333 ETH, a widely-used decentralized application (DApp) developed on the Ethereum blockchain, has been flagged as a typical Ponzi scheme type scam. StateOfTheDApps has warned the so-called “ETH distribution project” is promising its investors a return of “3.33% per day” as long as other people keep investing in the project.
The warning noted that:
Given the ponzi nature and payout implementation issues in the contract, this can only go wrong. Be careful!
“Guaranteed Life-Long Payments”
As other similar scams have promised, the developers of the questionable “333 ETH” DApp claim investors can be ensured of the “security of [their] contributions and life-long payments guaranteed by the Ethereum blockchain.”
More red flags include the DApp being designed using a smart contract-based algorithm with the Ownership Waiver function. What this means is that the contract’s code will not only be executed autonomously, but also that nobody including its authors can access or modify it.
Before being identified as a potential scam, the 333 ETH app had been ranked among the top Ethereum-based DApps, as it has over 1,500 daily users – right behind CryptoKitties. ETH 333’s website explains that users who invest Ethereum’s native token, Ether (ETH), will have to pay an 11% fee for the DApp provider’s marketing services.
ETH 333’s “Business Model”
This amount will automatically be deducted from their starting Ether deposit, according to the questionable website. Additionally, 3% of users’ invested funds will go toward “technical support”, 2% for “payroll”, and 1% for “Fund payment Daily investor’s payments transfer fees.”
Then, the 333 ETH website says all investors will receive guaranteed payments of 3.33% every 24 hours on 83% of their investment (after subtracting the 17% total in fees mentioned). Also, similar to how other fraudulent Ponzi schemes are promoted, the website states daily profits will be significantly greater if the user invests larger amounts.
333 ETH’s developers claim that currently 1,602 people have made contributions to their “profitable” fund. A total of 2,354.62 ETH has so far been deposited, an amount valued at over $510,000, according to the blockchain-powered smart contract’s creators.
“DApps Are Ponzi Schemes”
Notably, these types of fraudulent schemes have been increasingly associated with cryptocurrencies. As covered, renowned economist Dr. Nouriel Roubini has heavily criticized digital assets while also claiming that “DApps are ponzi schemes.”
The newly launched EOS blockchain, which also allows users to develop DApps on its platform, has already seen a number of new apps attract negative attentions. As reported on CryptoGlobe, the developers of the EOS-based Trybe app erroneously distributed extra digital tokens to over 100 user accounts. Instead of going through the proper payment recovery methods, Trybe’s developers accessed users’ wallets themselves to retrieve the accidentally airdropped tokens.