BitConnect - A theory on the trading bot.

Bitconnect. Scam or not?
In depth explanation of what I believe is the actual trading bot in BitConnect and why it might not be a scam after all.

I have recently learned of BitConnect like many others. By looking into other cryptos that offered alternative and innovative ideas.
Ever since then, I have been almost obsessed with trying to understand its incredible returns and find out if this is a typical Ponzi Scheme.
I've been reading loads of information on forums and sites and watching tons of videos on the subject.
I have come to believe that I think I finally understand how BitConnect functions. And this is my attempt to explain it.

I have encountered many different reasons why people believe BitConnect is a Ponzi Scheme. One of the articles more often mentioned by those who claim BitConnect is a Scam is called "The BitConnect Scam Exposed" by the grinder.

Because of this, I will be mainly addressing the arguments on this article. I also address some other arguments that were not included in his article but that I found,
appeared quite often in Forums, Videos and Comment Sections around the web.

According to thegrinder's article. Bitconnect promises:

• "Return on investment of up to 480% in cash/year and guaranteed profit of 91.25 percent/year."
  True, and by the end of this explanation you will see that this is peanuts compared to what BitConnect is actually making.

• "No risk of loss."
  This is not true. - Buy it on the high and sell it on the low and you will have lost money.

• The money is made with a cryptocurrency trading bot they have created.
  And I believe this is exactly what is doing.

Unfortunately, while claiming that BitConnect is not innovative enough, he does not mention other promises. Some that came true and some that are still to happen.

We will come back to these later.

The most common arguments for why people claim BitConnect is a scam are:

1. English mistakes on their Website.

The only thing this claim actually proves is that they did not hire some individual with good grasp of the English language to write their website content. Period.

1. Too good to be true returns.
   So far BitConnect has been producing these returns. So a too good to be true return is only a truthful claim the moment that those returns are not met, just because they are too good to be true does not mean they are not true. And yes, I am aware of the fact that ponzi schemes work until they stop working. But I'm only mentioning this because this is not a valid proof (or at least not yet) that
   BitConnect is a ponzi scheme.

2. How the "scam" (trading bot) works

According to thegrinder's article, this is how BitConnect works.

a) "You send Bitcoin to them.
They don't ask for BCC, their own currency, they ask for Bitcoin!
Why is that? Because their currency will become worthless as soon as they close down the site, but Bitcoin will still be valuable."

Because their currency will become worthless as soon as they close down the site? The claim that their currency will become worthless as soon as they close down the site is not true.
The currency will become worthless as soon as people stop using it. People can still mine and use the currency if they close the site tomorrow. The wallet is out there for any to use, and miners are still mining the bcc. Either through PoW or PoS. The only thing that will be worthless if they shut down the site tomorrow is all those returns on investment and the great majority of bcc's in existence. That is, if they don't trade them on some other Exchange.

I'll explain that second part in a bit.

b) "You buy BitConnect with your Bitcoin, straight from the developers of BitConnect!"
This is not true. You buy BitConnect with your Bitcoin from their exchange, with other Bitconnect holders. This is very important to realize. Anyone can trade BitConnect for BitCoins and vice versa.
The developers do not have exclusivity like this article seems to suggest.

"Every time a user buys their currency, its price increases."
Again not true. The market is volatile, price goes up and down according to demand. Just look at BitConnect's trading history.

c) "You give them the currency you just bought in exchange for the promise of getting back its value in cash after 4 to 10 months, and some daily interest.
The interest is paid in Bitcoin."
Not correct and this is extremely important to understand, the amount paid back is calculated based on the current dollar value of the bcc initially invested.

"Now they have your Bitcoin and you also just gave them back their own currency and increased its price when you bought it."

EXACTLY! And this is the most important part of it all. So important I will repeat it again slowly:

"Gave them back their own currency and increased its price when you bought it."

I believe this is almost correct. The only thing I would adjust in this sentence is that you just gave their TRADING BOT back their own currency. Another very important clue.

"What do you have? A promise."

Not true, you have invested in a coin that shows promise, like EVERY OTHER COIN!

d) "They also offer a very generous referral program, so many people promote their site on YouTube, Facebook, forums etc.
This helps to bring a ton of people to the site.
It's a snowball effect: the more users they have, the more users they attract.
The funds of new users are used to pay the old users."

Almost everything is correct here. Their marketing strategy functions exactly as stated, except for one thing.
To claim the funds of new users are used to pay old users is just speculation. There is no actual proof this is what is happening.

e) "When not enough new investments come in, to cover the costs of paying the old users and still make them a profit,
they sell all of their ShitCoin BCC, which increased in price by 7000%+ since they released it because of their users buying it and giving it back to them, but almost never selling it.
They also have a ton of Bitcoin to sell, but at this point it's worth a lot less than the total amount of BCC they have.
They then disappear with all of the money."

