If Bitconnect is a Ponzi Scheme why isn't Bitcoin also?

in freedom •  2 years ago  (edited)


I want to address the current controversy around Bitconnect by asking the obvious question to those who claim 'Bitconnect is bad because it's a Ponzi scheme'. If this is what makes Bitconnect bad then isn't Bitcoin worse since it has an even higher market cap, more supporters, and can collapse in price at any time causing people to lose their life savings in exactly the same way?

They will probably respond with: 'Bitcoin has a function, it can be a payment system, it is cash'. Bitconnect also has a token even more advanced than Bitcoin which is hybrid proof of work proof of stake. The difference is Bitconnect offers a circular economy based on lending and the Bitconnect pyramid structure is a lot more obvious. Bitcoin has a pyramid too though, because people who got into Bitcoin early have every reason to want others to buy Bitcoin so they can sell their 10 Bitcoin for 10 million dollars.

When Bitcoin arrived people said it was a scam and many people including officials in China still say Bitcoin is a 'Ponzi-Scheme'. Do not take my words in the wrong way, as I am not endorsing Bitconnect or Bitcoin but merely asking for the supporters of each of these two competing platforms to distinguish the difference which makes one of the two a pyramid or Ponzi scheme? Because by the definition of a pyramid scheme a case could be made that because Bitcoin isn't backed by anything but computation resources, and because earlier lenders of computation resources paid less and get much more from it, maybe it too is a pyramid scheme like Bitconnect with the difference maker being that in Bitcoin the earliest users had to lend their CPU cycles while in Bitconnect it was straight up cash.

Both Bitconnect and Bitcoin have mysterious beginnings, anonymous developers, and people deem either of the two as extremely risky investments. That is why I want to understand why either side has moral weight to demonize the other side. In terms of risk, Ethereum with it's ICOs are also extremely risky and most investors will lose, yet people hype and market ICOs which very well probably are mostly scams.

Obvious scams make promises, take our money, and provide nothing in return. Bitconnect provides a centralized exchange website, a functioning blockchain, and potentially more. Their centralized exchange could trade BCC vs all other tokens in the future and become the next BTC-E type of exchange. Their blockchain functioning means Bitconnect cannot be shut down by anyone so if it is a Ponzi Scheme how would anyone stop it without also being able to use those same tactics to stop Bitcoin?

Bitcoin provides a lot as well, such as a huge community of developers, businesses use Bitcoin, and while there is controversy around forks such as Bitcoin Cash, it still offers something. Is it possible to be a Ponzi Scheme while also offering something in return for the investment? According to Bart Chilton all it takes for something to no longer be a Ponzi or Pyramid Scheme is for it to have a real world function. Bitconnect and Bitcoin both have tokens, and like it or not, they do have real world functions beyond just speculation.

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I had a discussion with the author and he just don't seem to get it at all. I've also written about BitConnect few weeks ago. As I analysed in my post, the supporters seem to be living in some unicorn land or some communist pipe dream. https://steemit.com/cryptocurrency/@vimukthi/trevon-james-vs-vitalik-buterin-in-depth-analysis-commentary-on-bitconnect

Eg comment: 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....


According to their interview they have an office in Vietnam and in other places around the world, and they plan to add more currencies to their exchange.

By more currencies you mean instead of taking just Bitcoin, they'd be selling their BCC for alt-coins. That'll bring more money in. But if you need a decentralized exchange, try Bitshares DEX or Waves Dex or Komodo or Cobinhood. If you need lending, try https://www.saltlending.com/

Your sentiment is perfectly aligned with the sentiment before Tulips, before great depression, before the dot-com bubble and the housing bubble and also echo with the https://en.wikipedia.org/wiki/Bernard_Madoff incident. Everybody was using the exact same logic before the housing bubble pop.

If you really trust BitConnect why don't you prove you are putting at least 50% of your savings on it.

