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Earth 2: Ponzi scheme or an in-game currency without a game?

Updated on Feb 21
3 min read
Written by
Cem Dilmegani
Cem Dilmegani
Cem Dilmegani

Cem is the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per Similarweb) including 60% of Fortune 500 every month.

Cem's work focuses on how enterprises can leverage new technologies in AI, automation, cybersecurity(including network security, application security), data collection including web data collection and process intelligence.

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We don’t write about B2C topics but seeing our friends invest in Earth 2, we wanted to bring our perspective and transparency to the topic.

Earth 2 was launched in Dec/2020 with a similar premise like the Second Life social network where users would be interacting over a digital copy of the real world. Currently, there are very limited ways to interact in this digital world however the website has reached possibly millions of visitors in weeks and individuals are speculating with real money in digital real estate. This could be viewed as an investment related topic so this disclaimer is necessary:

Please read our disclaimer about investing before reading this article.

Should you invest in it?

If you like to invest in the riskiest asset class and would be ok if you lost all your initial investment, yes. If you don’t like wasting money on a Ponzi scheme, no.

There are a few ways to evaluate an investment:

  • Once you buy it, can you sell it? At least some Redditors couldn’t.
  • Historical precedents. As Ray Dalio who founded the largest hedge fund, Bridgewater, keeps saying, history repeats itself.
  • Underlying assets & capabilities vs the price. In other words, value investing as preached by Warren Buffett, one of the top 10 richest people.

Historical precedent

So far, we have seen that digital currencies are as strong as their digital worlds and given that the world behind Earth 2 does not exist beyond the purpose of real estate speculation, we find it to be a risky gamble.

Examples we believe to be similar are: Second Life, World of Warcraft. Since Earth2 does not provide any game or interactivity at the levels we have seen in these games, we don’t see present value in purchasing land there.

In the future Earth 2 could develop such game mechanics and build a valuable virtual economy but we could not initially come across any cases of in-game economies launched successfully without first launching a successful game.

Building a game with a successful virtual economy is a complex, failure-prone effort and successful game developers have hundreds of developers. We looked into the Earth 2 team and noticed that they have accomplished advisors like Dillion SEO. They appear to have an accomplished team but the size of the team doesn’t compare yet to typical companies that pulled off successful games with virtual economies. However, there were also successful games like Minecraft developed by relatively small development teams.

Underlying assets & capabilities

There is no utility or economic value of the land purchased on Earth 2. However, Earth 2 team built a market for reselling land and other users’ buying up land could lead to profits for investors. We couldn’t come across independently verifiable metrics on the liquidity of the market and would be curious to know.

So from a value investing / underlying assets perspective, this is as risky as it can get as an investment. It is riskier than an investment in a startup where the investor would have a claim in the equities of the startup. It is also riskier than a bitcoin investment where at least amount of bitcoin is programmatically fixed, creating scarcity. The only thing that is provided by this virtual land investment is the chance to be able to sell the land off at a future date if

  • Earth 2 launches a successful game
  • the game becomes successful enough to generate a virtual economy
  • the land that you purchased ends up being valued higher

Or if someone would buy your land before all of these happen. There are a bit too many ifs in these sentences even when compared to a risky investment like early stage startup investing.

Is it a Ponzi scheme?

Currently it looks like one. People are investing with the hope that later other people will buy it from them at a higher price. The underlying asset currently has no real value, is centrally managed, can be manipulated by a relatively obscure party, the developer company and people already report cash withdrawal problems.

Initially, bitcoin could also be viewed as a Ponzi scheme however a decentralized network like Bitcoin has superior dynamics compared to an in-game currency since:

  • Supply is limited and managed in a decentralized manner
  • Transactions can be completed P2P or via exchanges
  • There is transparency on transaction history
  • It enables value generation via new use cases such as immediate, free funds transfers

If the developers create valuable applications on top of the earth2 software, then it would no longer be a Ponzi scheme but currently it appears to be one.

Please note that we are not professional investors, did not invest in Earth 2 and currently have done a relatively cursory search. For example, we are not clear on how they managed to reach their high levels of traffic as estimated by Alexa. Looking forward to your comments,

Cem Dilmegani
Principal Analyst

Cem is the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per Similarweb) including 60% of Fortune 500 every month.

