Altcoins

Ethereum Blockchain is Becoming a Ponzi Hub

Two of the top three trending apps on Ethereum, resemble pyramid based ponzi schemes. Namely, FOMO 3D and PoWH3D.

The DappRadar shows that both of these games have amassed 20,000 Ethereum ($9 million USD) in trading volume over the last 24 hours. This beats the highest highs of CryptoKitties, the blockchain’s most famous viral decentralized application to date. Both games are now on top decentralized exchanges in terms of the traded volume. And the success is mostly overnight.

DappRadar founder, Skirmantas Januskas, pointed out PoWH 3D on March 31 with a Medium post.

Let’s be honest, this is a pyramid scheme. Every user is getting paid for the users that join later,

The games feature penny auctions where the final highest winning bidder may get a cut of the amount paid, the other participants are also charged fees for entry. Like any lottery, the winner is given a small chunk of the sum raised collectively, the creators walk away with a lot though.

In a real world lottery, the auctioneers incur the costs of acquiring an asset and auctioning it. In the virtual lottery, the chance of people making money are virtually nothing except indictments. The returns on their investment is huge and certainly secure upon success.

‘FOMO 3D is a decentralized, trustless blockchain game running directly on the Ethereum network.’ It is a crypto gambling game to say the least. Atop of the top gambling games on the DappRadar currently.

Bitcoin forum explains FOMO 3D:

Players select from one of four teams which determine certain rules during the round. P3D holders receive dividends on each key purchase and at the end of the round. Players can purchase a vanity URL and/or refer your friends to the game for extra rewards.
Buying keys offers you a % chance to receive an “airdrop” winning ETH from a growing side-pot!

According to the same forum;

The game consists of a smart contract (an autonomous program on the ethereum network) carefully programmed and deployed so that the developers have no influence or impact upon the game, the ethereum in the contract, or advantages thereof. The application itself is completely trust-less, will run until the ethereum network dies and no matter how tantalizingly large the pot gets, will only be paid out according to the game rules.

Whereas, PoWH3D is a 3-D blockchain based 3D smart economy game, that simulates the real world ecosystem. The game claims to be multi dimension, much like the play itself. The homepage claims that PoWH3D is working on how people mostly lose is a problem they are trying to work on. While the term ‘working’ can virtually mean anything, might even mean that it is their unique selling proposition, it helps the makers earn player support instantaneously upon first sight. It promises to give people a cut out of the service units sold.

However, the sustainability of the returns is rather doubtful. Like any pyramid based ponzi scheme, both applications also collapse if new users quit joining in a way that’s similar to a basic pyramid scheme. The crashes, when less or more people than the pyramid backend allows enter the website, have come to attention of several analysts on social media. Crypto enthusiasts are warning buyers not to support what they believe are pyramid schemes.

JP Thor, CEO of CanYa, Tweeted:

The website for PoWH3D says ‘humans can’t shut it down’ in block letters. Both projects appear to be by the same group, which calls itself “TeamJUST.” The creators are maintaining their anonymity.

(PoWH3D) is running on a decentralized blockchain network created by a Russian madman worth billions, enforced by subsidized Chinese GPU farms that are consuming an amount of electricity larger than most third-world countries, sustaining an exchange that runs without any human involvement for as long as the ethereum network exists.

Ponzi schemes have made comebacks from 1920’s in different shapes and forms. Usually it is too late before government takes notice.

The website also says: ‘Your tokens are safe, or somebody would be yelling at us by now.’ Although why people can not yell at them for loses is because the firm is a virtual bot and not an unlimited liability person.

Both apps use a shared incentive that shares the currency raised among users and the creators. This makes the apps hotter than the rest. The website and app graphics are also very aesthetically inviting, designed to subliminally encourage the viewer to enter and invest time and effort that is ultimately likely to benefit the creators. PoWH3D says: ‘This is the active-gains component of our contract, we let you build your own network that rewards you!’ Things like these helped these two climb up the hot lists.

At the core, they seem to be taking the ideas of pay-per-bid auction models that were popular in 2009–2011, except instead of selling ‘real’ products for the bid price, they sell nothing tangible or of real value, Sid Kalla of token project consulting firm, Turing Advisory Group

Financial blogger, JP Konig Tweeted:

What these will bring depends on time. However, by the looks of it the sky is cloudy and ready to shed several Ethereum dreams.

Khunsha Javed

A Filmmaker, PR enthusiast & Editor of BlockPublisher-Unfiltered. I like things that make my brain tingle. Email: khunsha@blockpublisher.com or editor.unfiltered@blockpublisher.com

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