The Ethereum network’s DApp ecosystem can get a little chaotic at times, like it did when a digital kitten repository congested everything and forced many transactions to stay on hold. But nothing seems to top the fact that most of the DApp transactions on the network right now are going through one of two applications that are clearly Ponzi schemes.
One does not even have to use deduction to come to this conclusion. These two DApps do almost everything they can to demonstrate that they are Ponzi schemes to the faces of anyone visiting their sites.
We’re talking about Fomo3d and PoWH 3D. Both of these schemes have surpassed IDEX—the top DApp on the market—in 7-day volume numbers significantly and they took up the majority of Ethereum’s network activity on Friday and Saturday.
Both DApps work in a similar manner, each adding their own unique flavor to their idea of an ideal pyramid scheme.
Fomo3d works by putting the user in the helm of a fictitious ICO that goes through the hype cycle that most exit schemes go through. Its website even boldly wears the URL “exitscam.me.”
The DApp’s smart contract shows us that it goes through repeated “airdrops” that are awarded to the last person who purchases the fake tokens before the 24-hour round is over. As more people buy into it, the “jackpot” grows, presenting the possibility of massive returns to anyone who wins a particular round.
It’s basically an automated pump and dump scheme on repeat.
Although the creators of Fomo3d may seem unscrupulous, a look through the site shows that they made it as clear as possible that this is a game of Russian roulette and an experiment in one package.
Now, let’s have a look at PoWH 3D.
The site started out as a joke and continued in the same spirit, but people got hooked nonetheless. The creators continue to snicker about this all through the site, providing imagery of pyramids and comical puns about Ethereum and the token sold on the platform.
PoWH 3D insists, however, that it’s not a pyramid scheme, but something similar with a twist:
“In the case of a standard pyramid scheme, the first investors benefit the most heavily from the game as newer investors funnel money to the top. In a reverse pyramid scheme, the goal is upended to try to exponentially grow by trying to reward the newer investors the most. In our case, neither is true. We simply punish everyone.”
It finishes this statement by saying that the preferred term would actually be an “hourglass model” in which both new and old investors fight each other in a tug of war and the only people who may reap rewards in such a system are actually those who hold the tokens, weathering all the price fluctuations.
According to the website, a 10-percent fee is attached to any trading activity, including buying and selling of tokens, on the platform. This fee is then distributed to anyone still holding the coin, theoretically increasing its value.
We took a look at the smart contract behind PoWH 3D and found that it indeed charges a 10% fee for purchases, trades, and sales. Any sold tokens are burnt and then liquefied to Ethereum and whatever ETH is left after the fee has been collected is returned to the person ditching their tokens, as far as we can see on the public source code.
This is not a guarantee, however, as we only get to see the main source file and weren’t able to look into the onTokenSell() event definition.
This may be an interesting contract, but PoWH 3D is still a high-risk venture for anyone who buys the tokens. Everything could go south very quickly if chaos ensues and a majority of the investors want to leave the scheme.
All in all, what’s perhaps more interesting than Fomo3d’s experiment or PoWH 3D’s smart contract and unique scheme is the fact that two Ponzi schemes managed to attract more attention than any other DApp on the Ethereum network.
This article appeared first on Cryptovest
