A few days ago I came across a post by some guy who is planning to start a project to help minnows. I can't seem to find the post anymore, it's now buried under thousands of new posts. Anyway, the guy pledged to give 5 SBD to 3 minnows every week, but only if the community supports his project by up-voting his post. His first post did not receive much support and he posted a second video pleading with the community to help him raise $300 by up-voting his post. Now, what does he intend to do with the $300? you may ask. He wants to invest it in bitconnect, where he already has a $200 investment and he is apparently getting an average 1% interest everyday which works out to about $2 for his current investment.
He hopes to raise $300 so that his investment will be increased to $500 and from that he will make an average $5 in interest everyday. This is where he plans to make the three x 5 SBD that he plans to donate to minnows every week from. That is a noble thing to do, if he is genuinely interested in giving to the community. Since I can't find his post anymore, I can't tell if he managed to get the support he was hoping to get or not. Alright, enough about this guy, let's get down to what this post is all about, is bitconnect a real investment opportunity or is it a Ponzi scheme?
First of all, what is bitconnect? According to their website:
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 does that even mean? I would be lying if I say I understand what bitconnect really is and what their business model is. Their website does not make it any easier for me. To me, bitconnect is clouded with mystery and they do very little to make people understand their business model. Since I joined Steemit, my interest in crypto currencies has risen tremendously. I still have a lot to learn, it's really hard for me to understand cryptos fully, but I do my due diligence to understand as much as I can.
I've been looking for investment opportunities in cryptos for about two months now since I discovered how lucrative they can be. I'm forever regretting missing out on bitcoin and many other cryptos that have multiplied in value astronomically in just a year, but I know many more are coming and I'm always on the lookout to jump in when I see an opportunity. I have to say, steemit made things a whole lot easier for people to get into crypto currencies and I will forever be thankful that I found out about it when I did, (of course, I wish I knew about it in 2016 but, well...)
Let us examine what a ponzi scheme is, the term originated from a man named Charles Ponzi who operated the first such scheme in 1919. Investopedia defines it as:
A Ponzi scheme is an investment fraud where clients are promised a large profit at little to no risk. Companies that engage in a Ponzi scheme focus all of their energy into attracting new clients to make investments. This new income is used to pay original investors their returns, marked as a profit from a legitimate transaction. Ponzi schemes rely on a constant flow of new investments to continue to provide returns to older investors. When this flow runs out, the scheme falls apart.Read more: Ponzi Scheme https://goo.gl/nbZUZ5
If we take a closer look at the bitconnect website, we will see a number of red flags. I will try to identify as many of them as I can observe. I would like to point out straight away that I am human and I also have flaws, my observations and opinions are just that, nothing more. Everyone is free to see things whichever way they want, I, however, encourage each and everyone who intends to invest in bitconnect to do your due diligence and make your own research before risking your money.
Red Flags
- Bad grammar
- Unclear business proposition
- No proof of trading to show how investors money is traded
- No whitepaper
Bad grammar
The website is littered with terrible English grammar. No effort has been made whatsoever to proofread and correct the errors on the website. Take a look at these pictures:
Unclear business proposition
Anyone who visits steemit website will have a clear understanding of what steemit is all about. Take a look at the bitconnect website, the landing page is terrible, it leaves a person with more questions than answers. The one line statement does not even make sense to me. I can't understand exactly what bitconnect is all about.
No trading history
The investment option claims that your money will be traded based on the fluctuations of Bitcoin and the proceeds are where the interest comes from. It is very easy to make such claims. The only way to assure investors that the claims are true is to show the trading history of the bot. There is no such thing on the website. They do not show the performance of the bot and this makes me wonder if there is a bot doing any trading at all.
No whitepaper
I have visited a lot of cryptocurrency websites and I think all that I have visited have some sort of white paper that explains what the business is all about and all the terms and conditions that are associated with it. Looking at the bitconnect website, there is no such thing as a white paper, or blue paper or red paper or whatever paper. If bitconnect was really about transparency and educating its community as they claim in their introductory video, then they are really doing a poor job at this.
I am not a financial advisor and I am not an expert in cryptos and investments, but I don't think bitconnect passes the smell test. There is a lot of mystery surrounding it. There is a lot that I can say that does not make sense to me, but I know there are people out there with better understanding who are using bitconnect and making money from the platform. Now if anyone can explain to me why it is claimed that I can make money in three different ways, then why is it that when I sign up the only option is the investment option which pretty much seems like a ponzi scheme to me. What happened to the mining and how is it done? If it is possible to mine bitconnect then why is the process impossible. I clicked on the solo mining links provided and followed all the steps they provided but all I managed to get was a bitconnect wallet. When I tried to configure the miner, I could not find the file that I was supposed to download from github. The provided link leads to a dead end. They also mention that if you try to do solo mining it's almost impossible to get a block, they recommend joining a pool, fair enough, it is almost impossible to find blocks for most coins doing solo mining using CPU. I joined a mining pool (bitconnect mining pool) by clicking on one of the links provided and I found out the pool also has no luck, it's been a month since a block was found according to the statistics.
There is no telling if the statistics provided on the pool mining websites are real since the info is not updating. Perhaps after another month or so I will check to see if the info has changed or not. There are links to five mining pools provided, I clicked on all of them to see if I can get to join other pools and just maybe I might be lucky to find a pool that has some results. I joined bitdeal which is part of the mining-Dutch pool. Surprisingly the platform looks exactly the same as the bitconnect mining pool.
The statistics here were a bit better, 3 blocks had been found in the past 24 hours. I created a worker and waited, but there's nothing happening on my account. The graph does not move or change at all. This is a pool for crying out loud, I should be earning something even if it is minute. I have joined bitcoin pools before with the same machine and I was able to get some satoshis even though they were close to nothing but there was something. What is it then about bitconnect coins that makes them so hard to mine.
I decided not to go further with mining, clearly, there's nothing that will come out of it on my side. Anyone who has managed to mine bitconnect successfully, feel free to share your experience. I will not delve dipper into the investing part of bitconnect, but I will point out a couple of things that make me worry. The promised returns are just too high. What bot can be so good at trading that it makes consistently high returns all the time. If anyone can prove to me that such a bot exists, then I think bitconnect founders should have used that bot to make themselves rich by trading for themselves or selling the software, don't you think?
The other thing is the incentives offered to get people to join, the referral system. It all looks like a pyramid scheme. They want as many people to join the bandwagon and all the new joiners invest their money, the money is used to pay the people on levels above them and as long as new people are joining, there is enough money to keep people earning and referring people. This could go on for many years until there is no one investing, then the whole thing will come crashing down. Only time will tell. The thing about ponzi schemes is that it is hard to prove that it's not a legit business until it crashes. I will not discourage anyone to join bitconnect, if you have the money to invest and you think it is a worthwhile investment, by all means, go ahead and put your money into it. You might make loads of cash, but then again you might not. I would rather invest my money in Steemit because I believe in it more.
Thank you for taking your time to read my post. If you have any contributions or comments, feel free to leave them below.