Ponzi schemes are rising and falling on Ethereum
One of the hardest obstacles for blockchain to overcome is trust.
The world of blockchain gaming is no exception either, as one of the oldest scams in the book resurfaces, at least according to an ongoing consensus, in the form of two games called Fomo 3D and PoWH3D.
Over the last 24 hours, both games have accumulated over 20,000 ETH ($9 million) in trading volume. To put that into perspective, when CryptoKitties reached its peak trading volume, it reached 3,784 ETH ($1.77 million).
At over 96,000 transactions and counting, members of the community have already begun branding the duo as Ponzi schemes.
Not even 3 weeks old, 90k transactions. Almost $10m in the pot. A ponzi with dividends, game elements, airdrops and a reverse ponzi. Sucking in all elements of human character; one thing for certain, this thing won't end well. @VitalikButerin #fomo3d https://t.co/n8HJxOZhCm
— JP Thor (@jpthor_) July 23, 2018
JP Thor, CEO of CanYa gives a frank analysis of Fomo 3D and PoWH3D.
How they’ve gained traction
Much like a Ponzi scheme, these games gained traction due to the need for existing ‘players’ to bring in more players that pay to participate.
This system allows those already playing to earn money from each new entrant. The risk, however, is when new members stop joining, resulting in the collapse of the entire system.
These games, particularly PoWH3D were caught out and identified earlier as pyramid schemes by Dappradar’s founder in a Medium post from March 31st.
While it started as a joke, rather than distancing themselves from these games, they’re proving increasingly popular. Far from preventing them, Ethereum is giving people a new way to indulge in an old scam according to JP Konig:
…It is human nature to seek out gambling opportunities like ponzis. Till now the only option has been shoddily-run offline ponzis. If Ethereum's relatively clean ponzis displace the bad ones, the world is (a bit) better off. I wrote about this here. https://t.co/fRizFx9CxK
— JP Koning (@jp_koning) July 22, 2018
Ponzi’s on their way to collapse
On the 22nd of July, the number of Ponzi-based games had increased to five, all of which were ranked among the top 10. Since then, only Fomo3D remains in the list but has since had its total ETH volume fall by 79% over the last 24 hours.
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