A couple days ago, the latest crypto - collectible on the Ethereum blockchain hit the internet.
Enter Ethermon
The way it works is simple. You buy an Ethermon and that Ethermon pays you a dividend for each new buyer who buys the same Ethermon. On top of this is a suite of functionality that builds on top of what Cryptokitties started. While not yet live, Ethermon features battling, evolving, and a unique dividend structure which helps buyers aka "trainer" earn some ETH on their collectibles.
Now on to the dirty.
In general, the prices of the Ethermons vary from 0.1 ETH for a "Geenee" to 1 ETH for a "Quillster". However, these were the prices when the game opened yesterday. Currently, the cheapest Ethermons sell for 0.436 ETH all the way to 3.16 ETH for the most expensive ones.
The reason being is that for each Ethermon sold past the 100th Ethermon, the price for the Ethermon increases by a fraction of a 100th that Ethermon's original price.
For example.
If the original ethermon price is 0.1 ETH and promises a dividend of 0.001 (at this point exactly 100 people have bought in). The 101st person pays 0.101 ETH because of the way the price scales.... that person's 0.101 ETH is divided 101 ways to fulfill the 0.001 dividend promised to all previous buyers.
Because of this structure, the prices of Ethermons have grown proportionally to the number of people purchasing them and the earliest people who bought in have made the most money.
Consider this. A buyer of an Ethermon costing 0.3 ETH with a dividend of 0.003 ETH needs exactly 100 new buyers for him to break even. Which leads me to this.
Is this is a scam?
Not necessarily. It appears the way the pricing structure works out, not much money goes to the devs. Most funds from new purchases are divided and split equally to fulfill dividends to the previous buyers. Moreover, the elements of battling and evolving are great features which highlight some fun "utility" aspects for the game and which helps distance it from being a quick cash grab. Still, to play devil's advocate here, battling and evolving have yet to be implemented, so I remain cautious, but hopeful that the developers will live up to what's in the pipeline. Next!
Is this a pyramid/ponzi scheme?
Absolutely.
While there's totally a ponzi/pyramid element to the game, the fact that most new funds from buyers go not to the developers, but to the Ethermon holders is an interesting point of consideration. Now you might be saying... "Well hey! What if the developers own the first Ethermons, don't they stand to benefit the most from all new players?"
You would be correct with this concern, but from being part of an early discord group, I'm fairly confident that the first Ethermons are held by the public. However, I can't dismiss the fact that the current pyramid structure and price scaling essentially makes the game unsustainable for long term user retention.
While I do enjoy what the game is trying to achieve, to sustain user engagement, what needs to be happening is two fold.
The Ethermon's need to be released more frequently and need to be cheaper! The cheapest on right now (Geenee) sells for 0.48 ETH or around ~ $400 USD!! Doing so will help reduce the "height" of each pyramid in the game and enable new users to obtain Ethermon's without being abused by the 10's or 100's of buyer who came before.
The features that make the game unique (battling and evolving) need to be released ASAP. We saw that crypto kitties came and went within a span of 5 days. I see the same happening for Ethermon if something is not done soon.
Well! I hope I covered most of it. I try to be as transparent as possible and write to highlight my initial impressions of this new game. As always, this is not investment advice. Please do your research before putting any money into games like Cryptokitties or Ethermon!
Disclaimer: I own several Ethermons