Squid Game Cryptocurrency- and the League of ‘Trendy Cryptos’
The crypto world is being flooded with meme and socio-cultural trend-based cryptocurrency. No matter the crashes and prices, they have for sure made a mark.
Launched on 21st October 2021, The squid game cryptocurrency is one such example. The squid game crypto was a play-to-earn crypto. The players could purchase squid to enter the games and earn the cryptocurrency while they advanced in the game. The entry fees and its distribution were as follows:
7% fee rewards to holders
4% fee to marketing wallet
4% fee to the liquidity pool
The tournament, scheduled to begin in November, never took place. Moreover, though play-to-earn cryptocurrencies should be able to be exchanged for other cryptos or fiat money, many users reported issues selling their squid tokens a few days prior to the crash. While it traded at $38 early Monday, later that day its value grew to $628.33 and then to $2856.65. But the crypto world is not a bed of roses. Five minutes later, at about 3:10 p.m., this fast-growing crypto traded at $0.0007. As is the case with cryptocurrencies like Shiba Inu and Bitcoin, no one knew who its creators were, or where they vanished after the crash. The website, the white paper and everything else just disappeared. There weren’t any statements like ‘we are trying to figure this out’ from the developers, which clearly showed that this was a scam, with people losing over Rs 25 crores in it. The recent Tsuzuki Inu scam is quite similar, almost a copy of this.
In the crypto world, this is known as a ‘Rug Pull’ where developers abandon a project and run away with investors’ funds.
There were instances of people buying this crypto because they thought it was launched by the Netflix show. Attaching the name and making it a play-to-earn crypto worked like magic for the creators. It made the crypto appear somewhat authentic, at least to the investors, so much so that they even ignored the grammatical mistakes in its whitepaper. Quite similar to what the Hurdle Model of Price Discrimination states, if something is too good to be true, it probably is unless you’re willing to go to any length to attain it. With people being enticed by the popularity of Squid Games and the tournament promised to begin in November, no one took the trouble of doing background checks on this supposed ‘easy catch’ by reading the whitepaper carefully. They learnt their lesson soon enough when they lost all their money.
White paper of a cryptocurrency explains the objectives and working of the cryptocurrency and is launched before the crypto actually starts functioning. It is the best and probably the only way to know if a particular cryptocurrency has the potential and the technology to do good in the market. But when the whitepaper, which is the most important factor in the launch of a cryptocurrency, itself has not technical but grammatical issues, it should raise a red flag. Still, people’s craze for ‘trendy’ cryptos robbed them of all logic. This is called the Bandwagon Effect, in which people do something because other people are doing it, irrespective of their own beliefs.
When Shiba Inu was launched, people were apprehensive about it because it had a symbol similar to Dogecoin which was launched as a crypto joke. But Shiba Inu’s whitepaper and the fact that it operates on the Ethereum network, which is the second best crypto next to only Bitcoin, made it logical to invest in it, and it is doing good too.
What’s going wrong is that whether it’s trusting the token or doubting it, people are getting driven by a crypto’s symbol, name and the ‘buzz’ around it rather than focussing on the more important factors like the crypto’s technological framework, the network it will function on and the issues it seeks to resolve. We need to realise that just because something is being talked about doesn’t mean it’s authentic. This is what John Maynard Keynes also proposed. He talked about a fictional newspaper contest in which entrants are required to choose 6 most attractive faces out of a hundred photographs. Those who picked the most popular faces will be eligible for a prize. The logical thing to do here will be to take into account the public perception of attractiveness and make your selection on that basis rather than selecting the one you personally consider attractive.
The real risk in the crypto world is not about prices rising and falling, it’s the anonymity that exists here. Most of the time you do not know who the creators are and you obviously cannot complain, because cryptocurrency is not a legal tender. It is unregulated but not illegal, and despite the Government’s talks about introducing laws to regulate it, the idea has always been to discourage its use. So, if we do not want it to be ultimately banned or worse, lose its purpose, we need to work together to improve crypto literacy. It becomes really important to know where you are investing, and why you are doing it. Focus on sustainability rather than getting rich overnight, and understand that trends don’t earn money.