What is now the difference with Ponzi platforms with cryptocurrency exchanges

[Minor Miner]

Yes, anything can happen in this market but I also agree with you that binance crash is very unlikely. I also used a lot of exchanges but in the end I ended up with binance, I almost don't trust any 2nd exchange even with FTX and coinbase, and I am not a victim of FTX recently. I also want to emphasize like you, everything has risks and binance is no exception, although binance is considered the safest by far, the future is unpredictable. But I was prepared mentally as well as willing to take risks because when I entered this market, I determined that investing in cryptocurrencies was risky.

Back in few years ago, Mt.Gox was the biggest exchange since 2013 and anyone really trust it. No one expect Mt.Gox because it's the most biggest and popular centralized exchange, just like you thought on Binance. But on 2014 everyone was wrong, Mt.Gox collapse and they can't refund to every holders until right now, even though there's progress that they're promise to pay the Bitcoin in this year.

Sooner or later Binance will collapse, no one can predict the future and you're not working in Binance, so you're not know the actual of Binance's financial.

Whether binance will crash or not, let time tell, you cannot look at Mt.gox or FTX to confirm binance will crash. I don't know do you use binance? but what they are doing is definitely very different from the rest. They are all different but I will agree with you that no one knows what will happen in the future, even bitcoin.

I'm not defending them just because I'm using their services, but I'm prepared and aware of the risks I face if something goes wrong. Except for the holders, the rest of the market, I bet they'll be back to using CEX soon, we can't separate them. The ugly truth, but there are ways to avoid relying too much on them as well as ways to protect assets, so it is not necessary to eliminate all just because of 1 or 2 destructive components.

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[Natalim]

I am not surprise that some media now started to report crypto exchange as Ponzi and comparing it that way.

Too bad but I understand their sentiment yet they are wrong putting crypto exchanges in general. Because what happened to FTX is only for the FTX team. Social media is really trying to use their platform to help spread misinformation and this is not good.

Don't say you have to put your coins in your personal wallet or Dex. There you have someone you trust and breaking the trust. This is not good for cryptocurrency or what do you think about the trust broken?

More exchanges turn into scams, which seems alarming and we know people will consider this as a reason to stay away from crypto. Yeah, trust is somehow broken and doubts arise about which exchanges to trust as Binance also involve in the issue.

[el kaka22]

Realizing that there are a lot of exchanges that take your money, and let you "trade" while they keep your money in their safe, and you do not have to do that at all, do not have to let them have your money, would be the first step. Binance and all other places take your money, and then they tell you that it would be smarter if you could end up with just trading there without withdrawing.

Because, if ALL people withdraw ALL of their money, all exchanges would fall. This is why DeFi was such a huge deal, because if you put it in your own wallet, and trade via some DEX that would mean that your money is at all times in your wallet, and never given to anyone else.

[Ucy]

Reminds me how regulated banks were ran in the past before they had serious issues... You give them money, they squander it and governments bail them out. Interestingly, it's one of the reasons Bitcoin was invented but they are trying to abuse it the way the banks were abused. To minimize or stop the abuse people must use Bitcoin/crypto the way it was meant to be used... in  p2p decentralized manner. You should have nothing to do with exchanges that are run like banks, they are completely contrary to the ideals of Bitcoin.

There are couple of interesting decentralized or self-custody exchanges around. With them you have control over your fund and they are more suitable for long-term investments, or for buying dips.

[buwaytress]

There are couple of interesting decentralized or self-custody exchanges around. With them you have control over your fund and they are more suitable for long-term investments, or for buying dips.

Just make sure you do your full due diligence. Not all DEXs are built the same. In fact, the majority of DEXs out there, those you'd find on "top dex" lists and on search engines, anyway, aren't as safe as you might think.

Self-custody is really the only thing they have different from regular exchanges. But manipulation, lack of transparency, censorship, centralised and closed development, haphazard security, etc. Same same.

[tygeade]

Binance collapsing would be quite difficult, it would require a lot of money to do that and I do not think that it would be that possible. I am not saying that it's impossible neither, but it’s quite difficult for something that large to ever drop victim to some hacking attempt.

I would like to emphasize very carefully, I am not saying "impossible" so take all the safety and security measures that you can, that’s a guaranteed thing, if you can do that then it would be great, but if you don't and you have to put it on some exchange, Binance is better than any other and that would be a much better method for you, because all other exchanges are even worse.

That’s true, it would be very unlikely that we would see Binance going down. I feel like they would be doing security beer than anyone and they wouldn't go with these child’s play stuff that other exchanges which think they are super smart and does in order to bankrupt. FTX did some silly stuff obviously thinking they can get away with it, and obviously they couldn't and that’s why they dropped to this low levels, otherwise they wouldn't.

Binance is too smart and they wouldn't let such things happen and that’s why I believe they would never be turning into a scam. However, OP is right about the ponzi situation, exchanges do not have as much money as they claim they do, and that’s a problem.

[South Park]

Don't say you have to put your coins in your personal wallet or Dex. There you have someone you trust and breaking the trust. This is not good for cryptocurrency or what do you think about the trust broken?

