Incentive trees and what we can learn from Bitconnect
The incentive tree - a geometric reward mechanism
The more I look into Bitconnect the more I realize what the genius is about the platform. The genius of Bitconnect is it's marketing. This led me to look at what motivates people and why referral marketing is the most effective and the result was the discovery of a paper discussing that very topic in a way applicable to the crypto space.
- Incentive trees are an algorithm which act as a mechanism to determine how much rewards a participant receives based on their contribution to the network.
Incentive trees have been studied for use in crowd sourcing, or human computation, but no one has thought to think about the impact of incentive trees on the crypto space. The incentive tree algorithm may in fact be the secret sauce to improve the marketing of any crypto project.
Academic literature classifies the incentive tree algorithm as a "geometric reward mechanism". The interesting thing is this can also be simulated on computers, and machine intelligence can be involved to iteratively improve the effectiveness of these algorithms over time. This topic falls into the field of "computational social science".
References
Lv, Y., & Moscibroda, T. (2013). Fair and Resilient Incentive Tree Mechanisms.
https://steemit.com/bitconnect/@vlemon/warning-do-not-invest-in-bitconnect-it-is-a-ponzi-scam-read-these-10-reasons-why
My post wasn't about whether or not you should invest in Bitconnect. Did you even read it? My post is about what Bitconnect does best which is market itself. It's a new species of crypto and nothing like it has existed ever. Usually crypto has struggled to appeal to the mainstream or to market itself (including Steem), and usually crypto whether you think it's a ponzi or not, causes the average investor to lose money.
After much research I lean against calling Bitconnect a scam. People are being paid so it isn't a scam. You could call it a pyramid or ponzi but that is what people from the fiat world think of Bitcoin so I don't see that as particularly helpful. Why are we adopting the risk adverse attitudes of fiat?
Personally I see Bitconnect as being very risky like Satoshi dice, or like holding a crypto for the long term is risky. If it is very possible that all these coins could never give you ROI and go to near worthless over night so if someone is willing to hold Bitcoin for 5 years in cold storage how is that any less risky than playing around with Bitconnect?
Just my take on it. Either way, the marketing techniques could benefit Steem SMTs in my opinion. Steemit might not be willing to do the referral marketing but SMTs can.
bitconnect is full premined token
what is new and innovative that hasnt been before?
Bitconnect is MLM ponzi is a fact
Scams pay very well more so than legitimate cryptos and are generally funding heavy in marketing over anything...
that is until they pull an exit scam when they take enough money
trying to draw similarity between bitcoin because traditional financiers are against isn't a logical statement and regarding bitcoin is hearsay bitconnect has facts showing that it is a ponzi not rumors
bitcoin works on economics principles and rules not on investment and marketing like bitconnect
bitconnect has recently defaulted on tax obligantions being registered and trading in the U.K and earlier in the year moved operations to Indonesia in 60 days will be a shitstorm coming there way so dont expect it to last much longer
You should not used premined token as a point here, if you been around here and in crypto for some time you would know why.....
I am not really gonna defend anyone or any crypto but the hypocrisy is on the roof, do folks even understand how the Steemit reward pool works and how the Steem Dollar works, if you did, then you probably ask a different question.....
Again the post deal with marketing and probably how that technique is being used by probably one of the most successful crypto of 2017....
I wish we can articulate concepts of how a lending platform used Proof of Stake and Proof of Work to leverage its token BCC against BTC while incorporating marketing at its finest....People argue about the returns, but we also have to remember that both BTC and BCC has seen year to date growth of over 900%, that's on the blockchain... that isn't made up numbers.... the asset class and mechanics is is truly amazing
Once again, not defending, I am more interested in concepts and application of them, I don't want to know to much about people personal lives or speculation
yes i have been around a long time and to use full premine is a good point because isnt a coin with economic fundamentals or the strength of security like bitcoin or others so to liken it to others isnt an argument for is trying to draw similarities between different things
saying bitconnect gained in price is irrelevant of course it would they take payments in bitcoin so can push the price for free
you say at the end you are not defending yet say how amazing it is and the gains its made, it is scam of course it pays a lot when they exit they will take a lot.