To justify my sentiment so you understand where I'm coming from and can approach from the right perspective:

  • I do not trust Bitconnect.
  • I do not trust banks.
  • I do not trust developer(s).
  • I do not trust ICOs.
  • I do not trust the code.
  • I do not trust complete strangers on the Internet who claim to be looking out for my financial safety.

Now that my perspective is disclosed and out of the way, no one is looking out for me financially. Bitconnect is looking out for itself financially, but I think they have more to gain by staying in operation longer than by shutting down if they want to make as much money as possible. If they believe in their mission and want to make money then they will not shut down easily.

It is the same with Bitcoin. I do not trust the miners and we aren't supposed to. They get paid, and they get paid a lot. Crypto could be in a bubble and could pop at any moment. Any crypto could be banned at any time. Any argument you make about Tulips have been made about Bitcoin already and are not new. The Ponzi Scheme argument has been made about Bitcoin since it was invented and is not new.

So tell me why are you in Bitcoin if you are worried about bubbles, Ponzi Schemes, etc, and why do you suggest to me ICOs which offer even less return for more or the same risk? Are you going to invest in them?

Bitcoin was never a ponzi. It serves a purpose. It's P2P digital cash. Bitcoin will die because the competitors like Dash,NEM,BCH,PIVX,XVG are doing a far better job that Bitcoin. BitConnect add nothing to the world. It totally fits the criteria of a ponzi which BTC doesn't. Bitcoin solves real world problems. It allows people to be their own bank. Bitcoin is digital currency; not some speculative vehicle.

Can't say the same about BitConnect.

In a previous comment you called https://www.saltlending.com/ a ponzi. How do you even prove your point. SALT give you real money while keeping your crypto as collateral. It's not different from getting a loan using your house as collateral.

Digital cash already existed and the banking system already is P2P. The federal reserve gives dividends to it's peers (other banks). Jamie Dimon said Bitcoin is a Ponzi Scheme and why don't you believe him? You believe random Youtubers and developers about Bitconnect yet you cannot see the same game being played on people who hold fiat?

The bankers don't want you to use it so they call it a Ponzi Scheme but then the people who bought Bitcoin 3 years ago are millionaires now. So why do you think people lending to Bitconnect cannot become millionaires 3 years from now if it happens routinely in this space?

In a previous comment you called https://www.saltlending.com/ a ponzi. How do you even prove your point. SALT give you real money while keeping your crypto as collateral. It's not different from getting a loan using your house as collateral.

Real money? I suppose if you trust the fiat Ponzi Scheme where they create the money out of thin air? Yet you get upset if in crypto it is deflationary where they remove tokens from the supply? In either case they manipulate the supply,

In the federal reserve it is even worse because they give dividends to the banks that sign up. Where does the money come from? I guess if you trust the bank you can accept that they generate real money but real money does not mean real wealth.

The Dollar is nothing more than numbers on a ledger. Bitconnect lets you lend in dollars and pays back in dollars, and is acting like a bank. If you are a lender, you get the dividend which is like a revenue share. I do honestly have issues with how they do it but as long as they keep paying out what they owe then it's no scam.

Money talks. Those traditional banks you trust did not give you a dividend, or interest, or bail you out. Bitcoin was founded from the perspective of being anti-bank specifically because these banks inflate the currency, take dividends for themselves, and the rest of us pay fees for the privilege (along with taxes).

You trust the code of salt lending? Smart contracts fail all the time. Maybe humans fail too but it is the same risk. You just decide you want to trust programmers you don't know and code you probably can't read instead of trust people you don't know and can't see.

I looked deeper at Saltlending, not only is it not profitable for investors but it is evil. It promotes people borrowing rather than loaning money, and promotes putting people in debt by encouraging people to spend money they do not have. Sure banks will love this as it will put even more people in debt but it does not promote freedom.

