Explore the DappRadar high-risk category
High-risk dapps such as DoubleWay or Cryptohands are those which have the bearings of a pyramid or Ponzi-scheme. Notable warning signs include fabricated volumes, fast-risers beyond logic, and even the classic too good to be true story.
With Ponzi schemes, investors give money to a portfolio manager. Then, when they want their money back, they are paid out with the incoming funds contributed by later investors. With a pyramid scheme, the initial schemer recruits other investors who in turn recruit other investors and so on.
For any rising industry, credibility and legitimacy are invaluable. Therefore, it is fair to claim that such high-risk dapps have slowed the progress and adoption of decentralized applications in general. These two Ethereum dapps raked in $43M worth of ETH by July 2018.
FOMO3D had the design of an exit scam. It’s lead designer, Justo called it a social experiment in greed. Similarly, PoWH3D (“Proof of Weak Hands 3D”) is a pyramid scheme that made its way into the Ethereum protocol.
Even though these two are not necessarily traditional dapps with utility value, their success left a few lessons. The underlying greed that fueled their success, has been an Achilles heel to cryptocurrency.
So, even though legitimate dapps are transforming the world, others make it worse for those who have faith in them. However, the fact that blockchain technology has gained significant institutional adoption is a silver lining.
A high-risk dapp can run for a long time, and become tremendously successful without showing cracks. Unfortunately, some tout such success for marketing ends, drawing in even more people.
DoubleWay is a high-risk decentralized application running on the Ethereum blockchain that describes itself as “a binary add-on for the CryptoHands project, which is a standalone project for maximum decentralization.
Built on the principle of doubling (2 referrals in the first line, then 4, 8, etc.) Doubleday is different from the developer’s other output – CryptoHands. CryptoHands is built on the principle of tripling (3 referrals in the first line, then 9, 27, etc.). Fundamentally they are the same dapp with different multiples.
Everywhere on the site, it is written that there is no risk in the system. However, it is worth considering that in the time interval between your registration and the registration of your first referral, a situation is created in which you have transferred 0.08 ETH, but have not yet received anything back from your first referral.
Therefore, technically the maximum theoretical risk is 0.08 ETH. These 0.08 ETH will be returned to you immediately fully from the first referral.
Although the basis of the system is to build a structure from referrals, and referrals are the source of your profit, an interesting fact is that referrals are not required. In addition to the invitation, you can get referrals in two more ways: “Overflows” and “Free referrals”.
The data shows an interesting trend. Daily active unique wallets interacting with the dapps smart contract peaked around 2k, falling dramatically to between 2/300 in line with the 12th March financial crash.
Moving into the 2nd quarter of 2020 we observe a steady increase in the user number and an unaffected amount of volume.
The Big Picture
Taking a look at the.DappRadar high-risk dapp rankings, it paints a reassuring picture that most of the high-risk projects have a low transaction volume. A few like Ethereum dapps more so in the DeFi and Exchange sectors have significant transaction volumes and user numbers.
Crypto has a learning curve to go through to become a transcendent innovation. It is encouraging that blockchain technology has taken a life of its own. Decentralized applications can be the enduring legacy of cryptocurrency. Securing this legacy requires a concerted effort from everyone in cryptocurrency.