Once again, not defending anyone or any crypto, but lets evaluate the mechanics.....
The strength of any cryptocurrency is the blockchain and code powering it....In Steem we have Delegated Proof of Stake, it is our leverage relative to BTC or USD or any pair that the market providers give...In Steem we are leverage mainly against BTC and USD an thus we derive value, that value give power to the participant base on his Stake, what makes Steem blockchain unique, we participants mine the Steem and the overall value of Steem is base on the participant that choose to first buy the Steem on the exchange...one controversial aspect of the Steem ecosystem is the SBD, how does it obtain value, it can obtain value if its pegged to Steem or another asset that has value(in SBD case its the USD)...what one must understand here, something must offer a bridge to obtain value or a consensus must be reach where all participants agree that X is indeed worth that amount...If we should compare cryptocurrency to government back notes, the varying world currencies are backed by the respective governments making them legal tenders and thus giving them some market value....In cryptocurrency we are relying on the code and exchange, that says, given the demand and what available participants are agreeing that 1 BTC is worth this amount and from this other cryptocurrency/token obtain their value....There isn't any government backing so theoretically no one has any legal jurisdiction and no law is really broken...
With regard to bitconnect, the mechanics behind it are Proof of Stake and Proof of Work, two concepts you should be familiar with so I wont get into any detail..the max supply is 28 million and current supply is around 8million, now base on the supply and the demand BCC has seen its value risen from 3 dollars all the way to 280 where it is trading currently...impressive growth but we are missing the point of how it get there, it gave an incentive, an probably the incentive program fired up people who were energized to go out an recruit....what makes this unique, you can trace the transaction on the blockchain like we do with Steemd and the blockchain base on the market rate and supply give it a USD value of over 2 billion USD....there is much more to say especially with regard to Proof of Stake, an how the company has taken advantage of it to lock up tokens used in loans to further drive its price...so we have to zoom out now, we have three asset class BTC, BCC and USD, both BTC and BCC are appreciating relative to USD, the contract obligation of BCC is to pay the lender the equivalent of USD BCC value of their loan duration...at the beginning of January 2017 a 10K loan would have cost over 3000BCC tokens which has contract obligation of 120, if we did the calculation now a 10K only cost Bitconnect 49 tokens with an astounding USD return...if we look at the value left on the blockchain, Bitconnect made an absolute kill... now we haven't even mention the controversial bot but trading bots has been around with us since 2002, its primarily Bots moving in tune of over 4 trillion USD dollars for banks like Citigroup and look at the volatility in crypto, so we should really move from see this as far fetch and try to articulate weaknesses and strengths of the model
your making an example between different things yes bitconnect use pos also pow is much different than steem dpos
stating that they use POS is irrelevant to their legitimacy and isnt a innovation they created
also to say usd a a trading pair isnt correct majority of trades are done with btc on a platform they control only a small fraction not even 1% is traded in usd
artificial growth from a constant pump isnt a great achievement they accept btc in exchange for usd take fees from trading and in between etc is easily achieved
trading bots are in every market
humans cant make trades as fast as they happen 90% of trading is automated by bots
recently this year bitconnect relocated to Indonesia from the U.K leaving millions in unpaid taxes and within 60 days U.K will be seeking assets to claim this scam wont last much longer
You haven't read what I said, I never said POS was an innovation they created, I am saying they taken advantage of the concept to further their business model....
If you are referring to Bitconnect using BTC as payment then you lack the mechanics of how it works, it pays the USD BCC value, the only obligation of BTC in the contract is as an entry as with any cryptocurrency.....
