Kuailian is a scam, and I know it since a closer person from my direct environment showed me the Kuailian returns and ‘business model’ back in December 19′. Tried to ‘convince’ him that he was going to lose everything soon or later; but (obviously) he pointed me ‘wrong’ & moved on as he wasn’t going to refer me ‘succesfully’.
I also moved on, but less than a month later other person asked me about the same through my Instagram personal profile. Same end result.
Then another… this time a beloved friend from school. He ‘at least’ had ‘doubts’ about Kuailian being a scam.
”Oh cmon! you can’t fall for this, you’re much better than this shit!”.
He looked at me slightly worried, I know for a fact that guy always respected me a lot. We we’re very closer friends in the last years of school but life moved us through different paths.
He agreed to listen to me, and without noticing I ended in a closed whatsapp chat with 5-10 different people explaining with detailed facts why Kuailian is a blatant scam. Only my friend refused to keep promoting Kuailian while all the others turned their face and decided to keep scamming being aware of it. Pretty disgusting if you ask me.
People will keep asking me to join Kuailian, and i’ll keep pointing out that Kuailian is pure shit. I’m writing all my thoughts here regarding the matter to save me some time trying to explain ‘logical’ things to sheeps.
A motivation for writing this post was finding that other people found the same as me and took their time to try to warn others. I’ll never feel satisfied with innocent people losing money, but I’m glad to see others anticipating the ‘Kuailian scam fiasco’ coming.
Special mention to Tulip Research who wrote a full report here.
I also used some media resources from them. Great work!
A little parenthesis…
At this post I’m focusing (almost exclusively) on the financial aspects of Kuailian and I will argue why they’re a nonsense. There’s also legal & technical evidences pointing that Kuailian is a scam operating as a very shady scheme but I’m not going to cover them deeply as ‘legality’ isn’t my main field. I focus on the financials of the business. If they’re a nonsense I’ll keep pointing out the facts as being ‘legally’ registered doesn’t make you profitable.
Thousands of legal business failed before; if you ask me. I don’t care If ‘Deloitte’ or any auditing company is doing their ‘legal’ things.
If a the business model is flawed since the beginning, nothing else matters.
& a brief intro into masternodes.
I worked a bit with masternodes & I studied another bit the matter (one of the reasons why Kuailian cringed me since the beginning). Understand how MN businesses work is necessary to understand why Kuailian is flawed from the beginning.
Masternodes (MN’s)are a special type of full node implemented by some chains. The ONE that rule them all is Dash(DASH)
With my own words (surely not 100% accurate): In those networks, you can lock a required number of coins in a wallet as a ”Proof- of-Stake (POS)” and became a block validator of that network.
You receive rewards in the form of new minted coins for helping securing the network (verifying ongoing transactions, keeping a full copy of the chain & offering other services like privacy related ones).
Something important; High ROI masternodes aren’t better than the lower ROI ones.
One common misconception by newbies in the MN world is that a high (%) ROI masternode is better. EXACTLY THE OPPOSITE!
The amount of coins that you receive as a masternode operator are limited by code & they’re equally distributed between all the network participants.
That means, less masternodes operating = more rewards.
As a project grows, If the product is ‘legit’ (they’re actually trying to build something), it’s normal to see more & more people being attracted to the project and deploying more MN’s.
As this happens, the return by MN decreases. Because the SAME amount of coins are being distributed to more MN’s.
And as this happens (as the project matures in community & network effect terms), the $/sats value of the [insert-coin-here] tend to increase.
For that reason the ‘king’ of the masternodes Dash(DASH) ‘only’ offers a ROI of 6,23% anually. Because their network is strong and already attracted a lot of players.
A ‘legit’ masternode like Pivx(PIVX) offers a more ‘moderate’ ROI’s like 9% anually. Their network is strong (but not as strong as DASH, obviously).
Then we have the ‘gambler-beast-mode‘ MN’s like Eros(ERS) which offer absurd ROI’s like ~1500% anually (you recover your full investment in the first month*). They have (literally) 0 network and you’re alone with 4 devs and their cat.
(SPOILER: you probably won’t. Don’t try at home please. It’s called ‘gambling’ for a reason).
With this little introduction about masternodes understood, you’re ready to understand why I think that Kuailian is a scam.
But first of all…
What is Kuailian?
You can skip this part If you’re already into ‘the business’. But maybe it can help you to clarificate some things regarding the matter. Whatever. I’ll try to avoid beating around the bush.
Kuailian ‘claims’ to offer a multitude of crypto services as they’re (theorically) building a ecosystem. They’re going to offer a ‘Kuailian Bank’ services, A charity, arbitrage trading software… Lots of ‘awesome’ things on their roadmap (would be even more ‘awesome’ if they had been selling a ‘real’ product to finance themselves in my humble opinion).
Very nice, but how they make money?
