We All Thought That It’s a Scam, but Fomo3D Paid Out $3 Million

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While the whole cryptocurrency gambling thing still seems suspicious even for seasoned gamblers, cryptocurrency pyramid schemes look even worse. The FoMo3D game, based on Ethereum (the second-biggest cryptocurrency in the world), looks like an ice-cream van with a rather too jolly and richly mustached vendor. The reason for this feeling is that we’ve probably evolved to have a natural distrust for such schemes. Buy a token and get a portion from each token bought afterward – that’s what the pyramid scheme (aka Ponzi scheme) is. Ponzi stands for Charles Ponzi, a swindler, who used this scheme in the US at the beginning of the 20th century.

FoMo3D also promises high returns for earlier investors, but there is a difference: the game is based on blockchain technology, which makes it 100% fair. Another evidence of its fairness is that it recently paid out $2.8 million in ETH digital currency. Not as convincing as a smart contract thing; but still pretty nice, right? Let’s get to the bottom of this and find out how it works.

What Is Fomo3D and How It Works?

In the beginning was Ethereum, and then came TeamJUST with their Ponzi scheme idea. They’ve taken an old scam idea and evolved it into a brand new kind of lottery, based on smart contracts. To move further, we have to explain what a smart contract is.

What Is Smart Contract?

A smart contract (or blockchain contract, or self-executing contract) is a blockchain-based system which allows everyone to conclude a deal that without requiring any third party to ensure its fairness, nor to ensure both sides abide by the terms of the contract. Such a contract is actually carved into the very structure of the Ethereum network, thus making it permanent, and nobody can change even a single character of it. When the requirements of the contract are finally met, it releases the funds to determined participants. The FoMo3D game, as well as its predecessor PoWH3D, are based on smart contracts, and nobody has reported any issues with those games so far.

What Is PoWH3D?

Initially, PoWH (proof of weak hands) started out as a Ponzi scheme, or at least that’s what its creators have told us. In fact, it was quite an elegant social experiment, allowing us all to see how much influence greed has on us in both regular life and business. The scheme goes like this:

• A smart contract sells PoWH tokens on Ethereum blockchain and makes each bought token increase the cost of tokens by 0.25%. At the same time, each coin sold decreases it by the same percentage. As you can see, this means that while people keep buying those tokens, their price goes higher, while if they decide to sell out – the price will go down.
• 10% of each token’s cost goes to the current token holders, which means that the token you buy loses 10% of its value immediately after you’ve bought it. To break even, you have to wait either until the token price goes up by 10%, or until you get the required sum in dividends from the other participants.

The whole point of PoWH was to prove that the scheme is capable of going forever, given that everyone trusts in its fairness. Those who are in possession of weak, sweaty handies will sell tokens eventually, and the ones with strong hairy arms will buy them and hold them forever. The token price rises, people buy more, then some major players see that they’ve reached their estimate profit level and decide to sell out. This causes a cascade effect, people start selling more tokens to cash out what they have until it’s worth something, and it goes like this up to the point when some investors decide that the current price is quite attractive and start buying tokens. Most probably, they will be exactly the ones who have initially launched the downfall.

The difference between this scheme and the real market is that in reality, prices go up and down depending on the demand and supply ratio, while in PoWH they’re predetermined to change. When PoWH failed due to an error in its code, TeamJUST came up with another project, called PoWH3D, where the mistakes of its predecessor were taken into account, and the ponziness of the scheme was forfeited. Here are the most important improvements:

• With PoWH3D you don’t have an early-investor advantage, which means that it doesn’t matter when you enter.
• If you buy ten tokens or more, you can become a masternode and get 3% from each transaction made by the ones you’ve invited.
• Dividends are now distributed to every token holder, and their percentage is proportional to the number of coins you hold.

And now we’re slowly rolling towards the last Ethereum adventure of this sort: FoMo3D.

What Is FoMo3D?

FoMo3D (fear of missing out) game is based on PoWH3D and operates on its tokens, which means that all tokens bought in FoMo3D pay a percentage to PoWH3D token holders. As for the other parts – it’s even more interesting.

There is a prize pool, and each coin bought adds a fraction of its cost to it. What’s left is being distributed among the token holders. There is a 24-hour countdown, and each key bought adds a certain time to it. When the clock runs out, the one who has purchased the last full key gets half of the prize. The other half is being distributed among the other holders and the owners of the game. While you hold the tokens, you receive a passive income from all transactions made, and when the round is finished, you also get your piece of the pie.

At first, the game was immensely popular, and the countdown was running wild; but when the price of the key increased, more and more players decided just to hold their keys and wait, buying some more from time to time. Many players chose to play the game on a merchant basis, and created bots to automatically buy keys when the countdown reaches zero. And that’s how and why the first round ended.

How Did He Win?

Though the bot-based strategies are quite attractive for those who want to get the big prize in FoMo3D, they have certain drawbacks. One of those was exploited to trick the system and get the $2.8 million (10,469 ETH) payout. It was really smart and extremely risky, but the guy did it, and we’re happy for him.

If you own a bot that buys keys on a daily basis, you want them to be cheap; and one of the ways to achieve it is to minimize the blockchain transaction cost (AKA gas). The trick is that the more gas you’re willing to pay, the faster your transaction gets processed. The winner understood that, made some calculations, and decided to perform a scheme that can be considered a sort of a DDoS attack on major ETH nodes. He performed several transactions through the most popular nodes that his bot-opponents were using and put the gas to the max, thus reaching the maximum gas allowed for each block. These transactions ensured that the bots, paying relatively low fees, will be ignored in favor of the high-paying transactions.

It required a lot of time and effort, not to speak of a large sum of money (40-50 ETH or $11,000-14,000 approximately) to test this strategy and bring it to life. Another difficulty was to pick a time when there were no live players active because their gas couldn’t be estimated as easily. With some bad luck, the current winner could’ve jammed the system for someone else, but he got lucky enough to take three million to his vault! Even the game developers admitted that the winner (or winners) have absolutely outskilled everyone else playing.

Final Thoughts

The second round had started immediately after the first one ended, and the current prize pool is 1,400 ETH at the time of writing. Regardless of the second round’s outcome, Fomo3d had already shaken the whole cryptocurrency community and became immensely popular among all crypto-investors. You may say that the winner tricked the system; but in fact, what he did was a reminder for those who prefer automatic solutions: don’t rely on bots! If you’re thinking about investing in FoMo3D – it’s still a very questionable investment, but we’re sure that it’s fair, and its creators play by the rules.