A Breakdown of Bitconnect’s Service: Written By Jeti Knight

Setting up the scenario:

Bitconnect Coin at the beginning of this scenario is nominally worth $0.10 per bitconnect coin.

Say 10 people buy $10.00 worth of bitconnect coins and they “lend”

2 different scenarios

#1. If Bitconnect guaranteed their customers a percentage kickback in bitcoin/BCC this would be very tough to achieve giving the fluctuating nominal price of the asset and the consistent percentage that is guaranteed in the form of bitcoin/BCC. You have no wiggle room in this scenario. Example.

10 people buy $10 worth of BCC at $0.10 per BCC, which is a total of 100 BCC’s per person, and make a loan on Bitconnects lending platform. Bitconnect guarantees (for example) a return of 1% daily on average based on the BCC’s loaned out on their platform. Now on a loan of 100 BCC’s, 1% of that equals 1BCC. This means that no matter the nominal price of this coin, bitconnect guarantees a return of 1BCC for every 100BCC’s loaned out given the agreement. So, to satisfy this agreement Bitconnect must issue 10 BCC’s daily in order to make whole the 10 investors that all loaned out 100BCC’s NO MATTER THE PRICE OF THE COIN (1 BCC per investor). In the beginning the coins worth was $0.10, today that same coin is worth $50…and Bitconnect must still pay out 10BCC’s to these 10 customers given the nature of the agreement. So in the beginning Bitconnect was paying out $1.00 worth of BCC’s in order to satisfy this agreement. Today Bitconnect would have to pay out $500 in BCC in order to continue making this daily payout, which means that if they don’t already have the coins and they have to go out in the market in order to get these coins then they could run the risk of imploding in on themselves because they don’t have the cash revenue in order to make this agreement whole on a daily basis. Just because the value of the coin went up doesn’t mean that Bitconnect has all of the coins. If for any reason Bitconnect has to go out on the market in order to get these coins to complete their payouts, bitconnect will find themselves in a situation where they run out of cash and could eventually default on their agreement.

#2. If bitconnect guaranteed their customers a percentage kickback in “dollars” or USD this would be an almost infinitely easier agreement to fulfill giving the volatile price of their Bitconnect coin in comparison to a more static nominal asset such as USD. Example;

10 people buy $10 worth of BCC at $0.10 per BCC, and make a loan on Bitconnects lending platform. Bitconnect guarantees (for example) a return of 1% daily on average on what the USD equivalent was that you load out. Now on a loan of 100BCC’s, the USD equivalent at this time is $10 USD. So based on the $0.10 price of BCC’s to start it would take Bitconnect a total of 10BCC’s daily in order to make these 10 people whole on a daily return of 1%. BUT, that 1BCC only represents the converted amount of what is actually owed to the people who made loans given that what is owed is $0.10 given that the agreement is based on a USD nominal figure and not a bitcoin/bitconnect figure. This is an extremely important difference, and here’s why.

Now, we have a situation where the price of BCC skyrockets to $50. Well, these 10 customers are still owed a 1% daily return, but because their percentage is denominated in USD and not Bitcoin/BCC’s, Bitconnect is in a massively profitable scenario. They have to make their agreement whole, but it no longer takes a total of 10BCC’s in order to do so given that the price in USD terms skyrocketed. Since Bitconnect’s agreement is based in USD’s what it would actually take for Bitconnect to make their agreement whole in an environment where BCC’s are worth $50 is…

2% of just 1BCC! To clearly show, this would be a savings of 9.98BCC’s in total for Bitconnect as a platform, but also their value has just skyrocketed because of the value of the coin which ups their overall marketcap in relation to coin supply. Remember, the agreement together was to pay out $1.00 worth of interests in order to make 10 people whole on their daily 1% daily returns. So, with a $50 BCC price, bitconnect in reality could continue to pay this 1% to these 10 customers and would be able to pay out this amount every day for 500 days….on just 1BCC coin per customer at a price of $50 per BCC. To compare, if we take the price in the beginning where it took 10BCC coins to satisfy a day’s payout. The total amount after 500 days in that scenario would be a total of 5,000 total BCC’s, 4,999 BCC’s that Bitconnect just saved by the price move to $50 per BCC. Now this is where the true value comes in. With the 4,990 BCC’s saved to service new customers with $10 loans for example, with 4,990 BCC’s at a $50 price point, bitconnect could be able to service almost 5,000 new customers for 500 days if they all came in to establish $10 loans and the price of the coin stayed around that price point. This new found customer base, but more importantly, fulfillment of agreements will make this platform/service/coin even more popular and most importantly….RELIABLE. This is how Bitconnect would be able to offer these returns along with returning all lent money that was paid out to the system along with paying out rewards to their customers for referrals. And please keep in mind, this breakdown is purely based on the value of the coin going up in price, and doesn’t include the monies generated by Bitconnect through their trading bot software or the “exchange fees” that Bitconnect pockets when converting Bitcoins to Bitconnect coins and vice versa. And speaking of the money originally loaned out, remember, Bitconnect stated that they would issue your “Capital Back” at the end of the holding period, not the BCC amount that was converted to USD in order to make the loan. So for example, when the loan was originally made it required 100 BCC’s in order to equal the Capital being loaned out which was $10.00. At the end of the holding period, if the current value of BCC’s is now $50, when the customer receives their money released to them in their Lending Wallet it will still be $10, but that $10 will now be worth just 20% of just 1 BCC. This means that Bitconnect once again has earned a return on this agreement, which totals 99.8 BCC’s which they keep, given that what they have agreed to return is the “Capital” which is represented in USD and not BCC’s which was simply the vehicle that was used in order to convert into USD’s which was what was actually loaned out. The nominal amount that Bitconnect made on just 1 of the original 10 customer agreements when they released that money was $4,490. Multiply that by the 10 original customers and that amount is $49,900.

That is just insane profits for the Bitconnect platform and in my opinion explains in a general sense how Bitconnect can provide this service and it actually be legitimate.

In my humble opinion, this is the difference between bitconnect’s service platform and Pyramid/Ponzi schemes or other failed services such as Ecoin plus and Bitcoin’s Brain. Based on this understanding of mine, I believe Bitconnect could be as forward-thinking and revolutionary as a financial platform as what Bitcoin was when it was created as digital money and most importantly a blockchain technology.