They currently offer a ‘Smart Masternode Pool‘ & a ‘Machine learning tool‘. This means that you’re trusting them/their system to move around your money in exchange of a (pretty big!) interest. They claim to use ‘blockchain‘ & ‘smart contracts‘ as a ‘transparency’ tool.
Spoiler: 99,9% of their users doesn’t know what ‘blockchain’ or ‘smart contract’ means (If they did, they wouldn’t never touch Kuailian in the first place; nice ‘buzzwords‘ by the way). The remaining 0,01% are the founders; who obviously are filling their pockets with absurd referral commissions.
This is how it works from a user standpoint:
- You sign up on the platform through a referral link.
- Pay a ‘activation fee‘ of 50,95$ to start using their ‘services’.
- You purchase as many KUAI’s as you want. Every KUAI has a cost of 100$ in ETH and represents a ‘share’ in the ‘smart masternode pool’ which lasts ~1000 days.
- After ~15 days (or so) you start receiving daily payments in ETH ”100% passively” into your personal wallet.
From a ‘enterprise’ perspective this is what happens (theorically), check also the picture below:
- They receive your ETH, 80% of that money goes to the smart pool(more below). The 20% remaining is paid to your uplines (people who referred you).
- The ‘smart pool‘ is made of a ‘diverse’ portfolio of masternodes chosen by a ‘machine learning‘ tool which assembles/disassembles those MN’s based on profitability. Theorically this ‘AI’ is able to trade them to maximize profits on the open market because is ‘clever enough’ to prevent pumps/dumps.
- From ALL the profits of the smart Pool, ONLY a 65% are paid back to the first purchaser of the KUAI. The remaining 35% are split between Kuailian founders (14%) & more referral commissions (21%).
- The cycle repeats.
How much they’re paying?
As I checked from my notebook, overall numbers didn’t changed that much.
Since I first checked back in February, Kuailian introduced ‘medium risk‘ licenses which I’m not going to analyze. The ‘low risk’ ones are absurd enough.
Investors are receiving a low end of ~0,14% daily profit from their Low Risk KUAI’s. Doing simple maths this equates to a ~4,2% monthly profit.
I’M NOT COUNTING ALL THE PROFIT! (according to them). Only the ‘Client profit‘
If we take in consideration the whole profit of the pool (low end of ~0,21%) that sum increases up to ~6,3% monthly profit.
Can you see the problem here?
Check this :
- ~66% of all ‘investors’ funds are locked into Dash MN’s (15 million $).
- ~27% are locked into CVCC, BONO, TDPS & DIVI.
- The remaining ~5% are locked into ~10 different coins.
Until here, nothing new.
But what would you think if I reminded you that DASH as a masternode ‘only’ produces a ROI which equals to a ~6,23% YEARLY?
Exactly. Taking in consideration the ‘pool profit’ stated before. The Dash MN’s only cover 1 month worth of returns.
From where it comes all the rest?
‘Theoretically’ from the remaining ~32% invested into all the other masternodes. But there’s enough market to sell the profits taking in consideration that there’s MILLIONS of dollars invested into (apparently) illiquid MN’s?
Let’s check the different markets for the CVCC, BONO, TDPS & DIVI masternodes*.
*Masternode amounts extracted from the report, Coin prices & markets checked at 18/05/2020.
‘CryptoVerificacionCoin (CVCC)’ markets
According to CoinmarketCap (CMC) We have only 1 market for this coin:
Now let’s check the orderbook.
- In case you don’t understand what does it mean the ‘0,77 BTC’ that I pointed out, it means that the buy side of the CVCC market can only absorb 0,77 BTC worth of sells (~7,700$) (Falling to ‘0’ in the process by the way).
- Fact: Kuailian holds 115 masternodes worth of CVCC (1,4 million USD).
- Given the fact that the buy orderbook only represents a ~0,55% of the total position on that given coin, HOW a ‘theoretically wise machine learning tool‘ can exit their position? Let me answer: not even a human can.
No comments. Let’s keep researching…
‘TradePlus (TDPS)’ markets:
Let’s check the Crex24 market as again it’s the most liquid one:
- More facts: Kuailian holds 25 TDPS masternodes (worth ~1,2 million USD) . The orderbook can only handle 1,26 BTC worth of selling (12,6 thousand USD).
- Again, how anybody can sell their whole position worth x95 times the whole buying orderbook? You can’t. Because there’s NO POSSIBLE MARKET.
- Do I need to reminder that at the date of the report 5,8% of the total Smart Pool holdings were allocated into this ‘low risk’ asset? It’s the smart pool really ‘smart’? Food for thought.
Let’s check 1 more….
‘Bonorum (BONO)’ markets:
Let’s check the Finexbox market, as it handles the ~44% of all the volume.
- 5,86 BTC in the buy orderbook (~60K USD) vs ~2 million USD in total holdings for this coin. