Investor Warning : CORIONs Peg to USD is FAILING

For me the key to mainstream adoption of crypto is price stability and that was one of the reasons why I first became interested in the CORION project. When I first read the whitepapers I thought it had some innovative and clever ideas that could work well so I made an investment hoping the project would succeed.

What follows is my personal experience and observations of the CORION project as it has progressed from pre-ICO to early implementation. It explains how I have gone from optimistic and supportive investor....to disgruntled and concerned critic over the last couple of months.

The Innovation

For those unfamiliar with CORION I will try to summarise why I think the project has some clever ideas. It kind of explains (vindicates?) why I invested in the first place.

The idea is that CORION is a crypto that is pegged to the US Dollar in a way that does not expose it to counterparty risk like Tether USDT (where actual USD are deposited into a bank and held as collateral against the USDT crypto). Basically the coin supply is dynamic in that it expands or shrinks based on demand (ie, price) for the coin. The primary mechanism for expanding coin supply is via a “Coin Emission” of newly minted coins (up to 2.5% per day) if the coins price is higher than $1 USD. The shrinking of coin supply is done via a burning of coins used for transaction fees.

In addition to these mechanisms, a “Stabilisation Fund” was to be created which would use 25% of the funds raised from the ICO to prop up the price of the coin (not unlike how central banks currently operate) plus the fund would have 29% of the total issued coin supply on hand to keep the price down.

Sounds legit. It could work, right…..? I certainly thought so when I gave CORION a mention in my post 5 Stable Cryptos to buy when the market turns

It is not unusual for ICOs to offer a coin bonus for early adopters or bounties for those who bring in new investors or translate marketing material into other languages, so while some will cite those as red flags I wasn’t too concerned about these things.

BIG RED FLAG #1 – The Telegram

The first big one for me was when I joined the Telegram group to discuss the coin. I found 3 basic types of people were dominating the Telegram channel.

1. The Fish – There were lots of uninformed investors in this space, many who barely understood how crypto worked and hadn’t read the whitepapers. For a lot of them CORION was the first crypto investment they were making and they’d been roped in via real world meetups with a sales pitch. Lots of photos from these events it was clear there was much more focus on marketing of the project rather than discussion about its challenges.

2. The Rampers – These were the guys talking up the coin. Talking about making millions and going “To the moon” which surprised me because anyone who read the whitepapers would know the coin would never moon because it was intended to have a stable price. Some of the hype being pushed and some of the claims on this coin were embarrassing but they were left unchecked.

3. The Enforcers – Often silent or making minimal comments these guys were the ones who came down hard on anyone asking too many questions or spreading any kind of negativity. While hype and ridiculous claims were allowed, nothing too negative was left to stand. People were regularly censored or blocked for having “The wrong attitude”

I very quickly came to the conclusion that the Telegram was a waste of time for someone like me who liked to apply critical thinking and ask tough questions. I did try a few times to get some answers but it was pretty futile. This lack of constructive discussion and information flow was a big red flag for me.

BIG RED FLAG #2 – The ICO Extension

The second big flag was when the ICO was suddenly extended by an extra month with one of the most interesting excuses I have seen for a software project to be delayed to date. To do it justice I really need to copy the text from their email titled “[BREAKING NEWS] Essential updates, and a shocking discovery…”

At CORION, we understand the seriousness of these threats, and decided to invite several highly-trusted security experts to review the CORION system. We wanted to make sure our code is not only bullet-proof, but also hacker-proof.
The surprising result? We have located a vulnerability unknown so far which creates a backdoor to the affected wallets, allowing hackers to circumvent the security of these systems, and gain access.

What is even more shocking is that one doesn't even need to be a hacker to exploit this vulnerability, and gain access to your wallet.
Turns out, due to the lack of industry standards for the creation and set-up of a fortified wallet, most are not nearly as secure as they claim to be. Our investigation suggests that this newly-exposed security hazard actually affects the majority of wallets currently available to users.

CORION experts have engineered a solution which should allow us to close this backdoor for good. We believe that, once made common knowledge, our discovery will dramatically affect the entire cryptocurrency industry.

