Jumping aboard a Cryptocurrency Ponzi-Scheme

[fips]

Alright, this might be one bumpy journey, but here we go:

The legitimacy and longevity of cryptocurrencies alone is a hot topic right now.

But how about combining cryptocurrencies with a shady lending scheme, a mysterious arbitrage robot in the background, the promise of unmatched profits and secretive founders? Look no further but to BitConnect.

What the official website reads:
"BitConnect is an open source all in one bitcoin and crypto community platform designed to provide multiple investment opportunities with cryptocurrency education where it is entirely possible to find the independence we all desire, in a community of like-minded, freedom loving individuals who, like you, are seeking the possibility of income stability in a very unstable world."

What a short description on the system should read:
You deposit your Bitcoins in your wallet of their service, exchange your Bitcoins to their BitConnect coins (ICO-ish), lend these BitConnect coins to their arbitrage robot, receive daily interest (currently averaging around 0.9%) and get your capital back after so many days.

Here's an overview over their current lending interest:

The volatility software interest of the last days can be found on their website https://bitconnect.co/.

The massive interest rate, the forced use of their own currency, the generous referral program all scream scam.
If you do any research on BitConnect, you will mostly come across some more thorough and elaborate discussions by the critics and the comparably shallow arguments of referral-giddy supporters (I don't blame them - there are simply not many useful information to provide meaningful arguments).
Here are some reviews on the sceptical side of things:
https://steemit.com/scam/@thegrinder/th ... am-exposed
https://news.bitcoin.com/cracks-appear- ... zi-scheme/

However, as far as I have read, BitConnect hasn't fallen short of paying out interest and capital yet and even without any investment robot, the increase in the Bitcoin price alone could cover for the interest payouts and some nice profit for the BitConnect team (at least it could have in the past).

Therefore, I will just take a chance, use some play money and throw it at the Ponzi scheme to see how much sticks and how much can be retrieved.

As there is quite some interest in cryptos and lending platforms on this forum and as you usually provide some very insightful and valuable feedback, I thought I would share my experience on BitConnect.

I started out today, bringing in capital that guarantees a 0.1%+ daily interest rate.

I guess it will be just a question of how soon this service will be shut down and my money be in someone else's pocket, but for now, I'll just see how it goes. I will let you in on my experiences and keep you posted. Having emphasized that BitConnect shows every red flag of a Ponzi-Scheme, this cannot be a thorough investigation without referrals. If you are interested, please hit me up for a referral-link. Yes, of course that would make me money, but at least we can find out about how this machinery works together, I can let you in on the receiving side of referrals of BitConnect and the extra coins stay within the ERE community.

That said, the invested capital will probably be gone this year anyway and there will be not much to report upon

Until then, I am looking forward to the ride!

[Fish]

I didn’t read the links. But at 120% APY for the highest deposit tier(*), one just needs to put in about 0.84 years of expenses to become FI (presuming this isn’t a scam and interest rates hold up)?

Best of luck. I’ll be watching from the sidelines.

(*)0.25% daily interest * 120 days = 30% return on capital, then compounded 3x in a year —> (1.3^3 - 1) = 120% yield

[bryan]

Even though this and others don't even pass the smell test of being not-a-scam, I do think Bitcoin has ushered in a renewed interest in more traditional investment schemes. Lotteries, tontines, ROSCAs, etc. If done correctly, it removes a huge portion of the counter-party risk and trust required.

[BRUTE]

definitely sounds like a ponzi scheme, but those can make a ton of money if the ship is being jumped on time. if brute recalls correctly, there used to be a bitcoin ponzi scheme literally called "bitcoin ponzi scheme".

[fips]

But at 120% APY for the highest deposit tier(*), one just needs to put in about 0.84 years of expenses to become FI (presuming this isn’t a scam and interest rates hold up)?
...
(*)0.25% daily interest * 120 days = 30% return on capital, then compounded 3x in a year —> (1.3^3 - 1) = 120% yield

Afaik you can even reinvest everytime you have received interest of at least USD 10.
Also, you receive the volatility software interest, which historically averages around 0.9%.
On top of that you can receive additional "guaranteed" interest of 0.1-0.25% if you lock in more capital.

However, I think that neither the volatility software interest nor the system as a whole are sustainable.

brute, correct. The question is when the ship will sink.