I will never be dumb enough to use Saltlending or a credit card. First it is risky to be a long term holder in crypto so the idea of taking loans against something which has so much volatility and unknown value makes no sense. Then how do loans actually give you anything?

The more loans you take, the more you owe someone else, when it is better and wiser to have someone else owe you. I think it is better to be your own bank and lend than to borrow.

I hate loans, and credit. I prefer to earn and then spend. If there has to be loans then I prefer to give loans rather than take them so you only encourage me to like Bitconnect even more if that is the alternative.

From what I understand Bitconnect is trying to become an unregulated exchange like BTC-E once was. This would mean allowing people to trade multiple currencies against each other. In 2013 the high risk high reward attitude was normal in the space and in that setting BTC-E launched. People used the exchange for years but it was not shut down until the government shut it down. BTC-E did not run off with the money but this is not to say they were not corrupt. Bitconnect charges a fee for exchanges and these fees can be used to provide interest for lenders. If it is an exchange then the lenders are liquidity providers.

In my opinion they should transition into something regulated if they are allowed to but who knows if they can because this is a competitive space and there are other exchanges plus banks which probably don't like what they are doing. So that argument in my opinion is truly believable for why they don't come out of the shadows, but even if they were in the open and working directly with the government it wouldn't mean their token is more profitable to hold or that their business model will be more profitable under scrutiny.

I think if you want trust then stick your money into a bank account. Crypto is not safe, never was safe, and risk free profit does not exist. So if you want high returns you must take high risk. Bitconnect is high risk high return which is the only way to get a big win off an investment.

Crypto is about high risk high return investments. Crypto is not about 'trust' and I don't know why you believe Bitcoin and crypto was founded on trust. I say always do not invest or lend what you cannot afford to lose.

If you can afford to lose $100 then putting $100 in Bitconnect is the same risk as putting it into an ICO. If you can afford to lose $1000 then Bitconnect is the same risk as putting it into an ICO. If you can afford to lose $10,000+ then lending to Bitconnect is the same risk as lending to an ICO.

So it is the same level of risk. Most businesses (9 out of 10) fail. So you have a 90% chance of losing your money. At the same time you tend to reveal high risk low return investments like Salt or you show me Bitshares which if it were just launched would make sense but isn't really any better of an opportunity than Bitconnect is now.

The typical investor in an ICO is either a person who truly believes the ICO will change the world, or someone who believes they can get rich, or someone who believes a combination of the two. I cannot imagine anyone would think any ICO is going to make them rich while also being low risk and if they do believe it then they don't understand investing.



The main risks of Bitconnect are a government shut down, or the developers discontinuing. I do not think they will run out of money based on math. I do trust the math that the network will be profitable but I do not think an unregulated exchange will be able to last without going regulated or being shut down sooner or later.

No one should put 50% of their savings into Bitcoin or any crypto. No one should trust any developer(s). No one should trust any code produced by any developer(s). Once you realize it is not an industry based on trust, or based on regulation, then you understand what Bitconnect appeals to. Bitconnect appeals to those who want to self regulate the financial system and it even says that is the goal of what Bitconnect wants to do. I don't know if that is a wise goal, but even if it is not, I also don't trust banks which charge us interest for giving them money, nor do I trust the companies integrating into that because if you think about it what put you into debt if you are in debt now? Was it banks or was it crypto? So if it was the banks why would you turn to them to get you out of debt?

The choice is yours though. If you feel safer with your fiat in a bank then I'm in full support of you staying there. If people want to risk their money in crypto and they lose, well that is what it takes also to have the chance to get rich, this is the way it is if you invest in a startup with 90% chance of failure.

My personal reasoning for my rant against banks is that those institutions are the main institutions charging me interest right now, and crypto institutions are willing to pay interest to me. Fiat is lower risk and if you have a lot of it then you don't need to keep taking risks to simply invest in very low risk low or moderate yield investments, but if you aren't a multi-millionaire you never will become one if you don't take a gamble at some point.

