It seems people can’t get enough of transparent pyramid schemes on top of the Ethereum blockchain. Just like any other unique idea involving blockchain and cryptocurrency, it doesn’t take long for multiple clones to come into existence. Given all of the shenanigans we have seen with PoWHCoin and ShadowFork, it is only normal that people are more hesitant when it comes to these opportunities. That won’t stop EthPyramid from becoming a success, though.
ETHPYRAMID IS ANOTHER DISASTER WAITING TO HAPPEN
There is something seriously wrong with a lot of people if they think transparent pyramid schemes are a great use case for smart contract technology. While it is true we need to find as many use cases for smart contracts as possible, running a pyramid scheme is not something that will get many positive headlines. The big difference is that projects such as EthPyramid are completely transparent and warn investors well in advance that they can – and probably will – lose money at some point.
In the case of PoWHCoin and ShadowFork, one coding error spelled disaster. Even though the code was public for everyone to see, it only became apparent there was a major flaw after people had thrown nearly US$1 million worth of Ether into the pyramid scheme. Due to an infinite negative gas price loop, no one was able to withdraw money from this smart contract. The money stored in the contract is probably lost forever and highlights the immaturity of smart contract technology in its current state.
This makes it all the more surprising to see yet another Ethereum-based pyramid scheme gain traction rather quickly. EthPyramid has a very similar formula, even though the creator claims its smart contract code was built from scratch. Whether that means there are no flaws or malicious functions to be found is a different matter altogether. Most people who participate in these investment opportunities can’t read the inner workings of a smart contract due to a lack of knowledge. They will find things out the hard way, unfortunately.
As one would expect, EthPyramid is completely transparent about the service it provides. Tokens are issued to investors, yet these tokens have no value outside of engaging in the EthPyramid game. They are also not a real investment and should never be considered as such. EthPyramid also offers reinvestable dividends and a 10% redistribution for every token sold by holders. It is a nice evolution of smart contract-based pyramid schemes, although not the best use case for this technology.
So far, it seems this pyramid scheme has already collected US$439,000 worth of investment. While this is a positive sign for the people who got in early, it also shows just how willingly people trust something which clearly advertises itself as a pyramid scheme. The lack of common sense in the cryptocurrency world is rather disturbing. We can only hope no one gets burned badly by EthPyramid in the coming days and weeks.
All of this portends a worrisome future for the likes of Ethereum and smart contract technology in general. If people continue to exploit this technology for pyramid schemes and other Ponzis, the technology will eventually lose its appeal in the real world. Being associated with a “transparent pyramid scheme” may not be all that negative, but people will only remember the “pyramid scheme” part and not the “transparency” angle.