Again these are unfounded claims but at the same time they pretty much explain exatcly what potentially could make this system work but fails to realize that.

1. "They have no white paper."
   This is a common used argument for why people that came up with BitConnect are scammers.
   Well, once again. A lack of whitepaper only indicates... well, just that. A lack of whitepaper.
   At least they have their Roadmap.
   And that seems to be happening according to schedule.

To recap:
"They attract users by promising amazing returns on their investment."
True, the same way ICO's attract users by luring them with a bunch of promises. Are ICO's a big ponzy scheme? Maybe.

"They artificially increase the price of their crypto by tricking users into buying it with Bitcoin and giving it back to them, along with the Bitcoin."
Again not true, they do not give the Bitcoin or Bitconnect back to the users. They give them a digital IOU promising they will exchange that IOU in form of bcc and then if so desired in bitcoin.
That is all.

"They pay back the interest to their users from new investments.
When their profit is maximized, they sell all of their artificially inflated currency(7000%+ since release) and Bitcoins and disappear."
This is again speculation.

Maybe, just maybe... what if what they are telling us, is actually how the system really works? What if the bots, are actually doing their job.

According to BitConnect's website. This is what the TradingBot does:
"The chart above represents interest rate changes on our platform, tracking the volatility of BTC vs USD and the volatility of USD against major world currencies.
The Bitcoin Price Volatility Software calculates interest in real-time for you, so you can monitor profit at any time.
Increased volatility means there is greater uncertainty on the returns of your investment."

Again, let's pay attention to what it says:
"The chart above represents interest rate changes on our platform, tracking the volatility of BTC vs USD and the volatility of USD against major world currencies."
So far, all it says, is what the chart above represents. Nothing else nothing less. And to give people credit, it pretty much, says nothing at all. If this was lost in translation, or if it is deliberately meant to mean nothing is unknown. Probably the latter I suspect.

Then they continue:
"The Bitcoin Price Volatility Software calculates interest in real-time for you, so you can monitor profit at any time.
Increased volatility means there is greater uncertainty on the returns of your investment."
Again, a bunch of meaningless words.

The interesting part is what they claim in another part of the site:
"This investment option involves profiting from Bitconnect trading bot and volatility software."

Again we are back at the trading bot. Now if this trading bot exists. How could it be that we don't see it trading on major exchanges. This is another claim as an argument why BitConnect is a scam.

Well... what if it doesn't have to be? What if the thing that keeps BitConnect relatively stable while other coins are fluctuating like crazy, is the actual Trading Bot?

The great majority of people flock into BitConnect because of the promises of great returns. Thegrinder actually explained quite well, how the system works when he said

"Now they have your Bitcoin and you also just gave them back their own currency and increased its price when you bought it."

Who do you think is probably buying your Bitcoin when you trade it to bcc on their exchange? Who is taking your bcc after you lend it for profit based on fiat?
Who do you think is TRADING this BCC with other users for Bitcoin in their exchange and profiting insanely from it? And while doing it, sharing a small amount of it's profits with the rest of us?

The price of bcc has gone from $0.5 dollars to $9 dollars per unit in six months? And at the time of this writing it is at around $60 dollars per unit.

That is a 119 fold increase in its value in less than 8 months.
How can people be asking how is it possible to offer a return of investment of a mere 480% a year when the bot has made many times over that in less than 6 months.

Let's get down to numbers.

According to their marketing material, these are the properties of their coin:

1. 28,000,000 - Coins that will be generated total.
   Total PoS coins that will be mined = 20.4 million
   Total PoW coins that will be mined = 2.6 million

2. Only PoS algorithm continue to generate new coins until all 28 million BCC come in to existence.

3. There are now 6,903,501 bcc's in circulation.

By taking a closer look at bcc's block chain and the rich list, you will see that the top 7 accounts are holding more or less 65% of all BCC in circulation!

I repeat... more than 65% of all BCC in circulation and they have only around 5 total transactions on each of them. This tells me 2 things. Either we are talking about massive whales involved in BCC.
And these guys are not lending their money back to the bot for insane returns. Or another option, which I think is more likely, is that these are all the bot's bcc.

If these are the bot's, the only reason I can imagine they are sitting in wallets with only 5 transactions in each, with each transaction happening 1 month from each other is because these accounts are staking the coins. And generating 10% return by month with new coins. 10% on new coins that in 8 months have increased in value 119 fold!

Obviously these are not all the coins the bot potentially has, after all it would not be able to perform its daily trades if it kept all its coins locked in 7 wallets.