I love unicorns <3

Whether or not it is a Ponzi Scheme doesn't tell us whether or not to invest. You can say Bitcoin or Bitcoin mining were Ponzi Schemes too but that doesn't change that buying Bitcoin in 2010 would have been a really wise decision looking back. Will Bitconnect last? I think it will last for some years after looking closer at it, but will it last for decades? Probably not. But most coin wont last for decades.

So to say "do not invest" because it's a Ponzi Scheme doesn't tell me how I might lose more money investing in Bitconnect than in Bitcoin at the current price. What if Bitcoin crashes back to $2000 or even back to $200? So the same can happen to the other high risk investment options but Bitcoin doesn't even pay interest.

Such a great debate! Only God knows about the truth. Theoretically speaking, Bitcoin and Bitconnect are the same. The founder of Bitconnect is another genius except Satoshi Nakamoto. But maybe the people who can spell over Bitconnect are just genius, too. Is Mr. Craig Grant angel or satan? It reminds me of the original story of infamous "Ponzi scheme" and the famous "Amway" at the same time. Of course, Amway is proved legit later and now new American education minister is just from Amway family.

Craig Grant is just making his money and doing his thing. He is neither an angel or a demon, he appears to be neutral. I do not think you should buy a token just because Craig Grant is buying it on Youtube because Craig Grant earns tokens while a lot of people have regular jobs and have to buy Bitcoin to buy Bitconnect, so the risk is not the same for people who can earn to spend vs people who must buy to spend.

  ·  2 years ago (edited)

I guess some people like the high risk of trying to get actual profits out of Ponzi before it collapses. Not many I believe.

Bitconnect site will one day disappear and good luck trying to trade it on any other exchange with minimal volume. The price will be in single digits and under within days. My advice is that if you advertise this scheme, first put up a big warning that goes over every point in the link I provided you and why users should expect to see the service just disappear to thin air and their money along with it.

But hey,

  1. "The Guaranteed Return" is too good to be true
    First and most convincing argument.
    I just calculated that if you invest 10 000$ and reinvest every penny you get from your BitConnect income, with a 0.5% daily interest you would have 10 405 071 in 2 years.
    This is unrealistic and I do not think anyone would believe this is a "guaranteed return".
    As we say in finance, there is no free lunch. I only wish there was...

Sounds pretty good, let's all put our money down and wait 2 years so we can all be rich together, guaranteed by Bitconnect itself! Who they are, no one knows though ;)

They don't guarantee that. Read their docs.

  ·  2 years ago (edited)

The difference largely is that Bitcoin doesn't trick you. You know exactly what it is and it is traded on an open market. Sure you can lose everything, sure they can trick you, but both things are more fair. Markets are inherently risky and are gambling o some degree, but there is also fairness.

A ponzi is a scam. It lies to people to get them to invest, then it pays old investors with the money from new investors. It's that lying and tricking people that makes it so bad. If they were honest... well, a lot less people would invest in them, which would mean less money and make it much less of a good scam.

Ponzis s pay out and they pay out fantastically—until they don't. If you happen to have the bad luck in your timing to just be getting in when the owners are getting out, you lose all.

The moral issue here is that you are making money off of cheating people. Yes, in a market you are making money off people. You are making money off people who don't know what they are doing. Most day traders lose in the long run and the barons of the market just keep getting richer. But again, there is some fairness here. No one is tricking anyone about how to trade. In fact, most investors warn regular people not to trade but to go see an experienced investment banker to get help.

But with ponzis the money is directly from lying to people and cheating them. Now if you are ok with that from a moral perspective, then by all means get into a ponzi. But be careful or you may be the one losing.

