In the world of cryptocurrencies, there are plenty of scams, pyramid schemes, and Ponzis to be aware of. Unsurprisingly, there are also honest pyramid schemes which make no bones about what they are doing exactly. The PoWHCoin project, for example, positions itself as the world’s first autonomous and self-sustaining pyramid scheme. It’s an interesting idea and one that is seemingly receiving a lot of funding as well.
Using Ethereum for Another Pyramid Scheme
The concept of Ethereum smart contracts is a very interesting one. This technology allows for automating various aspects of finance and running companies. It is unsurprising that someone wants to put this technology to the test and create some form of an investment program. A self-sustaining pyramid scheme is not necessarily something people had expected, but it seems there is at least one project out there pursuing this option right now.
PoWHCoin is by far one of the most intriguing concepts in this regard. Its entire algorithm is based upon something called Proof of Weak Hands, hence the name PoWHCoin. Rather than use proof of stake, the project will distribute money from new token purchases to existing investors. As a result, being one of the first investors in this pyramid scheme will net you a fair amount of tokens as dividends. It seems like a disaster waiting to happen, but people clearly know what they are getting themselves into with this opportunity.
Additionally, the team behind this self-sustaining pyramid scheme makes no bones about how they feel about Ethereum smart contracts. On their website, they note that people are trusting an “uncaring, mathematical gambling robot fueled by the magic of Chinese Ethereum miners”. Although this is anything but a kind comment, it is also 100% true. Smart contracts are a gamble if you don’t understand the code or don’t know that the contract has been audited by a security firm.
Additionally, the expectations for PoWHCoin are pretty low. It will be a coin that “pumps and dumps itself” on a regular basis. For every token purchased, the smart contract will automatically increase the price of future tokens by a small percentage. Moreover, for every token sold, future tokens will decrease in value, which is also pretty interesting. It’s an intriguing take on the concept of a pyramid scheme, but one that will be publicly visible at all times.
In a way, this particular project will reward holders of PoWHCoin more than any other currency does. More specifically, the team is confident they can protect users from pump and dumps as well as market manipulation. As more people buy and sell this token from the smart contract, they are effectively generating more revenue for those who simply hold their coins. Whether or not this will be enough to get people excited about buying into this obvious pyramid scheme remains to be seen.
Speaking of which, it seems the PoWHCoin smart contract had received 2,075 transactions totaling US$821.767 at the time of writing. This clearly shows there is growing interest in this new pyramid scheme, even though a lot of people will eventually lose some of their money. It is always possible to sell tokens back to the smart contract at 90% of the current price, which should make this a somewhat sustainable business model. Considering how so many people are willing to throw money at this project, things are looking both great and worrisome at the same time.