Since the price of Bitcoin (BTC) skyrocketed, investing in cryptocurrency has allured many entrepreneurs to the mining industry. Although generating crypto coins on your computer without buying them on the market is attractive, there are some things you need to be careful about before you decide to mine cryptocurrencies.
Here, we will tell you all you need to know about BitConnect and whether or not you should mine it.
Let’s first cover the basics of mining cryptocurrencies in general.
In the beginning, mining Bitcoin (BTC) or other digital currencies was quite an easy process that you could do with a basic computer with a CPU. However, as the price of cryptocurrencies skyrocketed, mining became a trendy venture for entrepreneurs. As more and more people started joining the mining game, the computing power allocated to mining cryptocurrencies gradually increased.
Because mining cryptocurrencies is a game of coming up with a valid hash before anyone else does, as the computing power allocated to mining cryptocurrencies, also known as hash rate, increases, the computer power you need to successfully mine a coin increases accordingly. Two major technological advancements in the cryptocurrency industry have resulted in jumps in the total hash power allocated to mining cryptocurrencies.
The first jump happened thanks to the allocation of GPUs to the mining business. GPUs are graphic processors that were initially designed to render high-quality video graphics, which is quite a task in terms of computing power. When miners figured out how to tweak GPUs to mine cryptocurrencies, they almost wiped out CPUs from the game.
The second jump happened when ASIC miners were invented. These are mining rigs specifically developed to run cryptographic hash functions to mine specific cryptocurrencies continuously. When ASIC miners joined the game, it became virtually impossible to mine cryptocurrencies without an ASIC miner, be it Bitcoin or Bitconnect coin.
Since the emergence of centralized giant mining farms, solo mining has become virtually impossible. Mining pools let you combine your hash power with others and split the block reward accordingly, but there are service costs on these platforms.
On the other hand, cloud mining lets you rent someone else’s hash power online. This ups your chances in the competition without requiring you to invest in an expensive mining rig.
However, to make a profitable business out of mining, you should consider your costs such as your electricity bill, the depreciation of your device, your internet connection fees, and your mining pool or cloud mining service fees and compare them with the expected revenue from mining cryptocurrency.
What Is Bitconnect?
BitConnect is a platform claiming to offer a peer-to-peer Bitcoin lending service. However, there’s a lot of controversy around this claim, so we’ll tell you more about whether this claim is legitimate below. In 2016, BitConnect launched an associated BitConnect Coin (BCC), an open-source cryptocurrency that’s a fork of bitcoin (BTC).
BitConnect Coin uses the same script algorithm as Litecoin (LTC). However, it’s a hybrid cryptocurrency that uses both the Proof of Work (PoW) and Proof of Stake (PoS) blockchain procedures, making it more efficient while keeping it secure.
Unlike other altcoins that forked from Bitcoin, such as Ethereum (ETH), Ripple (XRP), and Litecoin (LTC), the major catch with BitConnect Coin is that it’s linked to a platform that offers an exclusive interest program for those who choose to lock in their BitConnect Coins for a while.
To invest in BitConnect, you need to go to a BitConnect lending platform with your Bitcoin and exchange it for BitConnect Coin. The premise is that Bitconnect bots trade the deposited Bitcoin (BTC) in the cryptocurrency exchanges, extracting a good deal of profit. Then, this profit is divided between investors depending on their deposits or other factors such as the referrals they bring to the BitConnect venture or the amount of time they have been in the BitConnect system. At BitConncect’s high, in 2017, daily interest payments swung around 1% and went as high as 40% a month. Some thought the pledge was too good to be true, but still, many people invested in BCC.
Bitconnect’s Rise and Fall
The idea of Bitconnect started to gain traction in early 2017 when Bitcoin prices skyrocketed, and cryptocurrencies became a popular investment instrument. By the end of 2017, Bitconnect was on a dazzling upwards spiral – the coin had been worth less than a dollar at the beginning of the year but then hit 463 USD on 28 December 2017.
However, Bitconnect wasn’t an official company. Several entities were associated with BitConnect Coin, and their legitimacy was quite suspicious.
On November 7, 2017, the UK government issued a notice obliging BitConnect to prove its legality. The states of Texas and North Carolina soon ceased all BitConnect activity within their jurisdiction.
On January 17, 2018, BitConnect closed down, and BCC’s price fell to 19 USD. Still, the project shutting down was not an official procedure because BitConnect was never an official enterprise. Even though BitConnect declared it would return the lending it held at the time, another enterprise suddenly opened for business, offering an exchange of BCCX tokens in return for BCC. This was most probably a continuation of the same scam, designed as a last-ditch effort of luring desperate investors in with the idea of monetizing their BCC. Like BitConnect, BitConnect X was neither an official nor a transparent enterprise, and it soon disappeared, taking down BCCX with it.