Whether Bitconnect is a ponzi or not remains to be seen, but the reason people are doubtful is that they offer what appears to be a completely unsustainable interest rate, they have some strange paper trails that people have followed to deadends, and they send out confusing messages. For example, for the longest time they claimed they used a trading bot, but very recently a lot of the people promoting it have come out and said "there is no trading bot" and instead claimed the payments come from being linked to BTC. This lack of transparency is what is making people nervous. Also, they make it a priority to constantly have new people signing up. This is a red-flag. Normal investment programs don't constantly need fresh blood—but ponzis do. Again, it's not proof that BitConnect is a ponzi, but it does contribute to the level of unease people feel over the program.

The moral issue is, no one is losing money. Show me one person who lost their money to Bitconnect to make the moral argument otherwise you are arguing from a position of no evidence at all besides your emotions or fear of risk. You could argue the same about any crypto, any ICO, or any gambling or sports betting site, and a lot of people say these are immoral and should be shut down because people could lose.

But here you are on Steem where the value of Steem could drop and people who bought Steem could lose. So is it a Ponzi? I think people throw the word around without understanding how it is defined. The same with scam, a scam requires someone to have lose money and a Ponzi is just an unsustainable business model. All of crypto, and banks in general, could be described as Ponzis.

What does a bank do? They ask you to give or lend them your money just like with Bitconnect. They promise to give it back to you, sometimes with interest. Other times the bank even charges you a fee to store your money in a bank. You are okay with this, but you find crypto doing it and it's a clear Ponzi?

Simple solution, if it is about moral why not stay out of crypto, keep all your money in a bank where it is safe and the government can protect you? If not, then you're taking a risk being in Bitcoin, in Steem, in anything not fiat and backed by the government which you trust.

  ·  2 years ago (edited)

Yes i agree with you in all your points specially the fact that bitconnect has not scammed anyone. Actually i made the same argument here just 5 hours ago lol

https://steemit.com/bitconnect/@foodnature/i-quit-bitconnect#@ankarlie/re-foodnature-i-quit-bitconnect-20171119t014733777z

Anyway I am just a bit worried on those young teens like me who might be not think it through when investing on cryptocurrencies like bitconnect. But for me I only invest i am willing to lose and do it with due diligence.

I conclude people fear Bitconnect because it is not regulated by the banking industry. I don't think anyone cares if you and I make a profit. Where were these people before when ICOs popped up every day taking people's Bitcoin and offering nothing but a whitepaper? All ICOs carry the same risk as Bitconnect or greater because an ICO at best just is a whitepaper and some code with no data from which to determine the probability of a ROI.

With Bitconnect people are at least getting paid and as long as that continues we have more evidence that Bitconnect offers ROI than brand new potential scams like Saltlending which don't even have anything but an idea. Yet people who rant against Bitconnect are okay with others investing in an ICO.

It is all gambling. It is a low trust environment. People manipulate markets, and spread FUD, and the only thing which matters is are people making money and getting paid? If they are holding a token which isn't paying then they aren't getting their return on investment as quickly as Bitconnect lenders, so why listen to them?

Bitconnect may shut down, but the same can happen to a token which can be made obsolete overnight by another token, or copied, or dumped on by a whale.

Yes I totally agree with you.

well said sir.

Thanks

I have read on an article written by a fellow steemian that now bitconnect are targeting young people like me in their advertising campaign making it seem that is "cool" or "smart" thing to do in investing in bitconnect. The author was an investor in bitconnect also but he is worried that young impressionable people might get too excited get money from their parents or worse take out a loan from loan shark and invest without really understanding the risk involved.

Wow, really? That worries me. It's like when cigarettes target kids. I don't like smoking, but if an adult wants to smoke—more power to him or her. But a young person... they may not always understand the risks, esp if the company is lying to try to trick them. So too here. Whether BitConnect is a ponzi or not is unknown, but... that almost makes it more risky. If people want to invest in it anyway, well, that's their choice. But BitConnect shouldn't be targeting young people by trying to spice up their image.

If you open a bank account, what exactly is that? You lend them money, you get what in return? Your own money back? Sometimes they charge you banking fees for the privilege of you lending them money. Bitconnect gives you the money as interest but does the same thing banks do.