I will go with "IT IS WHAT IT IS".

Exchanges was not the real "idea" behind satoshi's vision. It is actually exactly opposite what he thought and launched the blockchain. It's like Satoshi created apples for us but some thinker later created their own oranges and covered with the Apple skins.

These days what you see is that skin is peeling off and reality is getting exposed. Imagine if there was only bitcoin and the only way to trade it was via sending them from one wallet to other wallet with trust factor being the mutual understanding. I think it would have been the best case scenario.

May be the price would have been little but loss wouldnt have been in billions.

True, the dream of Satoshi was that people would do P2P among themselves, but people are simply too used to the current system in which centralized entities tells them what to do and what not to do, so they simply create the same kind of institutions in a market that is supposed to be decentralized, and even decentralized exchanges are centralized and are only decentralized in name, so with this in mind it is not difficult to see why we have seen the fall of so many exchanges over the years as they are simply not the right fit for this ecosystem.

[iv4n]

What happened on FTX exchange isn't a Ponzi scheme, it is a mismanagement of funds and a possible fraud from the management.  It is obvious that the anti-crypto media will take this opportunity to throw stones at the cryptocurrency industry.  So we just need time for the event to cool down.

As we know Ponzi scheme is a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.[1] but FTX does not offer a quick return on their investment that is paid by the later investors. FTX is an exchange and somehow uses their client money for other purposes.




[1] https://www.google.com/search?q=ponzi+scheme+meaning&rlz=

I never traded on FTX and I don't have any coins/tokens from their internal projects. I guess that makes FTX a Ponzi, they have/had their own investment funds/projects, and when people started withdrawing the tower collapsed. Of course, the management is responsible for this... we can only guess, but I think they wanted too much and their greediness eat them.

It's been a long time since we had a similar situation, but these things happen and can happen to any centralized service. Decentralized exchanges and services are much better, but people still need to learn about them.

[Gyfts]

What happened on FTX exchange isn't a Ponzi scheme, it is a mismanagement of funds and a possible fraud from the management.  It is obvious that the anti-crypto media will take this opportunity to throw stones at the cryptocurrency industry.  So we just need time for the event to cool down.

As we know Ponzi scheme is a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.[1] but FTX does not offer a quick return on their investment that is paid by the later investors. FTX is an exchange and somehow uses their client money for other purposes.

I agree that a Ponzi is predicated on an enterprise that doesn't exist, but in a way, FTX was riding on a house of cards that were one tap from collapsing, and they knew it too. When FTX had billions loaned to Alameda, it wasn't until recently that I learned those funds were then funneled back to Bankman-Fried to the tune of a billion USD.

Without a doubt fraud, misleading investors, and to me, nothing more credible than a Ponzi because the underlying enterprise were based on lies.

[Mauser]

Don't say you have to put your coins in your personal wallet or Dex. There you have someone you trust and breaking the trust. This is not good for cryptocurrency or what do you think about the trust broken?

It's true that this a terrible situation for crypto currencies, but to be honest with you the trust was broken a long time ago. It's nothing new that there are considerable security risks at an exchange and we shouldn't leave our coins there for a long time. It's fine to trade, just make sure to withdraw as soon as you are done with trading. The problem with cryptos is that it became very popular last year and attracted a lot of new people. And with anything in life there are good and there are bad people. Saying that every exchange is a scam is wrong, its not a ponzi scheme either. We do need exchanges to trade our alt coins and some people even make a living out of it. It's the same with a stock exchange, people are also not calling it scams. It takes a bad person with criminal intent in a position of power to defraud customers and investors. Better oversight would be one thing for the future to prevent it happening again.

[Leviathan.007]

There are many other platforms and exchanges where you can see similar things there and they usually ask you to hold your money there for taking profits or they will suggest you refer your friend for taking advantage of them and that's pretty much similar to a Ponzi scheme scam. I see not any difference there and in my idea, they're still doing the same thing but the only difference you can find here is they won't scam small amounts and run away. For any exchange and platform, it is important to ask people to hold their money there and trust them.

[rat03gopoh]

FTX isn't ponzi, it's a clear abuse of responsibility. It's clear that SBF manages that user's money to various services to improve its own company finances. The difference? none, both are the same as removing trust in any related and similar entities. And the worst thing is the opinion of new people that bitcoin is considered an integral part of this crime.

[Crypto Legend]

Various kinds of fraud in cryptocurrencies are increasingly diverse and it seems it will be difficult to prevent, this is because it is too free to create a coin or exchanges project, in 2014 when I was new to cryptocurrencies I followed a lot of cloud mining and hyip programs and most of them were scam projects.

[Smartvirus]

There is huge difference between a Ponzi scheme and exchanges or should I say, what played out in FTX. The issue with FTX came off because of a guy that tried to play smart. Trying to use the system for which he was central authority to enrich himself. It's what local banks do being a centralized system and as such, it makes no difference with a centralized exchange.

The mistake or issue here is, trying to make profit off people's money because, it was stored on your platform. Some unauthorised or unconsented loan and he lost it. They forgot the lose part of an investment or perhaps there is a side to the story we've not been told. Ponzi operates on a pyramid scheme, exchanges are nothing of that sort.

