"To me, the Internet is a big scam." - Ry Cooder
One of the most common questions about DRIP is: Is it legit, or is it a scam? I do understand where the question is coming from. DRIP makes some ambitious promises - the most prominent being "1% yield per day". Can it deliver on that promise? And if not, is it a scam or a Ponzi scheme?
What is DRIP
Let's first take a quick look at what DRIP actually is. DRIP is an ecosystem and an investment platform in the crypto/Defi space, and it can be accessed at https://drip.community/. The DRIP Token is the native token used on the platform.
The DRIP ecosystem consists of several parts, but the most popular is the faucet, where people can stake DRIP tokens for a daily 1% yield. Other major parts of the ecosystem are the fountain, which is where people can exchange BnB for DRIP tokens and vice versa, and the reservoir, which is a liquidity pool supporting the ecosystem.
Being a Defi protocol, there is no KYC or signing up in order to participate. Participants will need to have Metamask or a similar crypto wallet and connect it to the site in order to interact with the site.
Once connected, you will also need to have some BnB in order to get started. What you would typically do, is buy some DRIP Tokens to get started (you need a minimum of one token). Then you can go to the faucet, deposit your tokens, and voila - you are now earning 1% per day on that deposit, for one year.
The rewards are running continuously, every minute 24/7. Once you have earned some rewards, you can either choose to claim those rewards, which makes it possible to sell them for BnB. But it is also possible to hydrate them, meaning putting them back into the faucet. This makes it possible to grow your deposits through a compounding effect, which is a powerful way to provide exponential growth.
Every deposit will receive a 1% reward per day for 365 days, but if you hydrate, that will count as a new deposit. This way you can prolong the reward payments for as long as you want. When you have claimed or hydrated a total of 100 000 DRIP, you have reached the max limit, and your account will no longer receive rewards. But you can of course start one or more new accounts.
One thing to be aware of is that once you have staked some DRIP tokens in the faucet, they cannot be withdrawn. Only the rewards can be claimed. This may sound strange or scary, but remember that with 1% daily yields, you can easily earn much more than what you started with, especially if you hydrate your rewards.
What is a scam
Before we can discuss if DRIP is a scam, let's take a closer look at what a scam actually is. There are three elements that need to be in place for it to be called a scam:
A malicious actor - i.e. the scammer - someone with malicious intent
Deceptive tactics - something that is not what it seems
The pull-off - where the scammer exploits the victim and harvests the benefits
A typical example would be a phishing site: The scammer (1) sets up a fake web page and tricks the unsuspecting victim to e.g. enter his credit card details (2). Once received, the scammer exploits this by either making a cash withdrawal or online purchases with the victim's card (3).
It seems like the word "scam" is widely used to label almost any activity where the outcome was different than expected, but in reality, it is not a scam if one of the three elements above is missing.
An example could be if you paid for something in a store using cash, and were supposed to get $30 back. But later you realize that one of the three bills you received was not a $10 bill, but instead some foreign currency of much lower value. If this was done by mistake, it is not a scam, because there is no malicious intent. But if the storekeeper intentionally keeps a stack of foreign bills to put in between $10 bills to naive customers, then it is a scam.
Another example could be a certain stock that is promoted as a "Strong Buy" by a stock analyst. An inexperienced trader sees this and invests all his money in the stock. The company then goes bankrupt, and the investor loses all his money. Is this a scam? No, it is not. The victim may feel he has been scammed because he thought he was going to become rich and instead lost all his money. In reality, it doesn't have any of the required elements for it to be a scam. Investing in the stock market implies risk, and the investor should have made sufficient effort to bring himself up to speed on the given stock before investing. He made a really bad decision and lost a lot of money, but that in itself doesn't make it a scam.
In reality, things are not black and white. While some things (like phishing sites) are clearly scams, and other things are clearly not scams, there are gray areas where it can be hard to say clearly that something is or is not a scam. One example could be a gift card - something that most of us would say is not a scam. But what if a certain gift card had an expiry date of just 3 months, and that information was hidden in a terms and conditions text somewhere that people would rarely read? Does that make that gift card "a scam"?
