There are two groups of people that talk about this kind of project. There are the fanboys who say that they are making huge money, it’s not a scam, it’s the future, and then there are the people who are saying that these are just Ponzi schemes. In this article, we will talk about crypto nodes, nodes as a service, so projects like strong block, like thor nodes, etc., because they promise very high returns, but are they scams? Or are they not scams?
So, first of all, what are these projects? Well, they claim to be node as a service. Basically, in other words, you buy their tokens, you invest, you buy a node on their platform, and, with your investment, they are going to create crypto nodes for the blockchain to service the blockchain.
So, instead of you running the node by the hardware and running the node yourself, you invest with them, and they run the node for you at least; this is what they are saying.
If they are Ponzi schemes or not, we need first to understand what it is. Many people know what a positive scheme is, but it is better to see the actual characteristics of a Ponzi scheme.
There are four main characteristics of a Ponzi scheme. The first one is that there is no actual utility in the system. The second characteristic of a Ponzi scheme is that it is just money passing hands, meaning that new investors are coming into the project.
They are giving their money to the project, and this money is not used for anything. They are just passed to the older investor. So new investors come in, give the money to the system, and this money is just given to the older ones.
The third characteristic of a Ponzi scheme is that usually, a Ponzi scheme promises high profit. The fourth catalyst of a Ponzi scheme is that it is generally illiquid, meaning that you lock some money in the system and you cannot withdraw them.
In other words, there is a locking mechanism, and this is important for the sustainability of a Ponzi scheme because if the new people coming in give the money to the protocol, if they can withdraw their money when they want to well, the positive scheme is going to collapse very soon, but if, if there is a locking mechanism, the new money is locked in the system and they can easily be given to the older investors.
We can rank different kinds of projects on the ponzinomics scale because, yes, some things are: zero per cent Ponzi schemes, and some others are a hundred per cent Ponzi schemes, but in between, there is a huge gap. There is a huge scale, and we need to use this kind of judgment to rank them on this scale.
So, let’s start ranking different kinds of projects so; first of all, on the lower end of the spectrum with a very low degree of ponzinomics, we have normal decentralized exchanges, meaning that you provide some liquidity.
This liquid is used by the trader to swap some Tokens. They are going to do something with these swapped tokens, so there is some utility is not just money passing around. Also, they are very liquid because you can provide liquidity and then withdraw liquidity. But there are a little bit of ponzinomics.
Why? Because some people simply swapping the tokens just want to swap the tokens for them, providing them to the protocols. So, with these characteristics in mind, we can say that normal decentralized exchanges have a very low degree of ponzinomics.
Then, with the higher degree of ponzinomics, we have newly created decentralized exchanges created just to make money. These have a higher degree of ponzinomics because they are liquid, but they have some fees.
So when you provide liquidity, they have high fees like five per cent, eight per cent fees that you give to the protocol and then. There is an actual utility somewhere, but ninety per cent of people are using them just to make money.
Therefore, compared to normal decentralized exchanges, they are more Ponzi schemes and, more or less, at the same point on the ponzinomics scale. We have OHM forks such as, for example, time wonderland. They have some degree of ponzinomics, but the good ones were trying to create something to make some money with the treasury.
Therefore, you were investing your money in the treasury, and they were making some money just like a company. You would invest in a company, and with the money you provided, they were creating some value.
So, in other words, there were some possibilities. Still, they were trying to move away from that system and also, they were very liquid because you could give the money to the treasury, buy the tokens and then withdraw the money whenever you wanted. And then we have the last step, the 100% Ponzi scheme we’re talking about crap like.
Metic Staker or stable one, a hundred per cent Ponzi schemes, they say it in their documentation. They say that the money you are receiving as profit comes from older investors, so there is no utility, and they are illiquid because you buy some tokens.
You lock the tokens in the protocol, and you cannot withdraw your money. You can only make some profit if the Ponzi scheme goes on. You can only make some money if new people are coming in, and now is the time to rank our crypto nodes, which is not as easy as you might think because this kind of project can be very different.
So the first characteristic is there. Some utility well, some of these projects have actual utility. They create nodes, some other. They don’t do it, and I’m sure that some of them will create more utility as time passes. So now they might have a high degree of ponzinomics, but then they will try to move away from this kind of system and create more utility.
Second characteristic: is it just money passing hands? Well, it’s not just money passing hands because there is some utility, but at the same time, the majority of the rewards that you get is from newer investors.
The third characteristic do they promise high gains? Yes, they promise high gains and for characteristics, are they illiquid? Yes, they are very illiquid because you lock your investment in the protocol in most of them, and you cannot withdraw it.
So, where are they on the ponzinomics scale? Well, of course, they are not 100 Ponzi schemes, but they have a high degree of ponzinomics. Let’s be very clear about what I am saying. First of all, I’m not saying they are Ponzi schemes.
I am saying they have a very high degree of ponzinomics. Second, I’m not saying this cannot change; I’m saying right now, they have a high degree of bone genomics, but if they are able, with the investment they are receiving to create more utility and to create more utility for the blockchain and to create more profit for the investor, without using the new investors well, the degree of ponzinomics is going to go down. Third, I’m not saying that you cannot make money with them. You can!
I know you can make money with them. I’m not saying that, and fourth, I’m not saying they are scams because the most reputable ones, I hope they, are not going to do a rug pull. I don’t think they are going to do a rug pull.
They are not going to steal your money, and they are just going to make money, hoping that they can also make some money for the investors, and I hope that they are trying to move away from this system of ponzinomics.
The most important question is whether I should invest or not, and for me, not financial advice? The answer is very simple: if you think that a project, you study a project, and you think that it will create actual utility in the long term, why? Not?
Because if you study a project – and you see that there is a future, you think there is a future. You can invest thinking medium to long term, and what about the short term? If you are early on a project like this, you can sometimes make good money.
Still, of course, it depends on how early you are and second of all, it depends if you want to invest in this kind of system, with this huge ponzinomics, but the most important thing is do not to think about this project as low risk. They are very high risk. Therefore, in your crypto portfolio, they should have a small percentage of it.
They should have a small percentage of your crypto portfolio, and if you don’t have a crypto portfolio, a balanced one with low-risk measure risk and high risk. Well, you should start creating one.