onecoin-logoOne 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.

As Mr. Poth further explains;

(a) Blochain (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.