Cem's work focuses on how enterprises can leverage new technologies in AI, automation, cybersecurity(including network security, application security), data collection including web data collection and process intelligence.

Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.

Cem's hands-on enterprise software experience contributes to the insights that he generates. He oversees AIMultiple benchmarks in dynamic application security testing (DAST), data loss prevention (DLP), email marketing and web data collection. Other AIMultiple industry analysts and tech team support Cem in designing, running and evaluating benchmarks.

Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised enterprises on their technology decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.

He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.

Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.

Sources:

AIMultiple.com Traffic Analytics, Ranking & Audience, Similarweb.
Why Microsoft, IBM, and Google Are Ramping up Efforts on AI Ethics, Business Insider.
Microsoft invests $1 billion in OpenAI to pursue artificial intelligence that’s smarter than we are, Washington Post.
Data management barriers to AI success, Deloitte.
Empowering AI Leadership: AI C-Suite Toolkit, World Economic Forum.
Science, Research and Innovation Performance of the EU, European Commission.
Public-sector digitization: The trillion-dollar challenge, McKinsey & Company.
Hypatos gets $11.8M for a deep learning approach to document processing, TechCrunch.
We got an exclusive look at the pitch deck AI startup Hypatos used to raise $11 million, Business Insider.

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11 Comments
Marius Z
Feb 20, 2022 at 01:59

Charitably, Earth2 is like any other over-inspired crowdfunding game project, where developers raise a couple hundred thousand dollars in exchange for an industry- or genre-defining game, which of course they are unable to deliver. You can call them naive, or scammers. Except Earth2 isn’t positioned to deliver any game at all. Their tiny development team is working to produce cinematic trailers and a web-based Google-maps tiles, and not an immersive, massive virtual world like Matrix or Ready-Player-One, or even a scaled back version of such. Producing no revenues, making it very easy to deposit money, and very difficult to withdraw money (claiming KYC regulations), it looks more like a ponzi rather than an (over) earnest effort at producing a serviceable product.

ionlydofatchicks
Dec 13, 2021 at 05:59

Not a scam, new partnership with Polygon and transition to blockchain based metaverse will be huge. Give it time

Nick
Dec 11, 2021 at 11:57

Very interesting article, I quite enjoyed reading it.
I’m actually studying the white papers of a similar project: nextearth and I automatically found out earth 2 and this post.
At the moment (at least to me) it’s quite unclear what kind of future development nextearth will have as well.
So far it sounds like pretty much the same as E2: massive land speculation, open marketplace to trade it, in the future hope of generating a platform where businesses and people will interact and eventually, far in the future, they’ll be able to have a VR world.
Staying in their community I saw quite a chaos in what each user think about the project…and as final line they are all wildly guessing, making their own theories and consequently “strategies”.
But nobody know what will happen with the tiles once they will start implementing more features: since most of the lands are actually owned by massive high rollers, it’s quite unclear if the early bird will get massive benefit from that (leaving newbie with the crumble of the system) or if they will end up pretty much with a fistful of nothing if the rules will change and the entire platform will become a massive game minecraft styled.
Would you consider checking them out and writing an article on their platform as well?

Compliments again for the article!

Cem Dilmegani
Dec 20, 2021 at 12:33

Thank you Nick! We are experiencing hyper growth in our actual business: https://aimultiple.com/ so we are not investing into these speculative projects. I see them
– to offer no current economic value to users
– as poor clones of already developed systems (e.g. Second Life)

It takes significant investment to build a metaverse and Meta is giving a decent shot at it. If a startup raises tens of millions from reputable investors, that may be worth watching. However these startups selling virtual land are not worth tracking IMHO. I do not see them build something valuable so I ask myself, what is their goal? The most reasonable answer I can come up is that they will pocket the money and run at the peak of the bubble.
This is of course a prediction and by no means financial advice. I don’t (and can not) have evidence about this possible future event.

Timothy Adams
Sep 15, 2021 at 00:57

After reading the entire website, I don’t think we can completely dismiss Earth 2 as a scam. But currently there is nothing but hope and vague ideas about “something neat in the future”. So as this article points out, currently it still just amounts to a Ponzi scheme.

Anyone with sense knows that if you invest in something like this, it may or may not pan out. And that you have to be in it long-term (at least a few years). And don’t invest more than you’re willing to lose.

