The Ponzi game FOMO 3D has quickly become the most viral dapp on Ethereum network since Cryptokitties. However, rather than being cute and fluffy, the intended impact of FOMO 3D may have been more insidious. Two weeks ago, the developers behind both FOMO 3D and POWH 3D sent the tweet below at Ethereum's creator Vitalik Buterin:
While it is unclear whether FOMO 3D is the "nuclear bomb" exploit hinted in the tweet, the dapp is certainly a blackhole for retail capital. Shortly after the launch on July 8th, the two dapps have absorbed a total of 83K ETH, or $39 million as of the time of writing. How do such blatant scams attract so much capital and attention?
The mechanism behind these games clearly resembles that of musical chairs: lots of greedy people, lots of capital, one chair and what appears to be a never-ending song. This is definitely a significant phenomenon for Ethereum. Is the aim of these clever programs to show the world how ridiculous the ICO scene really is? Or did its creators call it a "nuclear bomb" because they believe it could cripple the Ethereum eco-system? Interestingly, the founder of Tron, Justin Sun, a self-proclaimed competitor of Ethereum, is an angel investor in these projects.
Translation: "I own 6.6% of FOMO 3D through angel investment. I should've bought more."
(Photo courtsey of Zhihu.com user)
The most curious question is how will these pyramid games end? Given the intricate incentive design of the system, it could be some time. However, Ponzi schemes are not perpetual machines. Without the creation of real value, any pyramid schemes will inevitably collapse sooner or later. As Shakespeare said:
"These violent delights have violent ends."
This week's news recap
Monday: An Ethereum-based Ponzi scheme called Fomo3d is going viral
Tuesday: Twitter and the cryptocurrency information wars
Wednesday: Lightning is expanding fast, but it is not ready for merchants yet
Friday: Bitmain’s self-mining conflicts with their IPO narrative
Further readings this week
Smart Contract attacks part 2:Ponzi games gone wrong
(Hackernoon, by )
"As you’ve probably already figured out by now, all an attacker would have to do is create a contract calling function DynamicPyramid(), thus granting them ownership. From there, the attacker could call function collectAllFees() and cash out. Although the attack is pretty straight forward, Rubixi is another prime example of the importance behind thorough review of one’s contract(s)."
Commentary on the timing of DAO
Rejections aside, calls for Bitcoin ETF are only escalating
(CoinDesk, by Muyao Shen)
"Just as the crypto community was – not so secretly – displaying its joy over Facebook's historic stock loss, bitcoin's price took a surprising drop below $8,000. A reaction to the news that bitcoin exchange-traded fund (ETF), one proposed by brothers and co-investors Tyler and Cameron Winklevoss, had been rejected for the second time, it was viewed as another blow to the market."
Crypto exchange unwittingly helps ransom racketeers
(Hackernoon, by Howard Marks)
"This is exactly what happened on ShapeShift. Almost one year ago, in August 2017, there were reports of the WannaCry Bitcoin funds moving through the crypto exchange ShapeShift. WannaCry was a ransomware virus that infected over 200,000 computers last year, locked up the systems, and demanded $300 in Bitcoin to unlock it. The hackers behind WannaCry then took just over $140,000 of ransomed Bitcoin and exchanged it on ShapeShift for Monero."