Bjorn Bjercke, a cryptocurrency enthusiast and blockchain developer, recently revealed that when OneCoin approached him in an effort to recruit him as Chief Technology Officer (with a supposed pay of $2.5M per year), OneCoin had no blockchain at all.
The murky altcoin which has mostly become known as a serious scam has no public-facing blockchain nor software wallets that users can access offline. Its current iteration is much more like a Federal Reserve style system where all trust must be placed in the issuer. And according to Bjercke, who could not talk to us for this article due to his co-operation with authorities investigating OneCoin, OneCoin is not a cryptocurrency at all.
There are a few basic requirements for something to be considered a cryptocurrency. For starters, coins must be generated using a cryptographic algorithm. Many have been used – Bitcoin uses SHA 256, Litecoin uses Scrypt, and some even use Skein. Others like DASH and other X-series coins use multiple algorithms. This is important for the soundness of coins added to the system and their ownership.
Bjercke says OneCoin uses an SQL script to generate coins. He bases this on the fact that they had no existing blockchain when they approached him. His job as CTO would have been to develop one, potentially, but it would seem more likely they would have put unreasonable demands on him as regards the ability to mute, rewrite, and reverse transactions as well as seize funds. This last bit is allegedly for the purpose of regulatory compliance, but thus far it seems regulators in numerous jurisdictions are seeking to shut the thing down.
Secondly, a cryptocurrency needs to be publicly accessible. Users should not need to be able to access Bitcoin.org in order to see their funds, yet with OneCoin, users must buy in with an account. While OneCoin claims there is no risk of inflation in OneCoin, it seems obvious that if they are capable of muting transactions and seizing funds, they are also capable of injecting more coins into the system. According to the following video, users are able to buy and sell coins in various other cryptocurrencies via the OneCoin platform.
This is reminiscent of the Hashlet scheme run by Josh Garza a few years ago. Users “invested” (read: donated) thousands of bitcoins in hopes of earning more bitcoins. Users were also able to transfer their Hashlets to others, and there were some who came out ahead – as there in every pyramid scheme. The point is, while users were taking a chance, Garza and company were raking in bitcoins free and clear.
Regulatory compliance is not a technical compromise, in any case. It makes no sense to offer a weaker product in order to satisfy government hacks. Regulatory compliance is an individual issue. If people choose not to pay their taxes, they are to blame. If they choose not to declare their bitcoins or other cryptocurrencies, it is a risk they are taking.
The mere facts laid out regarding OneCoin so far do not confirm the fact that they are riding dirty, but when one considers also the fact that their “blocks” are mined exactly every ten minutes, it is much easier to presume that a script is generating the coins. There are lots of ways to make money in the cryptocurrency industry, and even more to lose it. OneCoin is an example of the scammer’s approach to the former, while its users exemplify the latter. At this point there is no reason not to consider the entire project a scam of mediocre cleverness but maximal success.
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Last modified: May 21, 2020 10:01 AM UTC