John
Jul 13, 2021 at 16:48

You dont seriously compare minecraft to earth 2? Every CS student should be able to code Minecraft in a few days, its so simple. They want to do a VR replicate of the earth. Believe me, I’m in the medical device industry working on AR / VR, and thats not how it works. Please guys, don’t be naive.

Cem Dilmegani
Jul 17, 2021 at 08:09

You underestimate what it takes to build Minecraft. I would recommend reading the effort it takes to build such a game: https://en.wikipedia.org/wiki/Mojang_Studios

Sean
Jun 21, 2021 at 10:04

I think your column is spot on for the most part (for someone looking for a quick turn around) except when it comes to using the term “ponzi scheme.” It may be a scam, but for it to be a ponzi scheme the developer would be promising returns and taking other peoples money to pay you. This is not how the market place there works. Anyone making money is selling on the market place, not back to Earth 2.

Cem Dilmegani
Jun 22, 2021 at 07:47

Thank you for the comment. Especially in markets with low liquidity, the developer can act as a buyer and invest its earnings in hiking up prices to generate interest in the market. Technically, price manipulation may be a more appropriate name for this than Ponzi but the mechanism is quite similar.

OG
Jun 26, 2021 at 08:09

They are promising returns through 3rd parties that have ties with the developers so…

Blake
May 29, 2021 at 02:09

For a long while, reviews of Earth 2 IO on trustpilot and Quora were full of positive reviews with referral codes.
as we all know, spamming referral codes and cheap YT advertising are par for course with seminar/course scams and Chinese made make money apps or paywall game apps do.
Now times are changing and the positive reviews are being diluted with honest reviews. I still see those awful commercials on YT, but hopefully the scam has been revealed enough for the devs to run away with the money.
It’s legally a game so they can do this mess. We definitely need some restrictions on anything that’s fishy like most play to make money or pay to play apps.
Most aforementioned apps are Chinese owned, directly or indirectly, and that’s scary but left for another topic.
Earth 2 IO is Australian based as far as I can ascertain with info being so hard to find.
We need regulations in how much influence foreign devs have on the market just the same as we need them for national based devs as well.

Tobach C Nigh
Apr 22, 2021 at 07:44

They claim in their FB add, that I saw today, that they want to make a game like Player One (the movie) basically in the future development.. If this was possible, then I could see a potential benefit of investing in a virtual property before launch. But honestly to map out an entire planet?? Come on… We are light years away from that type of sophistication in computer hardware in my opinion (correct me if I am wrong). The idea sounds awesome and enticing. But that would be the only way I would be investing in a property if this technology existed to actually create a virtual world where people could actually exist in a, lets say mansion I bought in my home town…

Vaclav Dekanovsky
Mar 30, 2021 at 21:43

The game is early in the development stage and I thought it can be a scam or a Ponzi scheme. But I like the idea behind it. Many people love to build their own empires and enjoy strategy games. Earth2 promises both. It’s in the early development stage and it attracts many people who just bet on the fact the price of new tiles is rising (there are multiple sites showing the statistics about the game) so if they buy today in a few months they can sell easily to the new players. That however means they must expect new players to come. They must believe in the game and the team behind it.
I did some investigation about the team and the background – https://earth2.guide/blog/is_Earth2_a_scam/ – and for me the most important hints that the game can be success are two. Mapbox list them on their showcase – https://www.mapbox.com/showcase and that two of the designers worked in the five in Five Studios Interactive which have invented the drone game with awesome and easy 3D landscape editor – https://www.youtube.com/watch?v=10zkjYjSWZo.
Based on the statistics there is ~100K going to the developers pocket every day, all the people who spend this money believe that the game will be around for long enough time to withdraw even more. It’s a risky investment, so everyone must consider buying the virtual land in Earth2 on their own.

Rages
May 12, 2021 at 06:37

Five Studios Interactive has only worked on 1 game and its not even finished (still alpha). It has been in development for years. The lead developer for E2 was making assets for the unity game store before Drone and now he’s apparently working on E2. (Seemingly abandoning Drone unfinished). So although he might have technical knowledge there’s little experience with publishing a full game. Let alone an ambitious one like E2.

They said they’re going to onboard more people so unless they expand their techinal team i dont see E2 going anywhere.

