Many aspects of the crypto market, from token prices to consensus mechanisms, are driven by crowd behaviour and game theory. Two new DApps have taken this theme to a new level by creating incentive structures and protocols that are governed by nothing except game theory, crowd psychology, and greed. The one is a game and the other an exchange, but neither offers a service or product, beyond the opportunity to earn dividends or perhaps win a very large prize.
And, in both cases, the model is underpinned by nothing but one of the most basic human emotions – greed.
FOMO3D and PoWH3D were both created by an anonymous group called Team JUST, as a game, a parody of the cryptocurrency space, and a social experiment all rolled into one. The DApps are designed to be a microcosm of the cryptocurrency space as a whole, complete with the speculation, market psychology and game theory that goes with it. In creating these DApps, the developers are hoping to expose much of what the crypto industry has become and the dynamics that drive the prices of cryptocurrencies.
A game similar to FOMO3D has been used at Harvard University to illustrate game theory and behavioral economics. The experiment involves students bidding for a $20 note, with the catch that when the bidding stops, the second highest buyer has to pay their bid price too. In some cases, the bids have reached $2,000 to buy a $20 note.
FOMO3D is a decentralised game with a smart contract holding ether at its centre. Players buy a key, and the last one to buy a key when the timer runs down to zero wins the pot. The two current games on offer are FOMO3D: Long and FOMO3D: Quick. The game works through an open source Ethereum smart contract that is autonomously run by the program and inherently immutable.
The catch is that every time someone buys a key, 30 seconds is added to the timer in the long version of the game. In the short version of the game every key that is purchased refreshes the timer by an additional 5 minutes. Since the price of a key appreciates over time, the ultimate result is players dropping out when they can no longer afford to participate.
This game is not entirely a winner takes all event – players do earn dividends and a portion of the prize is shared between players. Whenever a player buys a key, they choose between four teams. The choice of team determines the amount that is paid out in dividends and who they go to. The team that owns the winning key also determines the amount of the pot that is shared with other players.
At the time of writing there are 21,689 ETH (≈ $10 million) in the F3D long pot, and around 24 hours on the clock. A key costs 0.0054 ETH, or about $2.40. In the F3D quick pot, a game mode that has a timer counting down from 5 minutes, with every purchase of a key restarting the clock. The quick game was recently released by Team Just with the current pot for Round 8 sitting at 35.59 Eth (≈ $16,500).
Justo, Lead Designer at Team announced the winner of the first round of F3D quick while also highlighting some impressive statistics. The first game lasted for approximately 200 minutes with the final winner receiving 1,639 Eth or around $760,000.
The website url is exitscam.me and some have dubbed it an honest Ponzi scheme. But really, it’s a social experiment in greed. Experts and analysts are divided over the real motives. Some believe the ether could simply ‘disappear’ at some point, while others think the code is legitimate and there is no way for the creators or anyone else to access the ‘pot.’ Chinese security company Knownsec said the game is not being controlled by anyone and have yet to find critical flaws.
Just to give you a brief taste of how much popularity this phenomena has gained, the sheer volume of traffic on Fomo3D and it’s connected contracts were responsible for using up to 40% of the Ethereum network on July 20th. Team Just has shattered records with their creation, with figures released by the team stating that more that almost 300,000 transactions of Ethereum were traded in 24 hours through their platform. An astonishing feat that highlights not only the mass-scale popularity of this DApp but also the robust nature of Team Just’s creation.
The other DApp (actually more of a platform), making waves is PoWH3D, or Proof of Weak Hands 3D. The platform is a decentralised exchange where anyone can trade Ethereum for the native P3D tokens. Each time someone buys or sells a P3D token, a 10 percent fee is charged in ether, and these fees are distributed to all token holders. The difference between PoWH3D and many other pyramid schemes dressed up as ICOs, is that distributions are made in ether rather than the native token. In addition, when keys are purchased in the FOMO3D game, a portion of the purchase price is distributed to P3D token holders.
At the time of writing, P3D tokens were trading at around 0.0437 ETH or $20. That’s up 250% in six days. The price has pulled back briefly a couple of times, but gone on to make a new high after each correction.
The entire exchange is run by a smart contract which operates on the ethereum blockchain, and nobody has access to the funds except the smart contract itself.
As per the site’s wiki page, the code is open source and cannot be changed by anyone. There was also no pre-mine, and developers earn no fees. The developers are keen to point out that there is nobody making money from the token and exchange except the participants. That is unless there is some sort of ‘backdoor’ into the smart contract, though nobody has identified a flaw in the code so far.
Attack of the Clones
As is to be expected with anything that gathers a following, clones of both models are already springing up. Some of these may well be legitimate, while many are possibly scams.
And of course, there are variations on the themes. Fomo.five is a impersonation on FOMO3D, except instead of key (or bombs in the case of Fomo.five) purchases adding 30 seconds to the timer, they reduce the time by one second. Whether it’s legitimate or not is unknown, but if it is, a point will come where one player with enough ETH will be able to buy the entire pot. The counter was last at 4,434 hours, and because it can’t increase, the round is certain to end within that time frame.
Where Is All This Going?
These DApps now have a life of their own, and it’s impossible to predict how the games will conclude. FOMO3D could carry on for quite some time, amassing huge sums of Ether in the process. Of course, it can only keep going as long as the Ethereum network continues to run and the prize pool will fluctuate with the price of ether.
The larger the pot, the more incentive there is for less scrupulous players attempting to access the pot by other means. Some speculate that Ethereum miners could collude to manipulate the game. Of course, if that happened, they would destroy the credibility of the network in the process – and that would affect the value of the pot too.
On the other hand, developers on the network may want to get rid of the game and others like. The only way they may be able to do that is via a hard fork, though Ethereum’s developers would be reluctant to go down that avenue. At the very least these DApps are stress testing the network and the opinions of the developers.
For academics studying game theory, this may be the biggest live experiment they will ever get to witness. For players who know nothing about game theory, this may be their first lesson.
By the 21st July, the two DApps had already broken records for the number of transactions on the Ethereum network, and volume has accelerated since then. Since the growth is exponential, it may not take long for the smart contracts to contain hundreds of millions or even billions of dollars worth of Ether. This hasn’t made it into the mainstream media yet, but as growth continues it inevitably will.
These DApps may be exposing much of what the crypto world has become and how powerful a force FOMO can be in driving crowd behaviour, but they may also be the next step in the evolution of cryptocurrency. As they grow and attract the attention of the mainstream, they may even end up driving education and adoption amongst a wider audience.
To join in on the FOMO3D/POWH3D convo check out the thread on the community forum;