There is nothing artificial about it, if Ethereum should incorporate Proof of Stake and lock up their coins in contract it would spark their price as well, if you aren't familiar this is basically the same concept behind Masternodes, its one of the features Dash has benefited from, in essence you can even think of Steem Power in the same light, the more power up the less Steem available and if the demand is great, Steem price would absolutely pump, so it isn't artificial... that how the market works, its the beauty of these varying cryptocurency project the code governing it and the economic model behind it....low supply coins are sensitive to price hikes providing that there is demand... Remember these concepts are ways of securing the blockchain...with regard to the article, the question we can ask, could Steem create an incentive, it used to be offering interest on SBD and the inflation that existed with Steem but participant had to deal with their Steem being lock up for over 2 years... its very lucrative to have a Dash masternodes but if the participant wish to sell then he/ she must forgo the agreement, remember the payment is in DASH at the market rate, so if Dash price continues to drive up, what matter place to be... what these coins are trying to do is give the coins more utility, for example Dash want to the crypto of commerce(used as payment option, that why getting merchants on board is important) when you do that you have another stream of income from transaction fees and the trading volume markets the crypto, so when Bitconnect makes moves to get debit card it shows that these people are making moves....I am trying to be objective as possible... I hope no one flags me but hopefully we better understand with regard to the 60 days we have to see how this plays out, quite frankly cryptocurrency does not really have any legal jurisdiction, what government can do is dictate what is a legal tender of commerce/ trade or not apart from that, there isn't much....base on the government classification whether they consider it currency or security, then we have to think of capital gains and the laws that exist with regard to taxation in that given country where the gains are realized apart from that, there isn't much written in law
These are only your personal opinions, but my post was not an opinion piece. I offered the facts based on academic literature which I cited. There are people who don't touch crypto by the same arguments you use about ponzi, and people who wont use Steem by the very same arguments. Steem has bots too, whales, and an internal exchange with a "Steem Dollar". Steemit+Steem is a legit innovation in the space and deserves to be discussed, but so is Bitconnect.
you keep referencing steem and other technology bitconnect doesn't use and are irrelevant
comparing two different things with little similarities is false logic and a week argument for
if you check this link you will see how bitconnect has committed criminal tax evasion from the U.K and will have a case put against after 60 days
So loaning is another form of mining? Plus they have an exchange. Their exchange takes 0.25% on every trade, which is the same 0.25% they give in interest max on loans. The interest or any other promises are regulated in the sense that they are variable rates and they can suspend accounts.
Also Bitconnect is not convicted of tax evasion, those are FUD rumors which have no documented evidence. The evidence does reveal a company with shareholders and you can find the names of the shareholders. Bitconnect based on all evidence is not going to shutdown in 60 days and even if somehow hackers shut the site down it is just like Steemit and can come up again in another jurisdiction because they have their own blockchain.
Anyway the post was not about whether you should invest in Bitconnect. We know you don't plan to invest in it and that is fine as no one asked you to.
References
Something to consider about Bitconnect, they could also be using the loans to simply buy BCC tokens. This would reduce the supply of the BCC, pushing the price up for future loan givers (you cannot take out a loan without first buying the token). The thing is, no one really cares about the price of the BCC tokens except outside speculators, who again could push the token price higher doing margin like trading, so in other words as long as the price of the BCC token keeps rising I do not see how Bitconnect will run out of steam.
It's not some simple thing like most people seem to think it is and I'm not saying I trust what they are doing at all. If they offered proof that the tokens sent to their bot were being burned however, this would completely change my mind. The Proof of Burn model already is used for OpenLedger for instance. If they burned all tokens (or provably locked them up) or the supply were reducing then people could in theory track the reducing supply to be able to show the exchange is making some kind of measurable profit as it could be seen on the blockchain.
They do have a blockchain explorer: https://chainz.cryptoid.info/bcc/
So it can be analyzed to either prove or disprove my speculation.
The largest wallet has over a million tokens. I hope this is the Bitconnect team itself because if that is a whale that is a scary amount for anyone and probably enough to crash the whole thing. On the other hand if it is the Bitconnect team and the team by some miracle are ethical, then this could be the reserve fund to keep the network operational for years potentially, because as the price of the token goes up, the value of their reserve fund goes up, and as long as demand exists for the token and they have the ability to supply the token, they can fund themselves without the need to take much of the profit from the centralized exchange.
Transaction fees on their centralized exchange can generate profit, but I don't know if it is enough for the affiliates, perhaps for now? I also followed up on this post with an additional post in which I speculate on whether it is possible to create a mathematically sustainable affiliate program over Steem. So far I lean toward yes, based on the fact that we have similar concepts like Steem Dollars and stable tokens, there is no reason in mathematics why it is not possible and it's just a matter of managing black swan events, and limiting the risks to some acceptable range.