Cem Dilmegani
Apr 02, 2021 at 17:53

Thanks but looking at the amount of money invested does not mean that an investment option is not a scam: https://en.wikipedia.org/wiki/Bernie_Madoff

Tyrone Session
Mar 23, 2021 at 14:00

I invested a few hundred dollars buying a few tiles and I listed them in the market place hoping to sell.. so far, no good! My tiles(land) have been sitting there for weeks and at a discount to top it off. I wouldn’t suggest anyone invest in Earth 2

Cem Dilmegani
Mar 23, 2021 at 21:58

Thanks for the honest review!

Obreja Andrei
Mar 22, 2021 at 08:46

Day by day, i start to realise that this Earth2.io is nothing more than a fishy business. These so called “proffesionals” had 3 months to prepare for the so much shouted “DUBAI / UAE” release, but yet they failed big time. Seriously folks, their lead engineer does not have proactive thinking? It was very obvious that players will storm at the moment of the launch, they had 3 months to setup proper servers and backups in order to make sure that everything goes smooth.

When the big launch came, surprise: servers down! And of course, they play the innocent card. If you’re thinking outside the box, this “servers down” thing was nothing more than a huge benefit for them. Why? I’ll explain my personal experience. I had preselected a tiny lot of 16 tiles, somewhere over UAE location https://prnt.sc/10s69eb and i clicked “buy” at second 1 after countdown. At second 2, servers were down.

After several refresh, i still could not purchase the desired lot, as you can clearly see here: https://www.loom.com/share/a2a175167d8048e491ec3efed877d3ca?fbclid=IwAR36Co4SFgLSkKOl0m7f2HxG-r-e_mQPm70wjr83WvfTBAqkAe4hpJ1mtFo

Done another refresh. Then, surprise: servers down again! To my surprise, when they were back on, the entire area where i planned to purchase, was already bought, in big lots of 300+ tiles! Seriously, how can someone (a real human) to buy 300+ lots in 2-3 seconds after the servers were back on? This is way too fishy , in order to be able to swallow the lies that Shane & co are serving to us.

Obviously, there were bots involved, like this: https://prnt.sc/10s6dfg and many many others. But the fun part comes now: i’m 99% sure that those bots were deliberately allowed at the moment of DUBAI / UAE. You may wonder why? It’s all about MONEY! A man’s ability to perform several actions within seconds it’s close to 0. By several actions, i’m reffering that, after the servers went back on, the play had to search for the area on the map, select the tiles, click buy, etc. These actions obviously can’t be done within few seconds (under 10).

So, by allowing ONLY honest players to buy land, they would not get the price per tile hype up enough to skyrocket their profits…

The solutions (own bots, distributed to certain key people of their own), which to be present to buy land at miliseconds, so that this ensures a very rapid increase of price per tile, so that the remaining “fools” have no other choice but to by much expensive.

Of course, they’ll play the innocent card, as always. This is convenient for them, as their hands are not dirty (directly). They were aware 3 months before UAE, about the fact that people reported them several “bots involved” situations, and yet, they have done NONE about this. Why would they play the “book of fairness” ? There’s no point to sabotage huge profits, after all, ya? So they let the bots go wild, then play the “oh, we’re sorry, we did not expected that, it’s a shame, but we can’t do anything to correct the situation”.

While their accounts filled up with lots of $$$ from the “fools” who put their snouts on this fishy thing called E2.

I’m not complaining about the situation, but the whole thing it’s nothing more than a disrespectful mockery agains the honest players.

Fortunately, my wife’s games world related vlog gained ground over the last year, so i’ll make sure that her’s over 600.000+ followers will find out in the next material about this mockery which E2 became.

Cem Dilmegani
Mar 24, 2021 at 05:21

Thanks!

Jai
May 05, 2021 at 02:02

All those claims are the persons perception, they did do right by investigating and found that there were no bot purchases involved. At the end of the day it’s still an investment riding on hope, multiple people in the community have reported receiving their payouts after they sold their land even if there is a wait. What’s happening is loads of “investors” coming in looking to flip a quick buck. The premise is to create a virtual economy, the premise is to build a virtual world, this is just the beginning and most of the community is aware of that. I’m all in for the game aspect and it would be great to make a few bucks too, but patience is needed. Look how long those who invested in crypto had to wait to see increases? I keep telling our community that at the end of the day it is us who give it value, we know virtual land is worth nothing we know anything digital is worth nothing, but demand creates value and if we have a committed base and growing demand, we can make this thing soar….and profit a little too.

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