[Farm_or]

<-- Happy to watch from the sidelines.
"YOU can do it!"

Interesting factoid: 237 kWh average energy required to mine one bit Coin . (NPR)

I've wondered about inherent worth. Not just "what somebody else is ready to pay for it."

[BRUTE]

I've wondered about inherent worth.

no such thing.

[bryan]

Counterexample, a picture is worth a thousand words. /s

https://en.wikipedia.org/wiki/Value_theory
https://en.wikipedia.org/wiki/Theory_of ... economics)

I've slept on it, and honestly it seems like setting up a basic decentralized susu/hui/ROSCA system based on blockchain tech should be pretty straight-forward. Added to my list of projects. If I ever complete it I'll start an ERE group with it.. for the most part we won't have much demand for the capital, but you never know (well certainly folks fighting high interest rate student loans would appreciate such a system).

[fips]

Counterexample, a picture is worth a thousand words.

True.
As for Blockchain/Tangles etc. I also see the waste of energy, but also this might be necessary in order to advance in technology. If we still lived in the Stone Ages, we would have a more sustainable environmental footprint, but also no progress. However, it goes without saying that this kind of advancement could be done in a more environmental-friendly way, but unfortunately, that's not the way it works yet (especially in terms of treating common goods).

I've slept on it, and honestly it seems like setting up a basic decentralized susu/hui/ROSCA system based on blockchain tech should be pretty straight-forward. Added to my list of projects. If I ever complete it I'll start an ERE group with it.. for the most part we won't have much demand for the capital, but you never know.

Those lending platforms do exist already today, however, as it is with these personal endeavors, you always find something that you could improve (and probably the founders of the platform feel similar, if they have honest intentions that align with your idea).

[fips]

UPDATE - Day 11

Merry Christmas everyone!

So far, everything is going according to plan:
- return on initial investment: 9,129%
- daily interest: check
- no reports on bitconnect failing to pay out: check
- growing traffic for bitconnect: check

Hiccups:
- BCC is suspended from future indexing procedures on the ground of curruption and security (link)

Average daily interest: 0.883 %
Return on initial investment: 9.129%

[fips]

Update - Day 14

Happy New Year everyone!

Stats:
- return on initial investment: 10.637%
- daily interest: check
- no reports on bitconnect failing to pay out: check
- growing traffic for bitconnect: check

Hiccups:
- A new cryptocurrency bitconnectX will launch January 10th without any further infos on what it's about. Maybe now another Ponzi scheme layer is added upon an old one
- Bitconnect claims to earn its interest from an arbitrage bot, suggesting that they could profit when the volatility in the market is high. However, recently the interest paid out on bitconnect has declined (which could be expected after long times of very high levels), but also the level of volatility in the market doesn't add up to the daily interest rates.

Average daily interest: 0.786%
Return on initial investment: 10.637%

[bryan]

I'm curious how you reason around the ethics of participating in something like this? I know a lot of things are shady if you squint hard enough, but a literal ponzi scheme (or various fraudulent ICOs/Coins and schemes around them) is pretty clearly.. not great?

[BRUTE]

if all participants know it's a ponzi scheme, isn't it effectively just gambling? taking money from other willing gamblers seems pretty ethically ok to brute.

[fips]

First off: I don't mean to engage in unethical business.
I have thought about this before and just as I have listed some cons before, there seem to be some possible pros (in terms of ethics) as well:

At least to my knowledge (and please correct me if you have more information), I have found some arguments that could count towards bitconnect being a viable long-term (and thus maybe "more ethical") rather than a short-term, shady (and thus maybe "more unethical") business:

1) Warning about associated risk
At least bitconnect.co itself talks about risk associated with the investment, even though they don't put the warning label into the spotlight (but then again - which financial advisor over-emphasizes on risk first?).

2) Not failing in payouts and no service complaints
As of now, the bottom line is that bitconnect is paying out and there are no complaints about their service (at least that I am aware of).

3) Profits generated by Bitcoin
You hand them over your Bitcoin and they pay you out in USD. If they have held onto the lenders' Bitcoins, they have multiplied the initial "loan investment" by their customers many times and made a very genorous profit for themselves, even after paying the comparable high interest to their lenders. On top of that, additional profit is generated by the transaction fees. On the other hand, customers have traded the potential of high reward (holding onto Bitcoin) for more security (daily interest payments).