An algorithm can adjust commissions rate on a weekly or daily basis. As long as these rates are not fixed or guaranteed in code then the variable rate will allow it to remain sustainable because as long as it never goes beyond the budget constraint it is mathematically sustainable. So if set aside 5% or 10% in the budget, then whatever that represents in tokens is what affiliate marketers get paid.
I fine it weird that Steemit, a place where bloggers were getting paid $1000 per post a year ago, are now filled with people saying the math for affiliates to be making thousands per day is impossible? The only way it is impossible is if the price of the token doesn't support continuing to pay out at those rates, or if the growth of the program outgrows the ability to pay for it (a sybil attack of a sort). In that case just like with mining, you reduce the payouts across the board to adjust to market conditions which can make it sustainable.
References
We can explore the first possible application of SMT would be Steem, a token that rewards marketers of the Steem blockchain, we can probably take some points from Bitconnect an apply it here on Steem, that was the tokens would be a currency for marketers.... The difficult part would be getting the correct model as we want a token thats lucrative enough and not just a badge with no real value
bitconnect is a scam and has recently committed criminal tax evasion from the U.K will be cases against within two months
https://beta.companieshouse.gov.uk/company/10278342
Are you spreading fake news about Bitconnect on purpose? If you are trying to convince neutral people that it is a scam and you use out of date information then it makes you look like you have an agenda.
Here is the latest and correct information: https://beta.companieshouse.gov.uk/company/10948031
They started a new company and that explains why the old company is being allowed to expire. Also to qualify as a scam they have to stop paying people but since people are being paid you cannot call Bitconnect a scam. You can call it a pyramid or Ponzi scheme just like you can call any other crypto including the crypto we like to use but it doesn't mean the pyramid will collapse any time soon as they can adjust everything, from interest payments, to levels on their referral program, and have made changes.
The only neutral position I can take is to say it is inconclusive as to what Bitconnect is. It could be sustained or not depending on the motivates of the people operating the website which remains a central point of failure. Steem avoids this because Steem will exist without Steemit due to the design.
if you did your research properly and weren't trying to recruit people to your scam you would see that there are 3 listed with bitconnect in there name
bitconnect the cryptocurrency waas registered here by Ken FITZSIMMONS,
https://beta.companieshouse.gov.uk/company/10278342/officers
the one you listed has multiple people none being ken FITZSIMMONS
the exchange is the central point of failure which deals with over 90% of volume when case are put against will be seized and owners will be gone with what they can pull in an exit
it is conclusively proven to be a scam and you supporting are a scammer
get your facts straight before talking shit
You will actually find some great arguments against Bitconnect on the 3 links I post below:
https://steemit.com/cryptocurrency/@vimukthi/trevon-james-vs-vitalik-buterin-in-depth-analysis-commentary-on-bitconnect
https://steemit.com/cryptocurrency/@arthuradamson/bitconnect-investigation-if-this-is-a-scam-and-it-falls-the-government-will-not-turn-a-blind-eye
https://steemit.com/bitconnect/@arthuradamson/bitconnect-investigation-update-01-tumbling-down-the-rabbit-hole
I'd put down some quotes from real people about BitConnect. All of the following quotes are simply unedited copy pastes from YouTube.
This is just human kindness people helping people, that's what the world needs and financial abundance is our basic inheritance not greed and fear like the controlling power wants us to live in and believe. They treat us as we are puppets and we are not. Love on....
HI TREVON! YOU MADE MY DAY, YOU REALLY CONVINCED ME THAT BITCONNECT IS SUSTAINABLE. I HAVE BEEN HAVING DOUBTS ABOUT ALL THIS AFTER WHAT HAPPEN TO BITPETITE. MY QUESTION IS, IF OTHER COINS ARE CREATED SIMILAR TO BITCONNCET LIKE WESTERN COIN, DOES IT HAVE THE SAME POTENTIAL AS BITCONNECT. BASICALLY IF EVERYBODY LENDS AND STAKES IT IS WORTH INVESTING IN IT???