In my opinion, there is a difference between a bad practice and a scam. There are a number of companies having one or more bad practices, doing business with low ethics, or giving customers poor value and poor experiences. That in itself doesn't make it a scam. The difference is that a bad practice can be improved, while an outright scam cannot. In the example of the gift card, it would be easily fixed by extending the expiry date. While a phishing site simply cannot be fixed, because it provides no value to anyone except the scammer whose only motivation is to steal people's money.
Is DRIP a scam?
The short answer is "No" - DRIP is not a scam. That doesn't mean that there aren't some bad or at least questionable practices. But in order to be able to say that DRIP is a pure scam, someone must intentionally have set up the ecosystem to steal people's money using deceptive tactics and then run away with it. That hasn't happened!
The good parts
There are many positive things in the DRIP ecosystem:
Transparency: Everything that goes on in DRIP happens on the Binance Smart Chain, which is a blockchain. This means that all data are available to the public and that experts can analyze the behavior of the underlying smart contracts to see if there are signs of foul play.
Immutability: The faucet smart contract that pays 1% is immutable. This means that it cannot be changed. It is basically carved in stone into the blockchain forever and will continue to work for as long as the Binance Smart Chain exists. Which means a long time.
Community: DRIP has a strong community of enthusiasts on Youtube, social media, and blogs. They provide information, news, insight, and more. This can be a valuable source of information for new investors, plus it is always good to have a community where you can talk to other people with similar interests.
Risk/reward potential: The risk/reward potential of DRIP is extremely high! That doesn't mean you cannot lose money on DRIP (you certainly can!). But given the compounding effect, you can start with as little as around $2 plus gas fees, and compound your way up to max (100k) in a little over 3 years!
The bad parts
Misleading marketing: DRIP is often marketed as an easy way to get rich. This is misleading at best. Everyone should know that there are no easy ways to get rich and that all investments carry risks.
Inflation: The main selling point of DRIP is that you can earn 1% per day. While technically correct, you are earning that reward in DRIP token. So if the DRIP price is falling, you are earning less. And if it is falling more than 1% per day, you are actually losing. This is something I wish would be explained much more clearer for new investors. The reason DRIP is currently falling is that many investors have been compounding DRIP for a long time, causing lots of new DRIP to be minted. This increases supply and lowers the price. This is contrary to the "deflationary" characteristic DRIP was supposed to have and has been marketed as.
Lack of real value: This has been my long-time pet peeve with DRIP. For a long time, the only value added to the system was from new investors. A system that is not providing a product or a service other than circulating the existing deposits, does not provide real value and cannot grow sustainably. This is, however, about to change. In the DRIP roadmap, there are several products/services planned for the near future which will bring external capital and real value to DRIP
Unrealistic expectations: Many of the DRIP influencers e.g. on YouTube have for a long time announced their unrealistic and unfounded predictions of the future DRIP price. "DRIP to $3000" and "$10,000 DRIP possible?" are examples of video titles released not a long time ago. This is pure hopium and serves primarily as clickbait to spike interest and gain subs. Unfortunately, it has little root in reality.
Undisclosed founders identity: The founders of DRIP go by the names "Forex Shark" and "BB", where Forex Shark is the lead developer and visionary. Their identities are not known, and there is no public company to sue if sh*t should go sideways. Although anonymity does not equal fraud or bad intent, it would for sure be a big plus trust-wise if the driving figures behind DRIP would disclose their identities and come public.
Conclusion
Going back to the original definition of a scam, it is clear to me that DRIP is not a scam in its current form. Yes, there are some questionable or bad practices that they should address, most notably the lack of real value. But in essence, DRIP works exactly as it should. It pays out 1% every day. The decline of the DRIP price this year may have caused many people to lose money, but that in itself doesn't make it a scam.
DRIP can still become a scam. The founders are anonymous, and they can use back doors in the system and run away with the user's money. But why haven't they already done so? It would have been easy for Forex Shark to whitelist his wallet towards the Tax Vault earlier this year, empty its values and run away with millions of dollars. Now that is much less profitable, mostly because the Tax Vault is more or less empty.
If you look at the crypto and especially the Defi space today, it is more or less the wild west compared to how things are done in TradFi. In that perspective, DRIP remains a solid and consistent figure in the landscape, even if there are things that need to be improved.
I am unable to see any malicious intent. To me, that makes it clear that DRIP is NOT a scam.
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