Bitconnect draws flak from community, says it’s a ponzi scheme

Bitconnect. An open source, peer-to-peer, community-driven decentralized cryptocurrency that allows people to store and invest their wealth in a non-government controlled currency, and even earn substantial interest on investment, at least according to its founders. Because for its critics, Bitconnect is a pyramid scheme of sorts that leaves stragglers keeping all their apples in their plates while early adopters get rewarded. While cynical people will argue that almost every other cryptocurrency is the same, evidence of wrongdoing concerning Bitconnect is starting to surface.

P2P Ponzi Scheme?

Accusations of  “scam coin” are thrown around in crypto on the daily, with even established institutions like Dash having shade tossed their way. Scamming investors with a Ponzi scheme and pre-mining an insane amount of coins aren’t in the same ballpark, however. Recently, cracks start to form around the fragile glass keeping Bitconnect intact, suggesting that there might be something more underneath the surface.

After its release in 2016, the market cap of Bitconnect’s BCC currency quickly rose to $2 billion, placing it in one of the top spots. It has since plummeted to a quarter of its ATH, and in a widely shared tweet from Ethereum-founder Vitalik Buterin, deployed the word that every industry does not want to associate themselves with – ponzi. 

Referrals of Referrals

However, it isn’t Bitconnect’s steady market cap that is slowly breaking down its foundations, but rather its referral scheme that the company is pushing. Referral programs are not at all strange, since most companies such as the BPO industry utilize it, and even crypto, where traders share referral links to wallets, token sales, and purchases. However, receiving commissions is unlike being part of a scheme where the only way to earn is by pushing other people to join, and sooner or later, a group similar to that will be in disarray.

Investors who placed $10,000 into Bitconnect were promised a daily interest of 0.25%, making out an annual return of over 90%. Put a couple of huge bonuses in the mix and Bitconnect seems like it has everything together, at first glance. A closer glance, however, reveals the coin to be in bad shape at around $270, with a descending market cap represented in blue, going down since earlier this month. A second look shows how much Bitconnect has failed in the past, and anyone who’s tried to dig deeper will discover a collection of shell companies in complete disarray.

Seven Circles of Earnings

Bitconnect is a multi-faceted platform, with its lending program causing the most uproar from the crypto-community. The scam/legitimate money-making opportunity works as follows:

  1. Deposit bitcoin with Bitconnect
    2. Purchase BCC on their exchange
    3. Invest these coins in Bitconnect Lending
    4. Earn daily interest and get your capital back after so many days

The question is where does Bitconnect get the money to pay all these huge paychecks and bonuses? That’s classified of course, but more and more people are speculating that it involves the company’s seven-tier recruitment scheme that profits from referrals of referrals.

Sinking Ship without survivors

Still, there are two sides to every argument and most of the allegations and claims getting thrown at Bitconnect’s way can also be applied to Bitcoin’s earlier days, in the sense that the project’s identity remains hidden, save for the fact that they’re based on “the far east”. And with most of the BCC locked within the company’s boundaries, it will be made worthless if its developers end up getting jailed, or worse, perform an exit scam.

Other side of the spectrum

Although more and more people are doubting the legitimacy of Bitconnect at present, the platform still has a user base that won’t back down so easily when the tides continue turning. This comes as no surprise, given that Bitconnect has delivered on their promise, and have rewarded their investors with their due profits and such.

There are numerous reasons why Bitconnect’s founders chose to stay anonymous and there is absolutely no issue with that. Still, until a clear explanation as to how their system works is provided for by their team, potential investors are advised to go into the rabbit hole with caution. If this descent continues, the aftermath will be enormous.