The companies up 42000 percent was featured in Forbes magazine! This year your seed come back you have to but there coin at market value the coin don’t disappear they just keep recreating wealth ! There day trading your money with all the inside info plus its under priced with will be 300 by the end of the year ! They may limit the number of traders once the achieve max has power think about it they creates 6 billion last night out of thin air ! There sharing the wealth they going to make 10,000 millionaires !
Very well said Craig, what if this actually works? There are so many negative people that are living paycheck to paycheck and misery loves company and they still choose to stay broke. I choose to better myself financially so I’m all in! See you at the top!
Hi Craig. People do seem to be having a hard time accepting Bitconnect as a real business. But as you said in one of your videos, you don't have to refer (or in MLM terms, recruit) new people. You can just make the loans and still make really good money as you've shown. The amount you make loaning funds is determined by the volatility of Bitcoin and I see nothing wrong with that. As long as the bot can do a good job when Bitcoin is going either up or down, then it should work.
Now my question is:Does anybody want to join a project like this.
They do not guarantee 1% interest in their fine print. People assume because people are getting on average 1% interest per day that it is somehow promised or guaranteed. The document stated it is not, this doc: https://bitconnect.co/bitconnect-learning/6/earn-bitcoins-by-referring-new-members
and
https://bitconnect.co/bitconnect-learning/1/what-is-bitconnect
So the fact based on their own rules is that the fluctuating daily interest is not promised and may not last forever. It is merely a profit opportunity, and the commissions also are not guaranteed.
The vital quote:
The reason Bitconnect works is that it is deflationary. The lending program locks coins up and staking locks coins up. Lending is a lot like Steem Power. The only problem is we have to trust they will actually keep lock tokens locked up, but they have the same economic incentive to see coin prices rise as the lenders.
The only reason the price of BCC keeps going up is the circulating supply goes down when people lend. A brilliant system and if it were decentralized by smart contracts so we could see the locked coins it would be provably secure.
So what service does BitConnect provide to the world? All it does is create an artificial scarcity. It adds nothing to the world. We already have BTC and much better digital P2P cash. We have excellent lending platforms like https://www.saltlending.com/ While BitConnect is kept afloat by the new money coming into the system. Bitconnect is simply the most sophisticated ponzi ever put into action.
Network effect. Read their mission statement. They are providing the same service to the world that Facebook provides. Their mission is to make the world open and more connected (the old mission of Facebook).
All the people who say it is a scam never actually read the fine print on the website itself. I'm not even saying they will not shut down. Bitconnect exists to connect and educate the world on Bitcoin and cryptocurrency in general. It also exists to financially empower it's users which is something none other platforms can say.
And if you are afraid of Ponzi why are you in Bitcoin? Bitcoin is no different. Why do you use Facebook? It only connects you with other people just like Bitconnect. Maybe crypto is too risky for you and you should stick to the bank account where your government can keep you safe.
People are getting rich with Bitconnect. I suppose that is the reason why so many are upset about it being a Ponzi. If it were banks, Facebook, even early adopters to Bitcoin or Steem, no one dare calls it a Ponzi. I say it is tribalism and bias, which clouds the vision of people on the inside of it.
Anyone who is at the top of Bitcoin will claim it is not a Ponzi. Anyone at the top of Bitconnect claims the same. The truth is that all fiat are Ponzi and Bitcoin is fiat. I am okay with it being a Ponzi if it provides more opportunity for people than the traditional Ponzi banking system does.
Financial freedom is adding something to the world. Education on cryptocurrency is adding something to the world. Bitconnect is doing both at the same time, promoting financial freedom while educating the world on crypto. So as long as it keeps doing that, it is doing what they said it would do, and cannot be called a scam.
Consider that some people in the world take the perspective that the government is never going to give them any financial freedom. That no one is going to save them from poverty. That everyone, including the Steemit whales, are working to keep them poor and dissolute. Bitconnect is so popular because there aren't a lot of investment opportunities which actually are paying people. Those ICOs aren't paying people, Bitcoin does go up but it doesn't pay dividends or provide income while it does, Steem doesn't provide dividends or interest anymore, so Bitconnect is the place to be for those seeking freedom.
