Technical Definition

Ponzi vs pyramid

A Ponzi scheme generally pays earlier participants using money from later participants, while a pyramid scheme depends heavily on participants recruiting additional participants into the structure.

By Crypto University EditorialLast updated October 20, 2026

Exit scamScamYield farming

✦ Key Insight

Crypto terminology and complicated payment structures can disguise traditional fraud models.

✕ Common Misconceptions

Blockchain technology does not make an otherwise fraudulent compensation structure legitimate.

Detailed Explanation

Both are unsustainable fraudulent models. A Ponzi is usually presented as an investment managed by an operator, while a pyramid typically rewards recruitment and expansion through multiple participant levels.

In Practice

“A platform claims investment returns but secretly uses new deposits to pay existing members.”

Dig Deeper

Yield Farming

Moving capital between DeFi protocols to earn the highest available rewards, usually paid in a protocol's own token.

Exit scam

An exit scam occurs when operators take users' money or assets and disappear, abandon promised obligations, or deliberately prevent users from recovering funds.

APY

APY, or annual percentage yield, expresses an annualized return that includes the effect of compounding.