Over the last week, I’ve seen a lot of news on PoWH3D and Fomo3D. For someone who is just slightly slow to the game, I only got introduced to these projects through a Coindesk article a couple days ago. If you’re the sort of person that doesn’t just take the word of some news article and DYOR, as you dig deeper, you’ll initially ask yourself questions like: Is this a scam? Is it a Ponzi/Pyramid scheme? Should I play? Is this bad for the Ethereum ecosystem? Eventually though, you’ll find that the implications of these projects are more profound that it may seem.
In this article, I’ll just talk about Fomo3D (The potential of P3D is actually even more interesting, but I’ll leave that for another article). I’ll explain my take on a few misconceptions about the game, and then talk about an interesting takeaway that has come from this project.
The Game
The point of Fomo3D is relatively simple. There’s a timer ticking towards zero and all you do is pay ether to buy keys. When you buy a key, 30 seconds are added to the timer (up to a cap of 24 hours), some of the ether you paid for the key accrues to a growing jackpot and some of it goes back to existing key holders (i.e. dividends). Smaller portions are funneled to other avenues which I’ll ignore here for simplicity. The price of the next key also increases a little. If you are the last person to buy a whole key before the timer goes to zero, you win the jackpot (technically half of it which is currently at $10M).
For the rules: Click here.
Is this a Scam?
In my opinion, it isn’t. A scam is a scenario where someone promises you something for your money with the intention of taking that money and never delivering on that promise. The 80% of scam ICOs in 2017 promised to take your ether and develop some kind of decentralized product when really they threw together a white paper, a flashy website, a fake team, marketed the heck out of its ICO and ran off with the proceeds.
This doesn’t seem to be the case here. The rules of the game are all laid out clear as day. I’m not a developer, but assuming that the smart contract code is solid (other than the problem with the side-pot- which is supposedly fixed in the quick version) as in the funds are distributed as written in its wiki, and Team JUST doesn’t have the ability to steal the pot, no one is fraudulently stealing your money. If you put Ξ 1 into the game, you will either win the pot (with a pretty much 0% chance right now) or continually collect dividends if other people decide to play the game after you.
Is this a Ponzi/Pyramid scheme?
That last sentence makes this game sound like a Ponzi scheme whereby early investors are paid by later investors. It’s true that there are elements of the game that make it seem like such, but it’s not fraudulent though. It’s not as if Team JUST are promising outsized returns for your investment, nor are they promising returns from some other source other than proceeds from future investors (a.k.a. Bitconnect). In fact, if you put in Ξ 1 right now, buying yourself approximately 183 keys (at the current price of Ξ 0.00548), you’re still a very small percentage of the total keys. Currently, about Ξ 96,000 has been put into the game. Even if someone came in and doubled that amount and chose Team Snek (which favors dividend payments), you’d only receive approximately Ξ 0.3 back in dividends. If that person then won (which is unlikely), you would receive an additional Ξ 0.03 (the total keys would increase diluting your position, and F3D holders would receive 20% of the pot). This is a 67% loss.
Of course early investors saw outsized gains, but we’ll only see this opportunity again if we see a giant upswing in interest. If you look at the top holdings, even if the total amount invested doubles, the current largest key holder “Player 4290” with 1.1M keys would only finally be breaking even (after putting in Ξ 3,000). Since that player got in at an average price of Ξ 0.00263, he/she has probably already recouped half their investment by now. The more people that invest in the game, the less he/she will get as the holdings dilute.
On the other hand, like a pyramid scheme, there is a referral system whereby you get a percentage of the proceeds from people that you get to play the game. However, unlike a pyramid scheme, even if you don’t recruit people, the game is self-perpetuating and you should be able to profit….eventually. (See section below)
The point is that the numbers are all out there in the open, and you can easily calculate what needs to happen before you make money. The game simply encourages you to get in early as it gets harder to make money the later you get in (thus the name Fomo3D). From a dividends standpoint, you’re simply betting that other people will want in.
Where Do We Go from Here?
