KP @SovCryptoBlog Cryptocurrency analyst and writer A Software Engineering major turned Product Manager at Twitch. Passionate cryptocurrency analyst and writer. Follow on Twitter

The success of CryptoKitties inspired many decentralized application (dApp) developers to build games on Ethereum. A few developers, unfortunately, took a different path and built CryptoKitties-like games that were actually scams. EtherTanks was one of these scams. Just as users can buy virtual cats on CryptoKitties, users can buy virtual tanks in EtherTanks. However, unlike CryptoKitties, where users can breed and trade cats, users can't do anything else with their EtherTanks tanks. The sinister property of EtherTanks is that users who owned a tank earned a portion of the income from users who bought the same type of tank after them. This made the game a clear Ponzi scheme and Pyramid scheme. To maintain plausible deniability and appease the late adopters, the developers promised that users can eventually trade and battle their tanks, which means more opportunities to recoup their losses. Whenever someone questioned the legitimacy of EtherTanks, its supporters would claim that the developers has already promised to deliver more. As expected, the developers never delivered on this promise.

A Ponzi And Pyramid Scheme A Ponzi scheme is defined as "a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading". EtherTanks is a clear Ponzi scheme. Every type of tank has a base cost and this increased whenever someone bought a tank of the same type. The cost of each new tank consists of the tank's base cost, a small payout to the developers, and a small payout to all existing owners of tanks with the same type. Every time a user buys a tank, they are essentially paying everyone else that bought in before. To make money from EtherTanks, a user needs to buy in as early as possible to maximize the number of people who buys in after them. Early buyers were incentivized to convince others to buy in. This manifested itself in many people promoting EtherTanks on social media. Those who remember the meteoric rise of the price of cryptokitties were the most tempted to join in. A Pyramid scheme is defined as "a form of investment (illegal in the US and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones". As tank owners shilled EtherTanks, the developers and early buyers made a large amount of money from legions of new buyers. Social media posts lauding EtherTanks popped up everywhere, on Reddit, Twitter, and Telegram. Here's a post on 4chan's infamous /biz/ forum encouraging readers to shill EtherTanks on the largest cryptocurrency subreddit, /r/cryptocurrency. With Reddit being one of the most popular locations for cryptocurrency investors to check for news, it was no surprise that the inorganic promotion was particularly intense on Reddit. Users were upvoting posts praising EtherTanks and downvoting comments questioning its legitimacy. Check out the frontpage of /r/ethtrader soon after the game was released: Here is one of the highest upvoted posts on Ethertanks. Notice how the poster emphasized how much money they were able to make... Users justified EtherTanks's Ponzi structure with the developers's vapid promise to add a marketplace and a battle mode. "EtherTanks wasn't just a Ponzi scheme, it's going to have more to it!" As expected, this promise was never kept, to the dismay of all the late buyers. Here's a sampling of Reddit comments shilling EtherTanks. The users were replying to a post from a /r/ethtrader mod warning readers about the scam: "Well my LT-1 is ready for battle"

"Looked sketchy as fuck yet here I am earning a bunch of ETH."

"Anyone with half a brain knows this is a Ponzi scheme lol. No need to read the code for that. That being said, LT-1 checking in."

"I just bought the LT-1 and Eskimo 15 min ago. The shit actually works. And I've already recooped 8% of the cost that I purchased the tanks for. Crazy. I look at it as a learning process, how to actually interact with the blockchain. Now I have a decent grasp of it, and I can confidently send and receive crypto, know how to lock it all up, know how to view the blocks of a chain, can view any transaction from the public...and it all really works!!"

"I am having a hard time believing this is real...yet here we are. Now I've made back ~15% of my initial investment (~$300) in the past 25 minutes."

"This received a lot of FUD today, but the community is great, devs have been responsive and supportive. HT-1 is the play."

"I think this is good way to make some extra eth since market is moving slowly recently"

"Bought the newest tank and got the investment back in like 30 minutes. Nice :)" Even The Merkle, a popular online cryptocurrency publication, published an article promoting Ethertanks.

False Promises The developers promised that users can trade and battle their tanks. The marketplace was slated to launch on January 7th while battle mode will launch a few weeks afterwards. As I've mentioned earlier, this never happened. What the developers did do instead was even more appalling. To keep the money train flowing and expliting their most gullible followers, after missing the January 7th deadline, they created a new dApp called EtherArmy. EtherArmy was the exact same thing as EtherTanks, except users can not only buy tanks, but ships and planes as well.