Was BitConnect a Ponzi Scheme?
A Ponzi scheme is a con scheme that lures investors by promising them high returns but doesn’t invest the funds in any legitimate venture. Instead, it pays early investors from subsequent investors while not backing up its liabilities with reliable business activity.
This way, it manages to offer a high rate of return to each downpayment without actually creating any surplus value. The problem is, a Ponzi scheme requires more down payments from new investors to satisfy the contract for each previous investor. It’s a form of fraud, as the scheme’s structure leads its victims to believe it’s a sustainable, reliable business model.
The fact that BitConnect failed to prove its legitimacy and the fact that there was a severe lack of transparency regarding its operations strongly point towards a Ponzi scheme. However, for the same reason, no one knows what was going on with BitConnect.
It Never Proved Its Legitimacy
When BitConnect was issued several notices to prove its legitimacy in late 2017, the grounds of the platform started to shake. When Bitconnect shut down a couple of months after that, the same promoters who were quite excited about the platform, in the beginning, had long since stopped promoting it and had deleted their previous content.
Making Money With Trading Bots
Making money with trading bots is not a myth. It can help you make more informed decisions in your crypto trades. However, the profit depends on your capital and your choices. Plus, it’s never risk-free, and the payoff is never guaranteed.
BitConnect claimed to have automated trading bots that make serious arbitrage profit out of the money pooled in the platform. The most popular and promoted one was the volatility software. However, the software’s codes for it that would show what that bot could exactly do were never disclosed. The lack of transparency raises many questions. For example, if the volatility software or any of BitConnect’s other bots were successful, why not patent them and market the service? Or, why did the investors have to lock in their Bitcoin rather than BitConnect Coin?
Guaranteeing Risk-Free High-Yield Investment
When a venture promises risk-free, high-yield investments, that should be enough to raise some red flags. Even if you find such a legitimate investment project, the window of opportunity for making a profit won’t stay open for very long as other investors find out about it and enter the game.
So, investing in such a venture is never a good idea unless you know how it operates and what is happening behind the scenes.
However, BitConnect was widely promoting its easy payouts. One of its passionate promoters, Carlos Matos, even became an internet meme for shouting BitConnect exuberantly and singing hey hey hey on BitConnect’s only convention held in Thailand.
The BitConnect Referral Program
The best way to explain BitConnect’s referral program is, well, to say it’s a pyramid scheme. If your referrals join the BitConnect Network, you get shares. If their referrals enroll in the program, again, you get shares.
Are There Other Crypto Scams?
Because of the decentralized nature of the cryptocurrency ecosystem, it’s an attractive ground for those who seek to profit by scamming others. If you spend some time in the cryptocurrency trading business, you’ll definitely come across imposter websites, fake apps, fake accounts on social media trying to trick you into investing in a project, fake ICOs, etc. If you’re being careful, you learn to tiptoe around these traps.
However, bigger scams are also happening in front of the public eye. For example, Bulgarian-based OneCoin scammed around $4 billion by marketing a coin that was not even backed by blockchain technology between 2015 and 2019. There’s also PlusToken, a scheme that emerged in China and is considered the largest crypto Ponzi scheme in the history of cryptocurrency. Another one is GainBitcoin, a company that appeared in India promising high-yield investment rates in return for locking in deposits. It attracted around $300 million before it was unveiled as a fraud.
How to Be Mindful of Crypto Scams?
It’s clear that swindlers prey on investors’ lack of information about cryptocurrency. Of course, it’s impossible to be fully aware of everything that’s going on in the crypto market and its advancements in technology all the time. However, there are simple tricks you can employ to spot red flags.
For example, you should always approach high yield risk-free investment opportunities or non-open source technology such as trading bots that are mysteriously efficient with caution. Another thing is that you should be mindful of FOMO (fear of missing out), which is a reflexive reaction to ample opportunities that crypto scammers often abuse. And finally, even if you hear about a fantastic opportunity from a very trusted friend or relative, you should always research the enterprises you invest your assets in.
Should You Mine BitConnect Coin?
No, you shouldn’t. BitConnect was a colossal fraud that victimized many people, hurting the reputation of the crypto industry as a whole.
BCC was a surprisingly popular coin. It was among the first 20 coins in terms of market price during its peak. However, after raising allegations, when the authorities shut it down, its market price fell below 1 USD. Today, the project has the reputation of a massive scam, and it’s not likely to be revived in the future. Plus, you can’t trade or invest BCC on the BitConnect website or any reputable crypto exchanges anymore.
If you are looking to profit from cryptocurrency mining, there are better ways to put your processing power to work.