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OneCoin Scam – What Should You Know?

Introduction

OneCoin was promoted as a blockchain-based cryptocurrency through an offshore company OneCoin Ltd. registered in Dubai and founded by Ruja Ignatova, a Bulgarian national. According to the claims made by the company, OneCoin is a cryptocurrency that works like any other digital currency system whose coins can be made through a mining process, and the coins can be used for making payments anywhere in the world.

But there is no specific clarity of the working blockchain model of OneCoin. OneCoin is also known for selling educational materials and courses for cryptocurrencies, investments, trading, and other subjects related to financial analysis. However, OneCoin has been labelled as a global Ponzi Scheme and the biggest cryptocurrency scam ever. Let’s navigate the details.

What is a Ponzi Scheme?

A Ponzi scheme is a type of financial fraud or investment scam where the investors are promised high rates of returns and profits with minimum risk. The scheme traps the investors into a false belief that the returns are generating from the sales of a product or any other means; however, they remain unaware of the fact that the source of funds is other investors. The returns for the early investors are generated by collecting the funds from the new investors. 

OneCoin: A Cryptocurrency Scam

OneCoin is an international Ponzi scheme and was created as a fake online cryptocurrency by its founders to deceive the investors. The company used the terminologies of real digital currencies to reflect a genuine and authentic impression of its business model. The target audience of OneCoin included all those people who were not aware of the cryptocurrency and technology mechanism. Even the education material and packages sold were plagiarized. 

The worst part of the entire scam is the company never had a blockchain, to begin with. The concept of ‘mining’ was fake, and the new miners were told to wait for at least three to six months before their currency can be mined. The transactions were observed without the use of blockchain technology. It was believed that they were using a centralized database to run OneCoin. Eventually, the company also revealed that the SQL database that was put into use was not capable of operating a blockchain.

OneCoin had an organizational structure similar to a pyramid scheme where everybody was actually paying to the individual above. So, there were two sections of the company. The first section was OneCoin itself responsible for marketing and spreading the platform.

In contrast, the other section of the company was composed of affiliates who were bringing in people for earning a commission. Local promoters would organize meetups to spread OneCoin, and even the webinars were also hosted. They had gathered maximum growth in Asia, particularly China, and that’s why the country was hit the hardest. OneCoin was successful in running a $2 billion cryptocurrency pyramid scheme in China. 

Conclusion

The founders of OneCoin and many other associated executives were formally charged, and the US Authorities had declared OneCoin to be a fraud. It is crucial for us to know the basics and fundamental concepts of crypto and blockchain to avoid getting affected by such scams. We should be able to identify the scams by analyzing and understanding the platforms properly before investing our money. 

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Crypto Guides

Knowing The Risks Involved While Using & Investing In Cryptocurrency

Introduction

Bitcoin, being the world’s largest virtual currency in terms of market cap, is aiming to give the financial space a new look. Also, blockchain technology, which is digital, distributed, and decentralized, has been powering transactions without the existence of intermediaries. With these features, it is believed to be a game-changer for the financial industry in the near future. However, apart from its primary features, it is essential to have a light on the risks involved in them.

Potential Risks Involved In Using Cryptos

Yet, cryptos have been the evolved way to look at currencies; there are ever-growing risks and concerns. Here are some reasons which show that using and investing in cryptocurrencies might not be a smart step.

Unavailability of traditional fundamental metrics

Cryptocurrencies lack the existence of fundamental metrics, which is useful for assigning value to an asset. In a stock, investors can get info about balance sheets, income statements, earnings reports, and many other fundamental factors to analyze a stock. However, with cryptocurrencies, there are no fundamental metrics that can be used by investors. Apart from processing speed and average daily transactions, the investors virtually get nothing about the power of digital currencies needed to analyze cryptocurrencies.

The SEC shall be of no help

A December 2017 statement from SEC chairman notes that decentralized trading can occur outside the confines of the US borders. And, as the transactions are considered to be anonymous, recovering the invested coins may not be possible.

Volatility

Though the cryptocurrencies have been in the market for quite a long time, the price fluctuation is still an issue. This could be due to the fact that people do not yet tend to trust these intangible funds. Moreover, even though a single entity doesn’t govern it, any major world news can the price of the cryptocurrency.

Lack of acceptance

While Bitcoin is welcomed in many countries, there are a few countries that still do not accept them due to its volatility and decentralized nature. Some nations have put a complete ban on it, and some have tried to cut off support from banking systems for its trading and use. Some countries that said ‘No’ to cryptocurrency are

🇨🇳 China

Bitcoin is officially banned in China. All financial institutions are prohibited from transacting with Bitcoin. The crypto exchanges in China are put to ban as well.

☭ Russia

Bitcoin is unregulated in Russia; however, its use as payments for goods and services is illegal.

🇻🇳 Vietnam

Vietnam’s government and its state banks claim that Bitcoin is not a legitimate payment method.

Thefts and Scams

Though cryptocurrency is intangible, there are possibilities of thefts and scams through hacking. Hackers have sophisticated tools that infiltrate cryptocurrency wallets and trading platforms to intercept transactions and send money to their wallets. Some of the Bitcoin scams with examples include,

Fake Bitcoin exchanges: BitKRK from South Korea
Ponzi schemes: Bernie Madoff
Fake cryptocurrencies: My Big Coin

Final Words

It is no doubt that cryptocurrencies have eased out the way of transactions. One can transfer coins to anyone, anywhere, and anytime anonymously of its decentralized nature. Having that said, the volatility, lack of acceptance, and thefts and scams can be viewed as a disadvantage and as a factor of risk.