If we take just the 1st address, the one that contains 1,030,931 bcc. In one month that one address will generate in today's bcc value proximately 6 million dollars in PoS. 10% of 1,030,931 bcc. But it does not end there. Remember our good old friend, the compound interest. Well, staking also works that way. On the second month that same wallet will generate 10% of 1,134,024. But the bot knows it can stake those coins for a minimum of 4 months, cause that is the minimum time it will hold your coins for. Well at the end of those for months the bot will have generated a total of 478,455 new bcc. That is a 46.41% return
on investment by staking alone.

Now let's not forget that this is just staking gains. And that what BitConnect pays back to its users, is not 1% of the current value of bcc. What it pays is 1% of the INITIAL investment in USDollars.

Remember that for the first users, the first initial lending were made when the value of BitConnect was probably $0.50 cents. If someone way back then, wanted to lend $10,001 to the trading bot, they had to buy 20,002 bcc, give it to the bot and the bot would give back a digital IOU to the client with promises of great returns. Only that the bot now knows for a fact that, that initial investment will be locked in the system
for at least 4 months.
But guess what? The bot never promised you your 20,002 bcc back. It promised your 10,001 fiat dollars back.
Which if locked for 4 months would be worth around a mere 2,710 bcc by the time it had to return your initial investment.

What about the daily returns you might ask. Well, there are 3 options you can do with those daily returns.

1. Keep it in an IOU form as USD.
   (BitConnect loves when you do that. That way the money is just parked there while the bot makes more money with your initial bcc)

2. Trade to bcc
   (You are forced to do this option if you want any other options. Well, guess who is more likely to be selling these bcc to you? You got it.
   The bot, dictating his price, after all he is the one with the most coins, and pretty much the only one buying bcc at the moment)

3. Now you have a few options. Hold bcc, reinvest that bcc for the great returns or buy bitcoin and claim your gains.

a) If you choose the first option you might as well move the money to your wallet and stake the coin. (BitConnect wins here, cause now it is forcing people to use their system, and their wallet)

b) If you decide to reinvest the money. Well the bot will get the bcc he just sold you and guess what? He will be making money on top of it trading with other users like you or simply staking for more bcc. Which by the way, the bot is pushing up in value with each trade:) (BitConnect wins again)

c) You decide to cash out and get your BitCoins back.
(Well, guess who is selling it's bitcoins back to you after bitcoin probably just doubled in value:) You got it. BitConnect wins everytime.

And this is it. By holding the most amount of bitconnect and by luring people into what I see now as petty gains the bot is the biggest whale holding the biggest amount of BitConnect.
Probably holding over 60% of the coins, and staking the great majority of created coins as they are created. Remember that total amount of coins that will be mined by PoS = 20.4 milion.
Well guess who is the only one holding bcc while everyone else is giving it away for those pathetic 400% a year? You got it!

This is unsustainable you say, that money has got to be coming from some where? Well it is. By all the new users that keep buying bcc at higher values. Oh wait... isn't that exactly how all other major cryptos gain value. Supply and Demand?

The only difference here, is that the bot does not have to dump the coins all at once, because it knows everyone is tied up for at least 4 months with their money, and that money is fiat money.
The bot never promised the people their bcc back. The one that now has probably quadripled in price since their initial investment. The same bot that is generating your daily profits by trading with you the bcc you gave it to him to generate profits in the first place.

And don't forget that it probably holds the great majority of the bcc in circulation, so the chances of someone dumping a bunch of bcc to lower the value of BitConnect is very slim. And if they do, which by the looks of the trade history, it does happen. Well, the bot once again goes to the rescue and buys all that bcc back to keep the price stable. It buys with all the Bitcoins we gave it to it to do exactly that. To make the BitConnect value stable. Stable enough, for the period necessary that the developers need to add the real value and potential of BitConnect.

Now let's go back to what BitConnect promises it will do:

1. Return on investment of up to 480% in cash/year and guaranteed profit of 91.25 percent/year on your initial fiat investment.
   Well, that doesn't seem that far fetched anymore does it?

2. No risk of loss? That is not true. it claims minimum risk. Most of the risk is if you buy bcc and try to make fast gains trading. You will be trading with the bot, and guess what?
   You will probably lose:)

3. The money is made with a cryptocurrency trading bot they have created.
   Well, this seems quite possible now.

Let's not forget that when any new coin enters the market, it enters with 0 value and a bunch of promises.

No one will start using anything without a promise of something.

People claim that Bitconnect is not innovative and that people are investing on it only for the returns.
I say, BitConnect is only open and blunt about. They embrace what every other crypto is not willing to admit.

Most people get into cryptos because of their return. And in some ways, this is good for cryptos.