4) Adjusting interest rate
One possible long-term (maybe more viable) strategy for bitconnect would be to lower interest rates according to what they can generate as profit from Bitcoin, their trading bot and any other fees. This is happening already (and does seem to losely correlate the price development of Bitcoin in the past).

5) Business concept
Bitconnectcoin is established as a cryptocurrency on its own. It has been argued, that bitconnectcoin has emerged with the primary focus to be viewed as the first choice to store value (in the world of cryptocurrency), similar to banks paying interest, because they were early movers in the world of cryptocurrency lending (again: afaik).

I understand that not everything is transparent with bitconnect, but also there could be a very viable long-term path by adjusting the interest rate to a very low level while growing a large customer base. On top of that, even without a trading bot, it seems that the payouts in the past could have been more than covered by the rise of Bitcoin and transaction fees alone.

[vexed87]

but then again - which financial advisor over-emphasizes on risk first?

A good one!

[bryan]

if all participants know it's a ponzi scheme, isn't it effectively just gambling? taking money from other willing gamblers seems pretty ethically ok to brute.

Of course, not all participants "know it's a ponzi scheme". Case in point, go to the homepage linked (no mention of Ponzi, unlike something like a PonziCoin project that makes it clear, etc).

Something like PonziCoin (or gambling, lottery, etc) is supremely fair compared to something like BitConnect or other frauds (ICOs, etc), I would say.

@fips shoots ta-self in the foot.. first post is "it's a ponzi, let me get in on this, I Accept the Risk of Losing All My Stake for Whatever Reason Whatsoever" and now it's actually a 5-point viable long-term scheme, thus "more ethical" (I would say that makes it "less ethical"). So I still wonder how @fips reasons around the ethics of participating in something like this (was it that easy to delude ta-self within 15 days?)?

[fips]

@bryan:
Thank you for your input, also especially for raising ethical questions. That seems to have become a rare treat in today's society. One of the reasons I like this community is that an above-average percentage of forum members argues sanely and tries to improve one another. And I hope that my feelings are misleading when they tell me that I am accused of knowingly engaging in unethical business. Because I still stand by my point that I have no intention to support such things by any means (and if you are still convinced that I am terribly deluded, please keep swinging at me - I am counting on you).

I am sorry if my posts seem like a sharp turn. There are several reasons I started out this thread on a negative note:
- I wanted to first emphasize on the risk involved to not have anyone blindly jump aboard.
- I am very sarcastic in nature and thus I tend to go on about negatives like in the first post. In retrospect, it does look awkard to invest in something that is mainly presented in a bad spotlight. I need to work on my somtimes overly pessimistic and sarcastic streak.

When later I gave some arguments for a possibly more ethical case, I did not mean to praise Bitconnect beyond what we know (and I get your point that making a fraudulent business model viable would even be "less ethical"). However, after having over-emphasized on so many unknowns in the first post, I wanted to at least raise awareness for some viable, sustainable scencarios (as in truely sustainable, not Ponzi-scheme-prolonging-sustainable).

[fiby41]

Bitconnect Slapped with Securities Emergency Cease and Desist Order

[fips]

Not to side with Bitconnect, but I am not sure if
a) it's correct to mention the company in the order as Bitconnect Ltd when they have changed to Bitconnect Plc afaik (although they might have used the correct address in the order),
b) the order itself isn't void with Bitconnect's term of use clearly stating "The information and services provided on the Site are not provided to, any person or entity in any jurisdiction where the provision or use thereof would be contrary to applicable laws, rules or regulations of any governmental authority." and "You acknowledge that you are not relying on the Bitconnect or any of its affiliates, or consultants in making an investment decision." If the Securities Commissioner has found that the BitConnect investments are securities and that Bitconnect is not registered, then Bitconnect covers this case by not providing any service to those markets by their term of use. The reality might be different, but then again you can access any website from anywhere.

The general argument of missing registration would probably hold true for many cryptocurrencies, especially with ICOs, lending, staking etc. I was hoping for more new and specific information on Bitconnect or the reason for this order.

The market seems mostly unimpressed (so far?), with Bitconnectcoin trading lower, but not free-falling. However, Bitconnect has not announced tomorrow's interest, which they ususally do, or they have set the daily interest to zero (which has happened before).

[bryan]

https://www.youtube.com/watch?v=4Yu6dA603uw&t=59s