They’re not even trying to hide it anymore.
One of the most popular apps built on the Ethereum blockchain, a so-called DApp, is promising users a guaranteed fixed daily return on their investments. And all the would be crypto-rich have to do is put in a bunch of cryptocurrency up front, then sit back and wait for the rewards to come pouring in. Assuming new people keep following suit, that is.
And man, it sure does look a lot like a blatant Ponzi scheme.
For those not in the know, a DApp is a decentralized application built on a blockchain like Ethereum or EOS. You may be familiar with legitimate DApps such as Augur or CryptoKitties, but this is not a story about what honest programmers can create using the power of the blockchain. Rather, this is a look at the magical thinking of 333 ETH — a DApp that promises “life-long payments guaranteed by the Ethereum blockchain!”
“Given the ponzi nature and payout implementation issues in the contract, this can only go wrong.”
And you’d better believe people like the sound of that.
According to DApp-ranking site State of the DApps, 333 ETH sits somewhere around the fourth most popular decentralized app by daily active users. It’s just behind the third most popular, CryptoKitties.
“Warning: We have received user reports that this DApp is not working as expected,” reads the highlighted note from State of the DApps. “Given the ponzi nature and payout implementation issues in the contract, this can only go wrong. Be careful!”
Here’s how 333 ETH supposedly works. You buy in, and then immediately 17 percent of your ether is deducted for things like “Fund payment Daily investor’s payments transfer fees” (1 percent), “Payroll” (2 percent), “technical support” (3 percent), and “Marketing” (11 percent).
IMAGE: SCREENSHOT/333 ETH
With me so far? Then, supposedly every 24 hours, you receive a 3.33 percent payout on the 83 percent of your initial buy in. Everyone participating gets this payout, every 24 hours. The more you put in initially, the sales pitch goes, the larger your daily return is.
Sounds totally legit!
Of course, for this to work, more and more people need to buy in — because shortly after people stop transferring ether to the wallet in question, the funds will dry up. But you have nothing to worry about, as people will surely keep throwing money at this scheme. After all, 11 percent of your ether did go to marketing.
According to 333 ETH, as of Friday afternoon, 1,528 people had somehow managed to convince themselves that participating in this madhouse was a good idea. Which, we should emphasize, it is not.
Not a good look
That one of the most popular DApps appears on its face to be an outright Ponzi scheme doesn’t bode well for the future of decentralized apps. And yet, the outlook may be even worse than this inconvenient detail first suggests.
Remember when we said that 333 ETH was just behind CryptoKitties in its daily active user count? Yeah, well, according to State of the DApps, 333 ETH only has 495 DAUs. CryptoKitties has just 521.
A burgeoning decentralized economy this is not.
But hey, maybe you can change that! Just convince everyone you know to buy into the totally-not-a-scam that is 333 ETH, and our collective DApp blockchain future will grow along with your riches. Nothing can possibly go wrong.