Those who follow such things will have no doubt heard of a new phenomenon on Netflix called Squid Game.
This is a South Korean thriller in which hundreds of cash-strapped contestants accept an invitation to compete in children's games for a tempting prize. However losing competitors are killed.
A bit drastic one feels, so different from our homely shows helmed by Bradley Walsh and Alexander Armstrong but with, perhaps a little more tension. What has this to do with finance? – well some entrepreneurial individuals launched a digital token inspired by the game.
Digital tokens are a form of cryptocurrency – a specific amount of digital resources which can be owned or traded, assigned or redeemed. A Bitcoin is a form of digital token which has an assigned value, other forms of token are backed by real assets.
In this case the Squid Game token was marketed as a 'play to earn' cryptocurrency where people can buy tokens to use in online gaming and then can earn additional tokens which can be swopped for currency or other forms of cryptocurrency. In this case the promoters claimed to have created an online version of Squid Game which players needed the tokens to play. As the popularity of the series soared on Netflix so the value of these tokens rose from 1 cent at launch to $2,856 in less than a week.
There were a couple of features which some cryptocurrency watchers felt raised red flags over the Squid Game tokens. Firstly token buyers were unable to sell their tokens and secondly was the look of the website promoting the tokens which was riddled with spelling mistakes and grammatical errors.
Squid Game tokens were available for sale on decentralised crypto exchanges such as PancakeSwop and DODO which allowed buyers to connect directly with sellers without any form of central authority. Consequently there was no regulation or due diligence on the validity of the tokens.
Then the website selling the tokens disappeared along with social media accounts promoting the tokens. It now seems that this is a classic 'pump and dump' scheme whereby promotors boost the value of, in this case, a digital token and then suddenly close it down and depart with all the money.
According to a technology website, Gizmodo, the promoters made off with approximately £2.5m (£3.4m).
This is not the only game in town. There have been many other instances of decentralised cryptocurrency scams aiming to draw in naïve investors with the lure of quick profits. Some, of course, aim to take a gamble by buying in and cashing out before the promoters pull the plug leaving the uninformed or blindly optimistic holding worthless assets.
The level of risk in the cryptocurrency world is very high. Buyers are attracted by press reports of huge profits to be made by investing in Bitcoin and other forms of digital token. Forms of token linked to popular media can be tremendously appealing to investors who haven't done their homework or, frankly, don't understand what they are buying.
Fortunately, whilst in the Squid Game those competitors who don’t win are shot, losers in the cryptocurrency market only lose their money but, perhaps learn a lesson that not everything in the metaverse is what it seems and a dose of good old fashioned scepticism can go a long way - even in a digital world.
John Taylor is an author for accountingcpd. To see his courses, click here.