[serjent05]

FTX isn't ponzi, it's a clear abuse of responsibility. It's clear that SBF manages that user's money to various services to improve its own company finances. The difference? none, both are the same as removing trust in any related and similar entities. And the worst thing is the opinion of new people that bitcoin is considered an integral part of this crime.

Definitely, FTX isn't a ponzi scam since they don't function like that one.  FTX is an exchange where people do trades, they released a token but they don't promised anyone of a huge income if they get invested on it.  Investors are also not involved in sponsoring new recruits where they will get huge amounts of money as a referral bonus.  Unlike Ponzi Scheme FTX is operating as a normal exchange platform.  It is that SBF messed up and misappropriate the funds of FTX clients.

[jrrsparkles]

I am not surprise that some media now started to report crypto exchange as Ponzi and comparing it that way. This is because of the FTX crash making customers fund disappearing to $1 billion. The exact amount is still not clear because different people are giving different amount to what is lose and  Sam Bankman-Fried saying he will write his own story about the issue but the point is he "secretly" transferred money to a trading company Alameda Research. This is IMO a black weekend for people in cryptocurrency because just when people start to look for investment in cryptocurrency now we have FTX top officials secretly embezzling customer money to secretly invest in trading to make personal gain.



Where now is the trust? This is blackmail to crypto industry. There was ICO scam and others happened to cryptocurrency.


We try to running off from Ponzi and we begin to have exchange crash not because of hack but someone trusted with customer money is taking it away secretly. . This is not good to hear. It is sad to read about it and I know you are not happy about Sam Bankman-Fried action that is putting cryptocurrency investors into economic challenge in this hard knock inflation season.

Don't say you have to put your coins in your personal wallet or Dex. There you have someone you trust and breaking the trust. This is not good for cryptocurrency or what do you think about the trust broken?

It is just the exaggeration of what really happened to convince people that crypto is bad, did cryptocurrencies made loss to the people no. Its just because of someone's fault or mishandling of funds or scam as you said but don't blame the market just punish the individual who did that is supposed to be the right thing to do.

Exchanges had more trust than it should be so atleast this is some kind of warning bell for all the holders using cryptocurrencies.

[G_Besar]

Various kinds of fraud in cryptocurrencies are increasingly diverse and it seems it will be difficult to prevent, this is because it is too free to create a coin or exchanges project, in 2014 when I was new to cryptocurrencies I followed a lot of cloud mining and hyip programs and most of them were scam projects.

When you know more about cloud mining and hyip programs that you've seen in the past, it will actually help you a lot in terms of avoiding them or similar programs in the future. This means you have absolutely nothing to lose when you first find out about such things in the past because it will protect yourself from repeated scams on the same program. So actually you can prevent it when you already know it first.

[Renampun]

Exchanges being insolvent due to whatever reason isn't anything new — that's one of the reasons why the quote "not your keys, not your coins" has been repeatedly said thousands of times already.

this is also what really confuses many people, many traders are trapped in CEX not because they don't know that "not your key, not your coin" but because CEX provides tempting things with promos, cheap fees and so on, which makes people (including me) forgot about the dangers of keeping funds in CEX.

But to answer your topic question, ponzi schemes are ponzi schemes and exchanges are exchanges. What made FTX a ponzi scheme in this case is because of how the CEO(and company) handled their user's funds.

what you said is very true, the CEO of FTX uses users' money to invest in other projects and this is definitely a scam (looks like a Ponzi scheme).

[2stout]

Sadly, there is not much difference between Ponzi platforms and some cryptocurrency exchanges; as a result, even the "good" exchanges will be lumped in and viewed negatively.  History just keeps repeating itself as people didn't learn from mt.gox and now ftx; there will be another soon.

[serjent05]

Sadly, there is not much difference between Ponzi platforms and some cryptocurrency exchanges; as a result, even the "good" exchanges will be lumped in and viewed negatively.  History just keeps repeating itself as people didn't learn from mt.gox and now ftx; there will be another soon.

There is always this kind if incident every year, exchanges shutting down, getting bankrupt, and exchanges CEO misappropriating funds.  Well an exchange will never get bankrupt if the management is so keen on its responsibility.  Though I beg to disagree that Ponzi platforms and cryptocurrency exchanges are the same.  These two are very different because an exchange never promises us wealth but only serves that our crypto funds is safe in their hands.

Various kinds of fraud in cryptocurrencies are increasingly diverse and it seems it will be difficult to prevent, this is because it is too free to create a coin or exchanges project, in 2014 when I was new to cryptocurrencies I followed a lot of cloud mining and hyip programs and most of them were scam projects.

When you know more about cloud mining and hyip programs that you've seen in the past, it will actually help you a lot in terms of avoiding them or similar programs in the future. This means you have absolutely nothing to lose when you first find out about such things in the past because it will protect yourself from repeated scams on the same program. So actually you can prevent it when you already know it first.

Indeed and you will know that Ponzi platforms are very different from a cryptocurrency exchange.  Your given example are platforms that uses Ponzi scheme system and if compared to crypto exchanges, we will find out that they are not the same.