Analyzing the Bitcoin Ponzi Scheme Ecosystem
This paper analyzes the supply and demand for Bitcoin-based Ponzi schemes. There are a variety of these types of scams: from long cons such as Bitcoin Savings & Trust to overnight doubling schemes that do not take off. We investigate what makes some P
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Computer Science, University of New Mexico, Albuquerque, USA [email protected] Tandy School of Computer Science, The University of Tulsa, Tulsa, USA [email protected]
Abstract. This paper analyzes the supply and demand for Bitcoinbased Ponzi schemes. There are a variety of these types of scams: from long cons such as Bitcoin Savings & Trust to overnight doubling schemes that do not take off. We investigate what makes some Ponzi schemes successful and others less so. By scouring 11 424 threads on bitcointalk.org, we identify 1 780 distinct scams. Of these, half lasted a week or less. Using survival analysis, we identify factors that affect scam persistence. One approach that appears to elongate the life of the scam is when the scammer interacts a lot with their victims, such as by posting more than a quarter of the comments in the related thread. By contrast, we also find that scams are shorter-lived when the scammers register their account on the same day that they post about their scam. Surprisingly, more daily posts by victims is associated with the scam ending sooner. Keywords: Bitcoin
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· Cybercrime measurement
Introduction
Bitcoin draws out risk-seeking individuals. The exchange rate is volatile; many businesses built on top of it are speculative in nature; the currency is pseudoanonymous and distributed. Consequently, it is perhaps unsurprising that many Bitcoin users have taken to Ponzi schemes (and Ponzi scheme runners to Bitcoin). In this paper, we look at the ecosystem around Ponzi schemes advertised to Bitcoin users. Previous work of ours has established a lower bound for the amount of money earned by criminals through Bitcoin scams [12]. Here we more comprehensively study the scams by gathering data where they are promoted. As well as shedding light on the “supply” side of Ponzi schemes, we also look at the “demand” side by gathering data on victim interactions with the scams. People keep falling for Bitcoin scams, but why? Bitcoin users like to purport themselves as particularly technologically savvy, but does that help or hinder their susceptibility to scams? How do the steps taken by scammers, such as engaging shills to promote their products, affect their success? Ultimately, our goal is to shed light on why criminals are able to prosper in this ecosystem. c International Financial Cryptography Association 2019 A. Zohar et al. (Eds.): FC 2018 Workshops, LNCS 10958, pp. 101–112, 2019. https://doi.org/10.1007/978-3-662-58820-8_8
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M. Vasek and T. Moore
Even with the improved coverage relative to previous work, our results are necessarily incomplete. There are inevitably scams which use Bitcoin and we do not measure. There are also scammers which create multiple accounts to talk about their scam and we only are able to extricate the obvious cases of this behavior. Despite these limitations, we provide a large-scale analysis of this online Ponzi scheme ecosystem. The research contributions for this paper are both in the data collection methodology and in the analysis of the gathered data
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