the first to participate, until the money is exhausted . But that does not mean that in the second round of profit sharing you start at the height they were in before, but start again from the beginning (the top of the cascade). Therefore, there is a risk that those who failed to collect their funds because they are well below the queue, do not do so in other laps, even if new users continue to enter, since the dividends are equally distributed equally from the first Positions.
CRIME DOES NOT PAY
One of the most successful schemes in terms of capital raising is DynamicPyramid, having paid only 51 users out of 174 who invested. Another, the first in number of users is EthereumPyramid, that only paid to 124 users of 326 that participated. Another scheme, ZeroPonzi, which does not charge commissions for the money invested, was able to pay 28 users out of 46.
All the analyzed Ponzi schemes managed to raise $ 418,761 dollars from 2304 users. About 10% of the 1384 contracts whose source code was verified in etherscan.io are pyramid schemes Ponzi, and about 0.05% of the transactions in Ethereum are related to these schemes.
As an alarm, they point out that in the future these fraudulent schemes could evolve and be less detectable, since they could mix multilevel marketing, chip sales and promotion of games (such as casinos) in order to develop more complex contracts with Which can not be classified as Ponzi schemes.