I say until Bitconnect stops paying people, it is helping people achieve financial freedom even if it is doing it without the moral or psychological permission from the crypto government (Vitalik, you, and others).
Yep, their marketing is great because it aims on low emotions such as greed and the inability for emphaty because everyone who tells you to invest in Bitconnect is a straight up liar, knows it's a ponzi and that it will fail one day.
Let's hope their marketing never fails to provide an influx of new money because if it does we will see a Bernie Madof style mayhem and the whole system will fail and the money will dissapear.
The marketing is the genius or breakthrough of Bitconnect. Not wise to assume lack of empathy in my opinion unless Bitconnect stops paying and takes everyone's money.
You do know they say the same thing about Bitcoin and Steem. So it's unavoidable that people see anyone involved with any crypto even now as "scamming". There is no way to market crypto without someone from the traditional banking or the elder generation calling it a Ponzi. Do what works, and referral marketing works pure and simple. The people who believe in doing what works are the people who are likely to join and use Steem in the first place and for SMTs/ICOs there is a connotation that they are all high risk potential scams. The people who put their money or take risks are the people you want on Steem in my opinion.
I would believe bitconnect if they actually showed their "trading bot". Them not wanting to disclose their main source of income is just raising eyebrows and making it look suspicious. Also 1% daily on average is just a crazy and no legit bussines model can offer such a huge return.
I looked deeper into it and I think they can afford to pay out 1% a daily easily for at least a while. Have a look:
Bitconnect is a gamble, but it's at least paying people which is more than I can say for the majority of ICOs. People are being paid and they have the money to pay people according to my own estimate and the estimate in the video. They could always get greedy but they would make a lot less money.
Bitcoin went up how much % this year? People from the stock world are looking at Bitcoin saying no company could ever go up so much in a year. My estimate is based on the fact that Bitcoin and BCC both went up a lot this year but the payouts are in USD value, so think about this.
In any case, in my post I suggest that an algorithm be used to simply adjust the payouts in commissions, either raising it or reducing it, to make it adapt to the market conditions. On Steemit you could at one point make $20,000 for a post, I've seen it, so to say Bitconnect cannot afford to pay out millions when they have billions, is kind of weird. The key is to know how much you have, and adjust your percentages to your budget, which Bitconnect actually is doing.
For example they used to have infinite levels on their reward tree. They reduced it to 7, then 3. This means the referral bonus program is not guaranteed to stay and if they cannot afford it there is evidence they will just remove it.
will watch the video but as I told; as soon as the influx of new money, new people stops, they are doomed. and yes it's a complete gamble as you said.
If people stop buying Bitcoin or Steem what happens to the price? And what happens to the miners or stakers? So I see your point but I think all crypto could be seen as people describe Bitconnect because crypto in general doesn't follow traditional script.
It could all collapse, all of the ICOs, all of the coins, including Bitcoin, but for now people are making money. Here is something amusing, true believer in Bitconnect @craig-grant said in his latest video that when he gets his payouts in the future he intends to buy 1 million Steem.
If doubters are wrong then expect to see Craig Grant as a Mega Whale.
I get what you are saying but btc or steem don't promise you 1% daily roi on a shady bussines model that depends on new investors.
As long as Bitconnect continues to meet it's promises it's not a scam and no one has lost anything. It's paying interest but remember if we look at the history of Steem we were also receiving interest on Steem Dollars before they changed that.
Most people are not aware that Steem also had similar "impossible" daily ROI when it launched in 2016 so they see something like Bitconnect and have no reference. I have reference because I remember Bitshares and Steem which had interest, so I know it is theoretically possible to achieve.
1% daily is possible under the right market conditions and right now in a bull market yes I do tend to believe they can afford it. As far as "shady business model" what is the business model for most crypto?
There is usually a token, the founders often have most of them, then they have to convince a new group of people to buy and hold the token, and then the new group holds until they can convince another group to pay more for the privilege of holding, and so on and so forth.
So if we are going by business model can you show me a business model in crypto space which couldn't be accused of the exact same thing or which hasn't been called a Ponzi? None of these gambles in crypto space are safe, it is all gambling but we are here because we are risk takers.