The massive success of CryptoKitties inspired many dApp developers to build games on Ethereum. A few developers, unfortunately, have decided to take a different path and build CryptoKitties-like games that were actually scams. Ethertanks was one of these games.

Just as users can buy virtual cats on CryptoKitties, users can buy virtual tanks in EtherTanks. However, unlike CryptoKitties, Ethertanks doesn’t have any unique gameplay mechanics. In CryptoKitties, users could breed new, unique cats that had a combination of phenotypes from its parents. In Ethertanks, users simply bought tanks. There was nothing else they could do with the tanks accept earn money from users that bought in after them. The game was a clear Ponzi scheme. The devs did promise that users will eventually be able to trade and battle their tanks but they never delivered.

The Ponzi 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’s economics system was a clear Ponzi scheme. Every type of tank had a base cost and this increased whenever a new tank of the type is bought. The cost of the new tank consists of the tank’s base cost and a small payout to every existing owner of a tank with the same type. As such, every time a user buys a tank, s/he is essentially paying fees to everyone else that bought in before him/her.

If a user wanted to make money from the scheme, they needed to get in early such that there would be enough suckers who’d buy in afterwards such that their returns could cover their initial investment and even exceed it.

There was a huge incentive for people to buy in as fast as possible and then shill the heck out of the “game” so that they can exit with meaningful profits. All the while, the devs were also making a huge amount of money as they took a cut out of each transaction and they were probably also the first users to buy into the scheme.

The Pyramid scheme

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”.

The Ponzi structure of Ethertanks resulted in a legion of shills (many from 4chan) that brigaded social networks like Reddit and Twitter to promote Ethertanks as the next CryptoKitties game.

Here is a post on 4chan’s infamous /biz/ forum calling its users to promote the Ponzi on the largest cryptocurrency subreddit, /r/cryptocurrency.

The brigading was particularly intense on Reddit with users creating and upvoting posts advertising Ethertanks.

Many users justified Ethertanks’s Ponzi structure by saying that the devs had promised a marketplace so any users who bought in could always flip their tanks in the marketplace, just like CryptoKitties. Of course, this was only a promise and many users would learn, to their dismay, that the devs would never deliver on the promise.

To have a feel of the scale of Ethertanks brigading, 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…

When users asked about the game’s obvious Ponzi scheme structure, the poster immediately countered by saying that there will eventually be a marketplace.

Here are some other comments on Reddit shilling EtherTanks. Honestly, it makes me absolutely sick reading some of them. The comments on this post where a /r/ethtrader mod was warning readers about the scam were particularly tough to read:

“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 cryptocurrency news and editorial website, published an article promoting Ethertanks.

False promises

The devs promised that users would be able to trade and battle their tanks. The marketplace was supposed to launch on January 7th while battle mode was supposed to launch a few weeks afterwards.

Not surprisingly, the devs never delivered.

However, the devs did pull a final trick to try to get more people to buy in. After missing their January 7th deadline, they created a new dApp called EtherArmy where users can not only buy tanks, but ships and planes as well. EtherArmy was the exact same thing as EtherTanks except for a few new reskinned useless blockchain assets.

Aftermath

As with all Ponzi schemes, most people who bought in lost money. The devs made a huge amount of money, the earliest adopters a little less but still a significant amount, and the latecomers lost most of what they put in.

Here are some posts from the game’s subreddit, /r/ethtanks:

The one good thing that came out of this game is an important lesson for everyone involved, as well as outsiders. Never let your greed, your desire to make a quick buck, override your common sense. Understand that social media can easily be manipulated and you should not let Reddit and Twitter posts do the decision making for you. If it’s too good to be true and it looks like a scam, it probably is.