Plutus is a Ponzi scheme (probably)

For those who haven't come across Plutus yet, it is one of the crypto card providers, similar to (soon no more) Binance card or CDC card. Unlike the other two however, Plutus only has the card business and nothing else.

How does their card work? Whenever a customer spends money, they receive cashback, either percentage-based or from certain "perks". This cashback is paid in the form of PLU, which is an ERC20 token created by Plutus. After a holding period of 45 days, this PLU can be sold on certain exchanges (Coinbase, Uniswap etc.) for fiat or other tokens.
Like any other token, PLU only has value if there's a market for it, so where does demand come from? Demand comes from other customers buying PLU to hold it for additional rewards and they can also spend PLU to increase their reward cap. That's it.

So it's another service with a dedicated token like all the others, what makes this a Ponzi scheme?

Simply put, there is no utility provided by the protocol or company that generates sustainable value for the token. Customers only buy PLU in order to gain more PLU to sell. Thus, PLU only has value as long as Plutus gains additional customers who buy PLU to hold for additional PLU rewards. Like any Ponzi scheme they eventually run out of additional customers, at which point the value of the token has to deteriorate and holders either watch their holding continually lose value or exit at a loss.

This is usually the point where someone replies "but all of crypto is a Ponzi scheme!". This may be true if you believe that crypto has no utility, but it certainly isn't true when looking at individual tokens. Take for example BNB, which (rightfully?) is quite controversial on this sub. Just like PLU it is a token issued by a single company (Binance), it's also a token rewarded as cashback (Binance card), but crucially it has a lot of additional use cases. It powers the BSC, it provides benefits as a customer of Binance in the form of lower trading fees and referral rewards and more. Clearly, lowering trading fees from something like 0.1% to 0.08% by holding 100 BNB is of value to certain customers while being completely sustainable for Binance, since they're still making a profit. While the Binance card was economically just as unsustainable as the Plutus card, it clearly wasn't a Ponzi scheme.

Plutus generates revenue from credit card fees. In theory they could use some of that revenue to generate value for the token. However, the lowest level of rewards (3%) is already above what they receive in fees. If they actually paid all of the cashback rewards from their bank account, they would quickly go bankrupt.

If the current model is not sustainable, is there a sustainable version that could continue to exist? There are several possibilities that I can see:
1) They create additional services that generate value for PLU, such as an exchange.
2) They lower reward levels to something they can sustain with fee revenue.
3) The scheme disappears in some form. Potentially bankruptcy, potentially rug pull.

Number 1 sounds like a long shot. They do plan to open a DEX, but it's unlikely that it would become big enough to make the card sustainable. Number 2 is not unlikely. CDC have already lowered their rewards significantly. But since PLU has no other utility, reducing rewards would make holding PLU far less attractive, thus decrease the price and existing holders would likely exit at a loss.

What can you do if you're a customer? One of two things, really.
1) Speculate that you're early enough in the scheme to be able to get out in time at a profit.
2) Sell your incoming PLU rewards as soon as you can and never buy PLU.

They have recently changed their reward levels and run a promotion until November 29, which has caused the token price to increase. Some of you may be tempted to enter. It's your money of course, but I would advise against it (notafinancialadvisor).

Stay safe out there.