A Study on Characteristics and Identification of Smart Ponzi Schemes

Abstract

A smart Ponzi scheme (SPS) is a financial Ponzi scheme that is implemented and deployed in blockchain through smart contract technology. It is built on treachery and lies, by which, the organizers and speculators jointly deceive innocent investors by fostering a belief in obtaining the expected benefits. The occurrence of SPSs is originated from the vulnerability of the supervision mechanism on the blockchain. Although there are many excellent studies, these contributions overemphasized the methods themselves, did not describe the characteristics of the SPS well, and had certain limitations in practice. We made a thorough study on the characteristics of an SPS and brought out the vital features to identify an SPS for an investor. Based on the analysis of the contributions of predecessors, we propose an approach to test whether a contract is an SPS. This approach could deal with two situations, the contracts to be deployed and the long-run contracts respectively. Of the approach, the priori method can be exploited to distinguish whether the contract to be deployed is an SPS for the runner of a blockchain; the posterior method could protect an investor from being trapped in a fraud. At the same time, the posterior method can also be extended to monitor some contracts dynamically to alert users with the probability to be fallen into SPSs.