Just kidding POWH worked well for me, tempd to exit one wallet there and throw a few dollars here instead since this is early, for anyone unfamiliar with how this works, this medium post about the original ponzi smart contract said it good other than the 10% of portfolio thing, that reckless. https://medium.com/@Cryptokeeper/the-smart-contract-ponzi-scheme-that-isnt-really-a-ponzi-scheme-e1f26d0eedc6

The Smart Contract Ponzi Scheme that isn’t really a Ponzi Scheme

Over the past week or so, while browsing my usual crypto-haunts, I saw several references to something called POWH coin (Proof-of-weak-hands). Those talking about it called it a “new Ponzi coin except it’s a smart contract and it can run forever.”

Naturally, anything that smells of a scam or a ripoff turns me off. While I like the fast returns that cryptocurrency projects offer, I never want anything to do with anything scammy or anything along the lines of a “get rich quick” scheme. I want to make money on projects with real products or services to offer. So I ignored POWH.

After hearing more and more about it, I decided to look into it myself, and I have to say, I’m intrigued by it. And I’ve concluded that it isn’t really a Ponzi scheme, nor a pyramid scheme in the classic sense (despite how those who coded it have described it.) I would describe it as more of a complicated beautiful social experiment that is driven by greed, and testicular fortitude (or “Iron Hands” as aficionados call themselves)

Allow me to explain it, and then explain why I don’t think it is a Ponzi scheme.

POWH is a smart contract offering to sell POWH coins on the Ethereum blockchain. You need Metamask installed on your browser and connected to your Eth wallet. POWH’s website is here. The gist of how it works is that each coin bought costs 0.25% more than the previous coin. Each coin that is sold costs 0.25% less. Thus, if there is net buying, the price of the coins goes up. If there is net selling, the price of the coins goes down.

The more interesting details are as follows: When you first buy coins, they are instantly discounted by 10% (in Eth value, not in quantity). That 10% premium is paid out as a dividend to all existing coin holders, proportional to their coin holdings. Therefore, to break even you need the price of the coins to go up by 10% OR hold long enough that you accumulate enough dividends to make up the difference. To make money, you need the price to go up even more, or you need to hodl long enough to accumulate dividends in excess of your initial stake.

The system is built on the assumption that people will fomo in (each new fomo-er providing dividends to existing hodlers), and thus the price will go up. Eventually, however, enough hodlers will get greedy and decide to sell. Generally this will cause a cascading effect, and the “weak hands” will follow suit and panic sell, and the price will collapse. The team has provided this super-sophisticated graph to show what they anticipate (and what has been the reality):

Yes, this whole thing comes with this kind of humorous, tongue in cheek approach. But it’s “real!”

At a certain level of collapse, either prior hodlers, new “investors,” or some mixture of the two will find that the new collapsed price is an attractive level at which to enter. They will start buying, and the price will rise, dividends will be paid, and then it will collapse again. Repeat ad infinitum, so long as people are willing to play the game.

Again, the coders who created this describe it as a Ponzi, and/or a Pyramid scheme. Here are some screenshots of their website, and the buying process:

So if they are so adamant about this being a pyramid/Ponzi, why am I saying that it isn’t? First of all, in the colloquial sense of those terms, traditional Ponzis or Pyramid schemes are operating in a manner that is simply unsustainable in the long run. They basically require that addition of new members/buyers in levels in such a way that before long, to sustain the scheme or Pyramid, the entire population of Earth would need to buy in. These types of schemes will NEVER tell their investors that “this is going to collapse.”

This is not the case with POWH. First of all, it is built on the assumption that the entire thing will function as a system that spikes up and collapses down repeatedly. And there are two main ways to profit from this: To buy during the collapses, and sell during the spikes, or to HODL and HODL and HODL during it all, and profit from the dividends that naturally come from all they buying and selling (Ok only from the buying in this case).

And this does not require the entire population of the earth. Realistically, a base of several thousand users who are actively participating could keep this thing going forever. Naturally, if nearly everyone decided to cash out, there would be some bagholders left with some worthless POWH coins.But this system is intriguing enough that I believe people will keep playing the game.

Second of all, traditionally pyramid schemes and Ponzis involve some dishonest actor who is looking to fleece unsuspecting “suckers.” That is not the case with POWH. This is literally code- it is a smart contract that, at this point cannot be violated by the coders, the “investors,” or anyone else. It is a system that is now set in stone, with strictly defined rules and parameters. Everyone is invited to inspect those parameters and understand the rules and code before participating.

So while I appreciate their frankness and warnings about the possibility of losing money (which are real), I find this whole thing to have a certain beautiful logic to it.

Which offers opportunity to profit! Now, I am torn on whether or not to “recommend” buying in to this. This would definitely fall into the realm of gambling rather than investing. So I will only tell you what I’m going to do. I’m going to sink 10% of my crypto portfolio into this. I’m planning on not trying to time the peaks and valleys, I’m going to sit it out and accumulate dividends. Obviously, at some point I will want to cash out. But I want to sit on my “investment” for at least 6 months to a year and see what happens!