Wow!! Make sure you read the last sentence. It sounds pretty serious. Lucky the CORION experts are looking out for us all...!?

So the end result of this shocking discovery was the ICO was going to run for another month to bring in more investors.....and at this point I thought my investment was probably gone.

IMPORTANT NOTE – I did not hear a peep about this discovery that “will dramatically affect the entire cryptocurrency industry” via any other channels.

BIG RED FLAG #3 - The Exchange Listing

Even though they had extended the ICO by a whole month, by the time it was over we still didn’t have a solid lead on where or when the coin would be available for trading. According to the email from the CORION project team it was going to be within 2 weeks after the ICO finished on August 27…then there were more delays. Eventually it was listed on Cryptopia on about October 5 which was closer to 6 weeks.

While this may be excusable as an unavoidable delay it is an example of the project team not being on top of things and failing to deliver on time.

BIG RED FLAG #4 - The Stabilisation Fund M.I.A.

According to the whitepaper the Stabilisation Fund was going to receive 25% of the amount raised in the ICO, which is a final amount I haven’t been able to find. I do recall seeing it in the vicinity of $1.5 million so that would mean the Stabilisation Fund should have about $375,000 USD – which is a LOT when you consider the entire buy side on the Cryptopia exchange is lucky to break 1.5 BTC (while the sell side is closer to 50K CORION <- Do the math).

The job of the Stabilisation Fund is to keep the price of CORION at around 1 USD. Once again a direct quote from the whitepaper would be appropriate :-

The Stability Fund will be used mostly at the beginning, while the community and the use cases are growing faster and it can cause fluctuation.

Naturally as soon as the coin was listed it immediately came under selling pressure and there was negligible buy-side support.

Then an email from Oct 11 stated :-

In the previous days we have successfully funded CORION’s Cryptopia account, and we are in the final phase of an automated trading bot deployment, which will facilitate to keep the price around 1 USD. This bot is to be launched this week, and this will entail the price stabilization very soon.

More promises. That was last Wednesday and the CORION price rallied on the news....then on Friday the 13th of October the CORION price crashed 94% to be the equivalent value of about 6 US cents. When I noticed the drop on Cryptopia I immediately logged into the Telegram to see what was going on because in my experience markets usually only have severe reactions like that when something has happened. But it was deathly quiet in there and as I started asking questions about what was going on with the stabilisation fund, I was at first censored and then banned from the channel for having “The wrong attitude”.

It has since bounced back and currently trades in the range of 45 to 60 US cents, but it has got to be a concern that the most promoted feature of the coin (a stable peg to 1 US Dollar) turns out to be a failure. Now it may not be fraud, but at best it is gross incompetence from the CORION project team and what I would consider a failed implementation.

For a coin who’s 29 page business whitepaper has a word count of :-

• Stable – 15 times
• Stability – 11 times
• Stabilization – 8 times

It’s just not good enough.

My biggest issue with the Stabilisation Fund is that there is no transparency about how it will work and how much is in there and that means it is open to insider manipulation. If it is being implemented via a trading bot then it will have specific rules that should be made public in the interest of maintaining (or restoring) confidence.

Now I accept it may all just be a bungled implementation, the trading bot may not yet be deployed and the Stabilisation Fund may still be on the sidelines and I really do hope this is the case, but for every day that the CORION price languishes in the 45 to 60 US cent range there will be a loss of confidence.

I do think there is a reasonable chance that with the delays and complications there may have been some “dipping” into the Stabilisation Fund already to cover unexpected additional costs, but regardless of whether my speculation is right I would like to finish with this final warning.

Once the Stabilisation Fund is dry there is nothing substantial to support the price and confidence is likely to have a final capitulation. At this point only bag holders will remain.

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Images and Credits
http://prophetsandpopstars.com
http://dutchcorionprovider.com
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https://www.cryptopia.co.nz
https://planacademy-nffybkc1gjvuuhit.netdna-ssl.com
https://www.facebook.com/CORIONPlatform