If you are into cryptocurreny community like I am, you have probably heard of OneCoin, a cryptocurrency which will “change it all”, at least according to them. Many sources have called OneCoin a scam and/or a ponzi scheme, however, until now, there haven’t been any technical proof of that. Next, I will present the proof, but first there is some technical background to clear (after that, I will present the claims, and going to compare it to Bitcoin, which is globally accepted commodity):

Blockchain is everything

All current decentralized cryptocurrencies achieve their decentralization by using a shared ledger called “blockchain”. Blockchain contains every technical piece of information concerning the currency in question: how currency gets generated, where it is transferred, and so on. Also, blockchain contains information on the subject which is the interest of this research: difficulty.

What is difficulty?

Blockhain 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. 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. For example in Bitcoin the block #1 (the second block) has a hash of:

00000000839a8e6886ab5951d76f411475428afc90947ee320161bbf18eb6048

And one of the current block’s hash is:

000000000000000004ce25c3427f09a3916339835f1fc76b2554bec51489b545

See the amount of zeroes? This indicates the difficulty.

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.

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.

Next we will see the proof, and after that I will tell you why this is a problem.

The proof

With the help of my OneCoin involved contacts, I managed to get access to OneCoin’s blockchain information web-interface. But first we will see from blockchain.info how a real block from Bitcoin blockchain looks like:

The most important thing to see is the hash. Now we will see how OneCoin’s block looks like:

As you can see, 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.  There is the “difficulty” indicator, but as long as it does not have any “mathematical backing”, it is useless (soon I will tell why).

And what about the 10 minute solving time? You can see Bitcoin’s recent blocks here: https://blockchain.info/. You will see, how inconsistent the solving time is, but as you can see below, in case of OneCoin, it is unrealistic 10 minutes, sharp:

Why is increasing (and real) difficulty important?

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.

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.

Conclusion

It seems that the blockchain OneCoin is building is useless. However, I will contact the company on this.

Mr. Poth

Blockchain consultant <mrpoth at protonmail.ch>

You can tip me (in Bitcoins): 1BBW7Ua4jkXMW6514F7BfYRsY6L9oLS9Tv