How Does KangAi Commune Avoid the Ponzi Scheme Trap?

A Ponzi scheme, put simply, is using new investors' money to pay returns to old investors, until it collapses when it can no longer operate.

The rules of a mutual aid platform, if improperly designed, can likewise fall into a Ponzi-like situation. If a mutual aid platform relies on new members to complete its aid payouts, then the day new member growth stops, the platform will inevitably collapse. To prevent this from happening, mutual aid platforms should work on the following aspects.

First, the amount each person contributes should match their own risk. If the risk of a critical illness is high, they should contribute more.

At KangAi Commune we set different rights based on age and health status, and establish different mutual aid groups for different populations, precisely for this purpose.

Second, mutual aid groups should be set up more like term (consumption-type) insurance in the insurance industry, rather than whole-life insurance. Whole-life insurance very easily degenerates into a Ponzi scheme.

Third, the platform must not guarantee the shortfall. When fundraising falls short, the actual amount raised should be the aid paid to the recipient. If the platform advances funds or subsidizes with members' prepayments and balances, a very dangerous situation will arise.

Fourth, the platform must not aim to absorb too much member balance. Funds should, as far as possible, be placed under third-party supervision through legal and compliant institutions.

Fifth, the platform should put sustainability first, must not blindly expand, and must always tread on thin ice and be cautious.

Sixth, provide proper risk warnings. Always make clear that mutual aid cannot be viewed as insurance; they have different operating mechanisms.

Seventh, do not mislead. Statements about contribution amounts must be extremely rigorous and must not cause members to misunderstand. Still less should a platform use the temporarily low contributions of its early days as a selling point.