The time of scammy crypto adoption is back: From ICO’s to Ponzis & MLM blockchain based

The crypto-sphere has been shaken these weeks by several projects making a big entrance! It's funny how these projects look like the ICO's scams of 2017. I wasn't into blockchain at the time, so this is history from the blogs to me. Still, I guess history repeats itself with this new type of project that got my attention, Multi-Level Marketing using blockchain. Projects such as Million.Money or Forsage.io are gaining attention recently since their transaction numbers are growing insanely. I will try to explain to you how they work and why I think there are harmful projects.

Million.Money and co: Multi-Level Marketing on steroids?

This project is the funniest, I think. First of all, because the team behind seems to have spent time on the gamification of it. So I'm going to use it as the case-study. Million.Money is presented as a Multi-Level Marketing product. The only difference from the old Herbalife MLM? It's all run by a smart contract.

Let's dive into the hard. Million.Money propose is to buy levels to make your affiliate structure grow. Your profit depends on the number of people in your team, the levels they've purchased, and the one you've bought. The entrance cost is relatively low (0,03 ETH). Your first two recruits will pay you the sums of levels 1 and 6 (0,03 ETH and 2,5 ETH respectively), their rookies will purchase from you level 2 and 7 (0,05 ETH and 4 ETH respectively) and so on. You'll have to control your level and the growth of your structure to get all your earnings. If one of your crew members buy the level he is supposed to pay you before you do, you lose the gains. Every 100 days, the levels acquired perish and you have to purchase them back. Here is the remuneration tab.

Now we can easily see the pyramid that looks like a Ponzi scheme. First of all, It all depends on the adoption curve. At a certain point, this curve will flatten and no newcomers will buy the levels of fresh arrivals. People will stop feeding the system and, the money will stop its flow. Because its a pyramid design, the early-adopters will get the lion's share of the cake and the rest will get the crumbs. The real problem here is that it will cause more damage to the reputation of crypto than anything. I'm not saying that you can't earn money with these projects. But in the long run, those are not the ones that will lead to sustainable ecosystems.

"Absolutely no risk" or how to drown the fish!

One thing about these MLM blockchain-based dApps is that they are doing everything to create a safe space for the users but also to hook them into the system.

When you go through the Million.Money website, you are permanently told that everything is safe and secure. This is the first sentence you can read in the site: " The fastest, easiest and risk-free way to earn 1500 ETH in 100 days". Then it goes on: impossible to lose money, absolutely no risk, SCAM IMPOSSIBLE, etc. The truth is they are right. I'm not an expert on smart-contracts, but if the Million.Money one is well written, there is no risk on that side. They are moving people's attention to what cannot be dangerous and is verifiable and create the illusion of a safe space.

The second distraction point is the little flag notice at the bottom-right of the page. It indicates whenever a new user joins Million.Money, someone buys a level, gets paid, or misses a level. With the current growth you have a notification approximatively every two or three seconds. This comforts you in the fact that you're not dealing with a scam and that money is transferred because you can actually check the transactions. It distracts you from reality.

Finally, it looks pretty good. The website is neat, the control panel offers you the possibility to manage your partners, contact your team, and even gives you promotional contents.

Despite the great aspect, there is no information about the team behind. The project seems to have started in 2018 when the domain name was registered. But other than that, no information is available, which is pretty weird. Concerning the business model of the creators, I think they have created the first account and distributed the first referral links. But I do not have any proof this is just speculation.

A new round of adoption or delusion?

Back in 2017 the ICO mania generated huge earnings for scammers. People were promised to get rich and ended ripped off. However, this period brought newcomers to the blockchain industry. In a recent video from a16z, the speaker explains that people were interested in crypto because of the surge in price and then started to dive into the tech. If these dApps start to take-off, it could lead to two main takeaways: new entrant in the crypto ecosystem and rise of ETH's price. Those two consequences are related, the more entrants, the more ETH you need to develop your structure, etc. In the short run, this might be great since the world of crypto will experiment a new growth.

In the long run, because the model is not sustainable, it might become a bubble and the cryptoverse might suffer, once again, from scams. Should we really go back to the "ridiculous" phase of the innovation? I believe there are two ways to avoid that. The first one is education. We need to warn people and teach them about blockchain. One might tell me that if people don't want to educate themselves we can't force them, and I agree with that. Yet, making information easily available to newcomers is essential to sustainable adoption. The second one is to promote and push the development of consistent projects to crowds. This is a way to educate them but also to see the real potential of blockchain past the scammy part.

All in all, I guess we can't prevent scams. That's part of the game and we have to accept it. But downplay the impact they might have is part of our role. At the end of the day, behind the technology and economy, I think blockchain is a social phenomenon. A group of persons thinking they are doing things better than they currently are and want to promote them. But spreading scams won't help.