Forsage, the largest Ethereum fund, enters China, with a total of over 1.1 million participating addresses

On the Ethereum DApp user list and Gas consumption list, a project called Forsage (Chinese name: Fosage) has long occupied the top three positions on the list since the beginning of the year. The highest number of transactions in a single day exceeded 40,000, the number of active addresses exceeded 20,000, the total number of participating addresses exceeded 1.1 million, and the value of capital participation exceeded 300 million US dollars. Investors who often check information on Ethereum-related data websites this year may have seen this name. Further understanding may tell that this is a Ponzi scheme project, but most of them do not know how Forsage operates and why it attracts a large user base.

Chain Catcher learned that the Forsage project was initiated by Lado Okhotnikov, who is allegedly a Russian resident, in early February this year. It is a pyramid-like model project that uses Ethereum smart contracts. Users join the plan by paying a certain amount of ETH to the smart contract, and receive commission rewards by inviting more users to pay ETH to the smart contract. It has an obvious pyramid scheme nature, but the more critical reason for its popularity lies in its double matrix, reward slide and other designs.

In August and September of this year, the Forsage project began large-scale promotion in China, inducing people to participate in the project through various channels including online and offline. It is currently estimated that there are more than 30,000 domestic participants, which has caused a large number of participants to suffer losses.

Author/Gong Quanyu

01

Design of the Ponzi scheme game

The popularity of Forsage lies not only in moving the common multi-level distribution network to the Ethereum smart contract, but also in making full use of the characteristics of smart contracts to maximize the psychological weaknesses and enthusiasm of participants.

According to various information, users participating in the Forsage project first need to open the link from the superior recommender and pay 0.05 ETH to the Forsage smart contract. The smart contract does not deposit any funds, but will divide this part of the funds into two parts through the x3 matrix and x4 matrix and automatically transfer them to the Ethereum wallet of the superior or higher recommender, that is, each has 0.025 ETH.

Promotional materials for domestic communities

Different matrices have different operating mechanisms. The design of the x3 matrix is ​​that each user ID has 3 points, namely the three referral positions. The 0.025 ETH of the first two referrals will be directly transferred to the referral wallet address, and the third referral's funds will be automatically transferred to the referral user address of the referrer. Subsequent referral users will repeat this process, that is, the bonus for developing two downlines belongs to themselves, and the bonus for developing a third downline belongs to their superiors.

The design of the x4 matrix is ​​that each user ID has 6 recommender points. The 0.025 ETH of the first two recommenders will be transferred to the wallet address of the user's online recommender. The development funds of the 3rd, 4th and 5th recommenders will belong to the user, and the funds of the 6th recommender will be randomly transferred to the user wallet at a nearby point.

Although the threshold for entering this Ponzi scheme is 0.05ETH, the two matrices also have 12 levels, with thresholds ranging from 0.05ETH and 0.1ETH up to 51.2ETH. The funding threshold for each level is twice that of the previous level. Every ETH invested by the user will be transferred to a higher-level recommender wallet according to the aforementioned mechanism.

Forsage's mechanism for inducing users to invest more ETH and improve their matrix level is that if a user's matrix level is lower than that of his or her downline, the rewards from the downline will bypass the user's wallet and "slide down" to the upline wallet with a higher recommended level and a matrix level not lower than that of the user.

For example, if a user only opens a matrix at the 0.5ETH level, and if his downline invests 3.2 ETH to open a higher-level matrix, the downline's fund allocation will completely bypass the user, thus generating a "FOMO" mentality similar to that in the cryptocurrency trading field.

Stimulate users to join by using eye-catching data on the official website

In this case, Forsage users' income after participation can come from two parts. One part is the so-called dynamic income, which is the reward from directly recommending users, and requires a lot of effort to expand downlines; the other part is the so-called static income. As long as the matrix level opened by the user is high enough and a certain number of downlines are developed, it is possible that when the downlines further develop downlines, the matrix level will be lower than that of the lower downlines, and then the user can enjoy the "slippage" income of these downlines.

More specifically, compared to past pyramid schemes and Ponzi schemes, Forsage has the following main features: it has an extremely low capital threshold, claiming that "only a few hundred dollars are needed to participate in international projects", and then stimulates investment through various mechanisms; there is no direct relationship between hierarchical relationships and the level of returns, and users can increase their ability to "intercept" slipping rewards by opening a higher-level matrix; it claims to be based on smart contracts and there is no risk of capital sedimentation and collapse.

From the above, it can be seen that Forsage fully possesses the characteristics of a pyramid scheme and a Ponzi scheme. Participants do not directly create any value, but instead gain profits by developing downline users to participate. However, this is not good for participants with weak market expansion capabilities and those at a later stage, and it is likely that the profits will be lower than the investment.

