One of the side-effects of the rise of MLM
cryptocurrency opportunities, has been analysis and scrutiny from the wider
cryptocurrency community.
When it comes to MLM and compensation plans, I like to
think I know my stuff. While I have a working knowledge of how bitcoin works
however, the technical side of the cryptocurrency isn’t something I’ve delved
into.
Presumably authored by someone in the bitcoin
community, on May 27th an article published by “Mr. Poth” compares bitcoin’s
blockchain with that of OneCoin’s.
Not surprisingly, the author has concluded that
OneCoin’s purported blockchain is “useless”.
For those unfamiliar with what a blockchain is, it’s a
ledger on which every transaction within a cryptocurrency is recorded. This
includes the generation of coins themselves.
Every cryptocurrency has its own blockchain, which is
typically publicly accessible. With it, you can observe transactions within a
cryptocurrency’s eco-system. Through distributed computing, the blockchain is
also used to verify the authenticity of transactions.
Regarding the creation of coins, “mining difficulty”
determines the target rate at which new coins are mined.
(a) Blockhain (sic) is
maintained by “miners” which are basically computers solving puzzles.
After they find a solution,
they broadcast it to the network, then the block (which contains the recent
transactions) is appended to the blockchain, and the miner gets rewarded in the
currency in question.
Then, after a certain number
of same level of answers are broadcasted, the difficulty increases, and the
solving continues.
(A) very important aspect is
that the difficulty is constantly getting harder and harder.
The answer to the puzzle is a
right kind of hash for the new block, and difficulty is generally the right
amount of zeroes in the beginning of the answer.
A “hash” is a numerical value given to any transaction
that appears on a cryptocurrency blockchain. Blocks themselves are represented
on the blockchain by their own hashes.
Once a block reaches the maximum amount of
transaction hashes and is verified by other miners, it is added to the
blockchain.
The more blocks generated that pertain to the creation
of coins (as opposed to just containing transaction records), the harder the
mining difficulty becomes.
An example Mr. Poth provides is the hash of the second
bitcoin block:
00000000839a8e6886ab5951d76f411475428afc90947ee320161bbf18eb6048
The eight zeroes at the start represent the difficulty
of this block.
A recently created block Mr. Poth cites has a hash of:
000000000000000004ce25c3427f09a3916339835f1fc76b2554bec51489b545
This second hash has seventeen zeroes, representing an
increased difficulty rating.
I’m not sure if this represents a linear increase or
what level of difficulty one zero represents, but what’s important is the
consistency with which block hashes continue to get more and more difficult as
more and more coin creation blocks.
Pertaining to the difficulty of bitcoin mining;
The network constantly tries
to find a level of difficulty were the average solving time is about 10 minutes
(so there is on average 10 minutes for your transfer to get its first
confirmation), so when computers are getting more and more powerful, the
difficulty increases.
One important thing to note
is, that since mining involves a lot of probability and randomness, 10 minutes
is only an average. Generally with Bitcoin, one can see a range from 5 to 20
minutes.
With me so far?
Bitcoin’s blockchain regulates difficulty to achieve a
10 minute average solve-time.
Computers get faster over time, which along with
blocks generated translates to more difficult math problems needed to be solved
before a coin is generated.
Otherwise the rate of generation would get faster and
faster, which is not an intended design parameter.
Knowing this, Mr. Poth asks (and answers);
So, why this is important when
investigating OneCoin?
Well, it seems that:
1) OneCoin does not have a
real difficulty.
2) The solving time is almost
exactly 10 minutes every time. Which is a statistical impossibility.
Through “contacts involved in OneCoin”, Mr. Poth
claims he gained access to OneCoin’s blockchain web-interface.
Screenshots from “blockchain.info” (a widely-used
bitcoin blockchain browser) and OneCoin’s blockchain are compared side by side.
Notably, OneCoin’s block hashes don’t appear to have
any observable difficulty rating.
the hash does not seem to have
any restrictions: any hash will do (and a computer creates a hash without any
restrictions in milliseconds).
I went through a lot of blocks
to see if there is any restriction (difficulty) concerning the hash: I failed
to find any.
Whereas bitcoin’s hashes have the zeroes as an
indication of block hash difficulty, in OneCoin’s hashes they are absent.
OneCoin does provide a “difficulty indicator”, which
Mr. Poth claims has no “mathematical backing”. The absense of this backing, he
claims, makes OneCoin’s blockchain “useless”.
Why?
OneCoin claims, that they will
open their blockchain to global use when the time is right.
However, a blockchain with no
difficulty is useless in public use because of three reasons:
1) Users (new ”miners”) can
create practically unlimited amount of blocks, which means they get OneCoins in
reward, which would mean fast hyper inflation, and fast loss of value.
2) If the difficulty logic is
built in, but not used (”0 difficulty”), then one miner with huge resources can
take over the chain (since the difficulty increases), and dominate everything
that happens in the blockchain.
3) In case of conflicts, the
network chooses the strongest chain, as above, with enough resources, attacker
(or well, anyone) could create a stronger chain, and dominate the chain.
As to the set 10 minute mining time OneCoin has, Mr.
Poth points to blockchain.info’s list of recently mined coins, which vary
in time mined.
When I visited the page as I was putting together this
article, the times displayed for six bitcoins mined were
- block 413870 to 413871 – 5 minutes
- block 413871 to 413872 – 12 minutes
- block 413872 to 413873 – 2 minutes
- block 413873 to 413874 – 8 minutes
- block 413874 to 413875 – 8 minutes
An example of blocks 68134 to 68137 on OneCoin’s
blockchain, mined on May 24th, reveals:
- block
68134 to 68135 – 12:03 UTC to 12:13 UTC, 10 minutes
- block
68135 to 68136 – 12:13 UTC to 12:23 UTC, 10 minutes
- block
68136 to 68137 – 12:23 UTC to 12:34 UTC, 10 minutes and 26 milliseconds
This differs greatly to bitcoin’s inconsistent solving
times, further supporting “mining difficulty” in OneCoin is irrelevant.
The thing with a blockchain is one you start it, you
can’t tamper with it.
For OneCoin to continue on with their current
blockchain (the company claims it will “go public” at around 80% of coins
mined), the above problems represent insurmountable obstacles.
Or from a different perspective, evidence that OneCoin
is not designed to ever be released to the public.
So, it might be true that
OneCoin is indeed building a blockchain, but it seems useless, and does not
seem to have any justification for the concept of difficulty, just an arbitrary
number.
Mr Poth, who claims to be a “blockchain expert”,
claims he “will contact” OneCoin about these problems. We’ll keep an eye out
for an answer.
My takeaway is that, from an MLM perspective, OneCoin
is little more than recruitment commissions plus ROIs tied to Ponzi points.
I’ve long described the consistent generation of
OneCoin points each day as a simple script that doesn’t operate like a
legitimate cryptocurrency would.
Confirmation that the pseudo-cryptocurrency would fall
apart if OneCoin ever relinquished sole control over point generation, only
reinforces this.
That this information has only surfaced now is testament
to the type of investors OneCoin are targeting. The great irony being that
OneCoin insists it sells cryptocurrency education.
