The Bitconnect project was accused of creating a financial pyramid

The creators of Bitconnect consider it "decentralized P2P-Crypto-currency based on an open source code that allows people to store and invest their money in a government-unchecked currency and even earn a significant return on investment." Critics of Bitconnect consider it a financial pyramid, which rewards the first customers and leaves the rest with nothing. While cynics can assert the same thing about many crypto-currencies, there is evidence that Bitconnect and the truth may be unclean.

 Accusations of fraud are often poured into different cryptocurrencies - even such large networks as Dash did not escape them, and Bitcoin was called a pyramid by the officials of many states.Nevertheless, the preliminary mining of an excessively large number of coins and direct investor fraud are two very different concepts. In recent weeks, Bitconnect's work has begun to show claims demonstrating that there is a possibility of hidden activities of an illegal nature.After the launch in 2016, the market capitalization of the BCC coin (not related to Bitcoin Cash) quickly grew to $ 2 billion, earning it a pass to the large players' cryptology. Since then, it has significantly decreased, and the oil on the fire was added to the comment on Twitter by the founder of the Ethereum, Vitalik Buterin, in which he called Bitconnect a financial pyramid.

Referrals Upon ReferralsIt is not so much Bitconnect's market cap that has caused concern as the referral scheme that the company deploys. Such programs are not unusual, fueling everything from health supplements to crypto, where many traders share referral links to exchanges, wallets, and token sales. There's a difference between receiving an Amazon affiliate-style commission however and joining a scheme in which the only way to profit is by ensnaring more investors. Sooner or later that house of cards is bound to come toppling down.

Investors who put $10,000 into Bitconnect are promised daily interest of 0.25%, which works out at an annual return of over 90%. Throw in generous bonuses on top, and Bitconnect starts to sound extremely comfy…at first. A cursory glance at BCC's Coinmarketcap chart shows the coin to be in rude health, trading at around $270. But what's that plummeting blue line? That'll be Bitconnect's market cap, which has fallen through the floor since the start of November. Falling is a recurring theme here, as anyone who's tried to research Bitconnect and fallen through a rabbit hole of shell companies and crazy videos will attest. As one YouTube commenter put it:

It's like scientology merged with hillsong infused with dorks and used car salesmen.

Seven Circles of Earnings

Bitconnect is a multi-faceted platform (that's why its explainer video alone runs for three minutes), but it's the lending program which has caused the most commotion. The scam/legitimate money-making opportunity works as follows:

1. Deposit bitcoin with Bitconnect
2. Purchase BCC on their exchange
3. Invest these coins in Bitconnect Lending
4. Earn daily interest and get your capital back after so many days

Where does Bitconnect make the money to pay all these generous bonuses? That's classified, and all part of the secret sauce that makes Bitconnect (head developer's name: "Satao Nakamoto") so unique. Best guess is it involves the company's seven-tier recruitment scheme that pays referrals for referrals for referrals.

One vociferous exponent of the platform is Marko Stokelj of Coincodex, who told news.Bitcoin.com:

Bitconnect employs a number of dubious methods in order to operate and promote its business. The business model outlined by the company is economically unsustainable with the current level of returns unable to be validated by any legally known investment system. As a result, we have taken the decision to distance ourselves from this project, delist BCC from the top 100 listings and issue a warning on the coin overview page.

Crashing This Exchange With No Survivors

Of course, there are two sides to every crypto coin, and many of the accusations being flung at Bitconnect could equally apply to bitcoin in its earliest days: no one knows the identity of the project's founders, or even where they're based short of "the far east". With most of the BCC in existence locked in the company's exchange, if its founders were to perform an exit scam or wind up behind bars, millions of dollars of bitcoin would instantly be locked up and BCC would be rendered worthless.

But What About All The Good Things Bitconnect Did?

The knives might be out for Bitconnect at present, but the platform still has a loyal army of supporters who are prepared to defend it to the hilt. Given that Bitconnect have been as good as their word to date, furnishing their investors with all profits due, proponents are aggrieved at the flak their community of "like-minded, freedom loving individuals" is taking.

Bitconnect's defenders may be swift to decry criticism of the P2P exchange, but the murmur of dissent is starting to rise into a chorus that can't be ignored, as a Twitter search for "bitconnect scam" reveals. There are many reasons why the platform's founders may choose to obfuscate their identities, and nothing untoward should necessarily be read into this. Nevertheless, until the Bitconnect team can provide more clarity on how their system of magical internet money works, aspiring investors would be advised to approach with caution. If that levee ever breaks, the fallout could get very messy.