There is good reason to believe that people will want to get in. Because the price of a key grows slower than what’s added to the pot, a key will always cost less than what is in the pot (note that this isn’t the case in the quick version though which may potentially resemble more the outcomes of a war of attrition- which as of the time of writing doesn’t seem to be the case as certain individuals seem to be taking down jackpots pretty profitably). This means that there will always be an incentive for someone (who might’ve never even played the game before) to come in and try to steal the pot at the last minute. After all, who wouldn’t pay a cent to win a dollar?
Thus in theory, this game will never end. Right now, there’s $5M at stake for the winner, so naturally there will be someone in the world who will at least try to plop down $2.5 to try to win it. The problem is that because the cost of a key is so low, if you’re in it for the dividends and there isn’t enough interest in the game, it could take years to recoup your investment.
On the other hand, a pot that starts looking ridiculously large may lure a whole new crop of players that accelerates your profit schedule.
Is Fomo3D Evil?
If uneducated, at its most basic level, Fomo3D is a gambling game. You put money down to “try” to win the jackpot. Naturally after you buy a couple of keys though and realize you can’t win, you’ll give up and move on. If educated, which most players are, since it takes a level of competence to actually understand crypto, buy ether, and operate Metamask, buying a key is no more than buying a bet that the game will increase in popularity.
If you think about it, this is no different than investing in the equity of a public company. You buy stock because you believe that the company will grow and be more profitable in the future. You expect that they will expand to new markets and products, increasing revenues while at the same decreasing costs, improving profits and thus returns to shareholders. Shareholder dividends are effectively some portion of what other people pay for the goods that the company sells. This is no different than key revenues in Fomo3D.
So is Fomo3D Evil? The game does prey on human greed, but so does consumerism in modern society. The difference is that Fomo3D makes no pretenses about it.
The Silver Lining
Despite all the negative press, Fomo3D is nothing more than a gambling game. From my perspective, there is something cool that’s come from the game though and that’s their use of “teams”.
In Fomo3D, when you buy a key you also align yourself with a team. The team you choose determines how the ether you’ve contributed is distributed. For example, if you choose Team Snek, 20% of your ether will go towards growing the pot, while 56% will be returned to other key holders as dividends. On the other hand people on Team Whale will choose to put 50% of their ether into the pot, and send 30% back to key holders.
Thus far, the majority of players have chosen Team Snek. Perhaps it’s due to the fact that it’s the default team when you purchase keys, or perhaps it may just be that players are actually good-hearted and choose to reward other players with their proceeds. On the other hand, someone who chooses Team Whale prefers to make the pot bigger which may benefit attracting new players to the game as the pot grows in size.
If you think about it, this type of team choosing and funds distribution can be applied to a lot of real world applications, providing a transparent and democratic way of governance. For example, a government could allow its citizens to decide how to distribute one’s taxes by allowing them to choose different political profiles (e.g. conservative vs. liberal) or a company could allow its investors to decide how to earmark their investments (e.g. R&D vs. marketing). A charity aggregator could also allow you to seamlessly and without cost distribute your donation across various charities sorted by some kind of cause profile (e.g. animals, poverty, hunger).
In turn, the funds would be immediately sent to , received and only unlockable by the appropriate entity.
While this may not necessarily be the best way to run a government/company, it does provide a transparent and accountable way to spread funds across different entities and with varying profiles. The best comparison here would be that of a robo-advisor where the consumer can choose between an aggressive or passive profile. The difference of course is with the general benefits of blockchain, one can trust/watch the smart contract invest accordingly.
Conclusion
While ICOs introduced a new framework for fundraising, tracking and trading that ownership, Cryptokitties the power of the ERC-721 token standard, Fomo3D shows us a potential tool to running decentralized organizations. In a way this is already being done. After all, funds contributed to an ICO can be earmarked for different purposes with various lockup provisions, but this is at the least the first time I’ve seen it done in a consumer facing angle.
Personally, I find the game extremely intriguing. It’s a great examination of human psychology and when you further add in an extra layer of complexity with P3D tokens, the potential becomes a lot more interesting. At the same time, I’m not so keen on blatantly exploiting others’ vulnerabilities for my gain.
Overall, for me, I guess the jury’s still out on this one.
For questions, comments and thoughts, shoot me an email at khlee692@gmail.com. =)