You can say it is risky, I accept this. But its your own choice where you put your money. As far as targeting children, what kind of child has Bitcoin or is playing with crypto? If they are then they knew the risk when they bought their first Bitcoin because no government authority claims Bitcoin is a safe investment.

I suggest the two of you continue trusting your government(s), and listen to their advice to avoid investing in ANY crypto at all. If you cannot earn crypto, do not buy it! It's all likely to crash at some point and you could lose all your money in a panic as many before you who react on fear have.

Final point, Bitconnect is not a company but is a blockchain. It has a corporate face and website but their website is no different from any other crypto website. Just like for example Augur, or the hundreds of other tokens out there, there is no guarantee by anyone in government or certified to give investment advice that these token will always gain value.

Will people lose money? You can. So don't invest what you cannot afford to lose, and if you fear it's a scam or too risky then don't touch.

The reason Satoshi Nakamoto had to keep his identity secret? People like these:

https://www.reddit.com/r/Bitconnect/comments/6wgkaj/reporting_bitconnect_to_the_fbi_tomorrow_tired_of/

https://steemit.com/bitcoin/@debugger/i-just-reported-bitconnect-to-the-uk-company-investigation-service-lets-se-what-happens

People are making money and other people who aren't willing to take the risks are afraid that other people willing to take the risk are making too much money from Bitconnect? Otherwise what is the agenda for reporting this? If you don't think it's worth the risk then you don't put your money into it but if the government seizes it then everyone loses.

I've invested in Bitconnect and Bitcoin knowing that there is always a certain amount of risk in my investment. I am just amaze on how persistent some people are in social media going out or their way just to discredit a certain crypto. Even the founder of Ethereum has taken notice of bitconnect and called it ponzi. Of course it is free market and no one is stopping me from investing on them. In a way it is good that they criticize since at least now people are aware of risk they are getting in to. Good or bad publicity it is still publicity.

There is no such thing as bad publicity —P.T. Barnum

The founder of Ethereum made that opinion based on nothing more than the returns. Ethereum went up over 7000% and no stock ever does that. Evidence of a Ponzi right? Same evidence Vitalik used. The truth is, Bitconnect is a blockchain just like Ethereum. Ethereum is a better technology, more decentralized, but also profitable for people who held, but for people buying at the top of the bubble, they might see the price crash in the future and call it a Ponzi.

So it's a matter of perspective. A person who became a millionaire from Bitconnect likely will not think their Ponzi is a Ponzi, just like a person who became a millionaire from holding Ethereum tokens might not see their Ponzi as a Ponzi. To people holding fiat these are all Ponzis which is why ICOs are banned in some places and crypto is banned in Russia.

Let me paint the picture. In Ethereum, Steem, Bitcoin, the large holders are at the top of the 'pyramid'. In Bitconnect, the large holders in BCC are also at the top of the 'pyramid'. The difference is in who earned the tokens and how. In Steem the top of the pyramid earned it blogginng or mining or buying early on. In Bitconnect it is earned primarily by promoters, marketers, and people who gave out loans early on. In Ethereum it is earned primarily by programmers, or people who bought in early on.

To anyone buying in now, it is an obvious pyramid because the people at the top of the pyramid need to sell to someone right? Who do you think that will be?

I liked the way you answered it sir will be following and i hope to hear more of your insightful comments. Very well said sir.

I didn't know bitconnect before i read this post

Bitconnect is becoming increasingly popular. But it is not at all a safe investment and the loan mechanism adds even more risk. That said if you decide to create a mining rig to mine Bitcoin you are taking far more risk than the loan in Bitconnect. In either case you could make money or lose money but in Bitcoin the time where you could 'get rich' from mining Bitcoins is pretty much over and done with.

I have literally seen more about bitconnect being a ponzi scheme than anything else about it.

Same here.