They are worth what they are today, because innovation is finally being able to be financed by people like you and me.

We choose to invest in ideas, without a middle man. Crypto has allowed us to do this.

For those asking, where this new added value is coming from. I have news for you. While you were lending your fiat to the bot in bcc format to make you money while you sleep.
The bot has been working 24 hours a day, 7 days a week, 365 days a year.
It does not need to eat, drink or sleep. It's only function is to generate value on a coin in which it pretty much controls. It knows the rules of the game and it follows simple rules to maximize profit. It feels nothing so it does not over reacts when a dump happens. Or it does not dump looking for short term gains.
In reality, all the value that is being generated, in some ways reflects what happen when full automation and delegation of decision making process is given to a machine.

Now imagine the possibilities.

These are the reasons I believe BitConnect is actually very innovative and could actually not be a scam.

Let's not forget that they have just re-invented ICO's.
Think about it. They are creating major interest in their platform with a completely new approach. They are the only stable coin at the moment and they have reached the top 10 in less than 6 months of existence.
If that is not innovation I don't know what is.

To conclude.

The reality is that only time will tell if BitConnect is or not a SCAM. As of now they should be left with the benefit of the doubt.
Like with any other cryptocurrencies. ONLY INVEST WHAT YOU ARE WILLING TO LOSE. But to accuse someone of wrong doing just because you don't understand how they are doing what they are doing, is just wrong.

I have invested in BitConnect, and I am willing to lose the money that I have invested in it.

The same way I have invested in Ethereum, Dash, Litecoin, Byteball, Neo and Iota. I invested because they all promised me something.

The only proof I have is that the developers of Bitconnect are working for that something. I have no idea who they are that is true, but the reality is that does not matter. They have something to show for themselves.

This is what they have achieved so far in my opinion:

1. Innovative way to get people to use their product.
2. A bot that so far is generating loads of value for them and some for us.
3. A decent and fast pc wallet.
4. Android and Iphone wallets.
5. A good website. (With not so good English)
6. An incredible marketing campaign. After all, you are here reading this.

What they still promise to deliver:

1. BitConnect Smart Card
2. BitConnect EcoSystem development.

If they continue the way they are. Implementing their promises in a timely manner. I can see this coin becoming quite useful and people actually using it to buy things. Specially because of its stability. Which is only possible because of it's adoption. Which in turn is only possible because of its infamous bot.

The bot probably holds 70% of the coins in circulation already and because of PoW it is guaranteed to hold the great majority.

Another thing worth mentioning, is that by generating wealth to the community and early adopters, they are guaranteeing the success of their coin by the time they develop their ecosystem. After all, who doesn't want to target their product to a bunch of newly rich people that have been used to this coin for so long.
It's a win win for BitConnect again.

All these claims are of course only speculation, I was not involved in the development of BitConnect and I have no idea who is. This could be all some delusion
from my head. I sure hope the bot won't dump all its coins at once when its time to cash out. But if it does, I don't see that being much different than other whales
doing the same thing with other currencies.

I do have hope that the developers thought this thing through. It's a shame that the bot is not opensource and that we cannot see what is programmed to do
with its bcc at the end of its journey. This obviously worries me quite a bit. I'm a big advocate for transparency and this bot, is true, seems to always be hiding around meaningless statements and catchphrases.

But I also see the potential of a system with these characteristics and if this is a ponzi scheme, wow... what a nice job It's a shame it won't be used for good this time.

And finally, don't invest on anything that you cannot lose. Or maybe this should be said in some other way. Don't invest any time or any money in what you don't believe in.

Anything you do has the potential of being in vain, does that mean you will stop doing anything because there are risks involved?

In reality, all money really is, is the time you put in doing some odd job to generate that money. It is all it really represents. This time, you will never get back. The question then becomes.

Is what you are investing in, worth that time?

Calculate the risks, if you think the risk is worth it and you are not putting others in harm, directly or indirectly. Then just go for it.

I must admit that the good return on investment of BitConnect is what made me interested in their platform in the first place.

But another thing that made me very interested was their philosophy.

And that is for me, something that easily gets lost, amidst this frenzy of profit seeking between cryptocurrencies. The reason this all started,
which should not be forgotten. Is to create a decentralized system and empower people financially. And if we can do this with each other's help along the way, even better. .

And this is exactly what BitConnect seems to be doing so far.

I sure hope that my theory is correct, not because I will not lose all my money. But because I really think that BitConnect has the potential to be the killer app of cryptocurrencies

If it is a scam or one of the most and innovative ways to realize an idea, only time will tell.

P.S. - One very important thing to note is that no one knows who controls the private keys to the bot's wallets. So there is still an extremely high risk to invest in this platform. You have been warned.