Despite this, due to its relatively new gameplay mechanism, Forsage quickly became popular in some regions, especially starting in May and June this year. The project caused widespread dissemination and participation in relatively economically backward regions such as the Philippines and Indonesia, with more than 10,000 active addresses on most dates.

At the same time, the launch of these marketing activities has also greatly stimulated the market's demand for ETH. Its explosive growth trend from June to August also shows a certain correlation with the price trend of ETH in the middle of this year. Wan Hui, founding partner of Primitive Ventures, said on Twitter that much of the vitality of the Ethereum network comes from Forsage, "Tracking large Ponzi schemes using cryptocurrencies has always been my best macro strategy."

At the end of June this year, the Philippine Securities and Exchange Commission also issued a warning against the project, stating that an entity led by Lado Okhotnikov and operating under the name Forsage was found to be engaged in investment activities in the Philippines that were not authorized by the Commission. Its plan clearly demonstrated a possible Ponzi scheme, in which funds from new investors were used to pay "fake profits" to previous investors, which was detrimental to subsequent members in the field. The public was advised not to invest or stop investing in the project.

Chain Catcher randomly collected data on 16 Ethereum addresses that had participated in the transaction for more than 20 days in the Ethereum browser (see the figure below), and found that more than half of the addresses were in a loss-making state. At the same time, the absolute profit amount of most profitable users was not high, showing a huge gap.

However, since the beginning of September, Forsage's data on the Ethereum network has shown a rapid decline, with active addresses between 1000 and 2000 on most dates. This is partly due to the official launch of a new version of Forsage on TRON to reduce the potential impact of the Ethereum network's high gas fees on new users, and also a new gameplay called xGOLD.

However, judging from the data from the Tron browser, the average daily active addresses of the Forsage Tron version are also between 1,000 and 2,000, which is far lower than the daily active addresses of over 20,000 during its peak period when the Ethereum data is added together.

02

How to enter China

Although Forsage's official website has versions in eight languages, it has not had a Chinese page for a long time, which also led to very slow development of the project in the Chinese market in its early days.

But starting from the beginning of August, an organization called "Magic Leopard Alliance" began to promote the Forsage project on a large scale, compiling a large amount of Chinese information about Forsage and participation guides. On the one hand, it held offline activities in Guiyang, Changsha, Chengdu and other central and western cities, and on the other hand, it converted interested users through Weibo, cryptocurrency media websites, Telegram groups and other channels, and organized communities to discuss Forsage.

Chain Catcher recently added several so-called community evangelists of Forsage through WeChat accounts found on some online channels. Every day, they post screenshots of their wallet addresses receiving large amounts of "slipped" ETH, as well as pictures of various offline promotional activities, on their Moments and WeChat groups, calling on everyone to "pick up Ethereum" together.

However, further analysis shows that there are many tricks in these "making a lot of money" screenshots. According to Chain Catcher reporters, many screenshots actually do not show dates. Different promoters use the same screenshots on different dates to promote orders in WeChat Moments, creating the illusion that users receive a large amount of ETH "slippage" every day.

However, according to the observation of the Chain Catcher reporter, many new users are joining the community every day, and more than 100 people have joined the group in two days. The reporter also added several users in the group, including many observers and participants. Except for one participant who claimed to have earned a lot of ETH, the other two have not yet recovered their investment.

Dandan (pseudonym), a participant familiar with Forsage, told Chain Catcher that he learned about the project from a friend in the cryptocurrency circle in Shenzhen at the end of August and invested about 1.6 ETH in it at the time, but later realized the "head-hunting" nature of the project and stopped participating.

“For those of us who know the industry and blockchain, playing with Panquan projects can bring higher returns. Forsage not only has low static returns, but also hurts your connections.” Dandan added, “For users outside the industry, concepts such as smart contracts and decentralized wallets are very high barriers to entry. The conversion rate will ultimately be very limited, and it is not a good project.”

According to community promotional materials, Forsage currently has more than 30,000 participants in China. Considering that the project's active addresses, number of transactions and other data on the Ethereum browser have not improved recently, it can be said that Forsage's market expansion in China is not smooth, and the same is true for the performance of the Forsage model in the global market.

Ethereum browser statistics for Forsage contracts

Even so, Forsage has recently remained at the top of many important data lists of Ethereum. This not only reflects the embarrassment of Ethereum in terms of application implementation, but also reflects the helplessness of Ethereum as a decentralized platform that is inevitably exploited by some scams. It requires technical developers, regulators, media and other forces to work together to solve these problems.