Indicia Bitcoloan is Probably a Scam

in hive-172186 •  4 years ago  (edited)

As #DeFi continues to grow in prominance, it will be increasingly important that one develoves the ability to discern legitimate actors from bad actors, and gauge counterparty and other risks appropriately.

Here are several indica that @bitcoloan is not what they proport to be (a DeFi crypto loan provider) and are at best a MLM marketing (read Pyramid) scheme and at worst, a straight up bad actor poised to exit scam.

  1. Obfuscated Ownership - #Bitcoloan not only provides zero information on who the owners are or even what country they operate from, but they have gone to great lengths to conceal this information.

  2. Short Operation History - The domain was registered less than a year ago, and service appears to have been operating for even less time than that. The accompanying smartphone apps have only a few thousand downloads.

  3. Exceptional Claims - Bitcoloan claims that individuals can earn returns in excess of 1% per day on cryptocurrency deposited to their possession. They claim that the deposited crypto can be loaned risk free to individuals or businesses willing to pay these exorbitant rates because sufficient collateral is held by Bitcoloan to repay on defaults.

  4. Nonsensical Business Model - Why would anyone take out a fully secured loan in any currency with an APY of 400%+? This might make sense for a unsecured or very low collateral loan, but I cannot even imagine a use case for anyone to agreeing to take on the former loan.

  5. Only Open to Creditors - Despite the seemingly infinite pool of well identified debtors willing to accept tiny crypto loans at massive interest rates, there is no parallel track or option to become one of these borrowers. There is no explaination of how to become a borrower or what they use the loaned to do.

  6. Borrowers Don't Exist - The endless pool of high rate low volume short term borrowers are clearly identified with pictures and full names, or Business names, but I was unable to verify outside of Bitcoloan any of these people or businesses existing.

  7. Rewards Focused on Marketing - The bulk of the rewards offered are focused on promoting Bitcoloan, not on deposit amounts or other claimed business metrics.

  8. No KYC/AML - Not only do they appear to flout KYC/AML rules, their error laden code prevents even verifying a SMS number.

Conclusion
The unnamed actors behind @bitcoloan offering a rate of return an order of magnitude greater than a standard DeFi or Trad Fi loan originators, are likely using new deposits to pay for absurd returns on specious loans and will continue to do so until new inflows fail to cover the amount of actual tangible withdrawals being made by users (a classic #PonziScheme), at which point they will disappear taking all deposits with them (a classic #ExitScam).

This is all speculation and I welcome and will present any evidence to the contrary I am shown. For now, if it looks too good to be true, it probably is.

You have been warned.

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