I was asked by a subscriber of mine on youtube to explain how Bitconnect can afford to pay off all of these referrals. Here's my attempt to do so. Please keep in mind that this is a scenario that I created, and not what I know for sure that Bitconnect is actually doing. Based on my understanding of how the system works, this is my opinion, or atleast how I would go about making profit and paying off referrals. Comment and let me know what you think. Let me set up the scenario. I will use small numbers in order for people to be able to follow and see how this idea of mine works.
Bitconnect has a total of 9 people using their loaning platform.
8 people have $100 loans, which equals $800 within the loan pool.
1 person has a $200 loan which equals $1000 within the loan pool.
The volatility software/trading bot makes $10 profit on the day, trading with the $1000 within the loan pool.
Bitconnect says “whatever the return is, we keep 20% of profits made daily and distribute the other 80% to the customers who pooled their money as a way to make profit for giving these individuals access to our trading bot”.
Bitconnect takes $2 from the $10 made (which is 20%) which leaves $8 left.
9 people issued loans which means that the $8 must be distributed evenly (in respects to percentage, not dollars)
In order to provide an even percentage on the $8 across the pool of participants, Bitconnect issues a interest reward of 0.8%
8 people who issued $100 loans are paid $0.80 and the person with the $200 loan is paid $1.60
To do the math,
$0.80*8 people= $6.40. add the $1.60 from the person with the $200 loan and you have your $8 distributed evenly across the pool of loaners.
In a situation like this Bitconnect makes cash hand over fist in this scenario. Why? Because this is a situation where Bitconnect didn’t even have to contribute to the pool of money that was used to generate a profit. This is basically “free cash” that Bitconnect can receive daily simply by providing access to their trading bot for their customers
An even smarter scenario would be for Bitconnect to also contribute to the pool. This is where Bitconnect can make a lot of money, and im talking multiples.
We’ve already done the breakdown with the 9 customers pooling $1,000, well imagine if Bitconnect put in $1,000 of their own money.
The Trading Bot goes out and makes $20 dollars on the $2000 used to trade. $10 of the $20 is Bitconnects to keep. They keep 100% of the money’s generated from their $1,000 investment. And in my scenario, Bitconnect also receives 20% of the other $10 generated from the customer pool. Bitconnect has made $12 on this daily trade while the customer who put in the most money (Customer with a $200 loan) made just $1.60.
Now, everyone is happy. Customers are making almost 1% return daily on average and Bitconnect is making money hand over fist and can also afford to pay off individuals who are going out and referring people.
Now remember, Bitconnect keeps 100% of the money that they put into the pool and receives 20% of what customers generate, and though they must pay for referrals (which is 7% of whatever the person referred put in for a loan. Ex. A $100 dollar loan means Bitconnect pays out $7 to the person who referred the individual), we must understand that Bitconnect will now receive profit of 20% from whatever that $100 loan generates before the customer is even issued an interest kick-back. So in the long run it pays handsomely to pay the $7 to the person going on to refer because you’re going to make multiple times that at the end of the 299 day period in which that $100 will be locked up.
Lets do the math.
If the trading bot generated $10 off of $1000, then it’s safe to say that it could generate $1 off of $100.
Bitconnect keeps 20% of that, which is $0.20 and issues the rest in form of an interest payment to the newly referred customer which is $0.80. Do this for 299 days and Bitconnect has made $59.80 cents off of this new customer at the end of the holding period. Subtract $7 from that amount given that this is what it cost Bitconnect to pay the customer whom referred this new customer and Bitconnect has made a total of $52.80 simply for paying $7 to a customer that brought in a referral. And remember, there are people who were not referred to the site and simply signed up so Bitconnect doesn’t have to pay $7 to anyone in order to satisfy a referral agreement. In that scenario Bitconnect would have made a total of 59.80 from a customer with a loan of just $100 and without a referral. As for the customer, they’ve made $239.20 at the end of the holding period AND they receive their $100 that was pooled.
Given my scenario, this is how Bitconnect can make money with the lending program while at the same time having the capital to pay off individuals who generated referrals. And remember, this also does not take into account the money that Bitconnect makes on their BTC/BCC exchange, which customers pay a small percentage fee to Bitconnect when they are converting their coins back and forth. This also doesn’t take into consideration the amount of money that Bitconnect has made through the value of their coin. In January 2017 the value of BCC’s were $0.16, at the time of this writing BCC’s are worth $52.50. That’s a value gain of almost 330 times of what the original price was just 6 and a half months ago.
Jeti Knight