What is Forsage?
The service describes itself as an earning platform run using smart contracts on the Ethereum network. This is achieved via a referral system, where users of the platform earn rewards in Ether when bringing more people into the service. Initially, a new user has to sign up at least three other people to begin accumulating rewards.
The main difference with Forsage has against similar services of the past, is that this runs on the Blockchain. It uses smart contracts to decide and distribute the rewards since a smart contract once deployed is immutable, the system is transparent to everyone in the world. All of the contracts the platform uses are accessible through an Ethereum Blockchain explorer and can be reviewed before ever attempting to use the service.
Also, a blockchain Dapp is virtually impossible to stop. Even if a government considered it illegal and shuts down the Forsage site, the service is still running on the network of Ethereum. Once up a smart contract cannot be topped unless the entire Blockchain is taken down. This is great for the active users, but terrible for regulators and other officials looking to prevent a scam from growing.
The payment of rewards is done via the Forsage platform. All transactions are peer-to-peer, so there is no central authority capable of stopping users from getting their rewards. All payments are between Ethereum wallet addresses, which gives some degree of anonymity to the participants in the reward scheme. The scope of the platform is global, so individual users are getting rewards for referrals from different parts of the globe. In the end, this makes an almost 100 percent censorship-resistant platform.
The Forsage service costs 0.5 Ethereum to join. This could be a considerable amount of money giving that lately, the price of Ether has been steadily climbing. Yet, this has done nothing to stop the growth of the platform. At the time of this writing, there were 723,466 participants and 541,755 Ether, an impressive 175,279,412.70 US dollars, given in rewards.
What has been the impact on Ethereum
This has been a monumental year for Ethereum. The network has managed to accumulate a sizable transaction advantage over all of its competitors, especially Bitcoin. The transaction count has always been more in Ethereum, but there was always a stable difference between the two biggest Blockchains in the world. As we can see in the chart below.
The gap between both networks is growing and the trend is clear, this won't reverse at all in the future. This is in great part by the impact of Decentralized Finance (DeFi) which is reshaping the world's economy and proving to be the best use case up to date for Blockchain.
This has reflected in another dramatic change in the space. In 2020 transaction fees in Ethereum became more profitable than in Bitcoin. This represents a sea change because right now both cryptocurrencies, Ether and Bitcoin, are in a bull run. Yet, despite the increasing price of BTC activity on the Ethereum network is picking up speed. As shown in the following graph.
Here again the trend is clear and it doesn't seem it is going to reverse. What all has to do with Forsage? Well, interestingly enough, much of this has been pushed by two similar services on Ethereum. The first of course Forsage, which saw an incredible 11.6% of network consumption and right now it sits at 8.58%. The platform also consumes an immense amount of gas with 4,131,667 USD sent in gas to the Forsage contract. No doubt one of the main drivers in the increase seen in the price of doing transactions in Ethereum.
The second culprit, MMM Global, is another similar Multi-Level Marketing scheme. Between both of these platforms, a total of between 24% to 20% of the Ethereum network is being occupied. This has led to a drastic increase in gas prices which rose 0.06 cents at the start of the year to 0.73 at the time of this writing.
It is incredible to witness that just two Dapps Ethereum use basically one-fourth of the network. Not only that, since those two Dapps are considered basically Ponzi schemes by many commentators.
The verdict
On June 30th the Philippines Security and Exchange Commission (SEC) declared that Forsage was a pyramid scheme. This was not the only warning, as the popular Blockchain explorer Etherscan has listed the Dapp as "High Risk," one of only two platforms in the world labeled as such. The other being EtherShare.io. There has been some backlash by the crypto community at large, but it is also true that the service is promoted regularly by influencers both in YouTube and written media.
In the end, there is no doubt that Forsage shares much of its design with traditional multi-Level Marketing (MLM) schemes that have existed basically since the dawn of modern finance. Here a new user gains money by recruiting more people into investing in a multi-level structure that becomes narrower at the top. This is because each slot costs twice as much in order to keep the profits going to those on the top.
Because Forsage works at a global scale the critical point where the whole thing collapses is still far into the future. The entire world is basically at the reach of those looking for referrals, but at some point, it will break. Until then, the platform is slowing and making operations on Ethereum considerably more expensive. The world of DeFi is a wonderful one, but with this new freedom, old forms of unscrupulous business practices are undergoing a revival in the industry.
For more advice on how to remain safe in the crypto economy read How to Avoid Crypto Scams.
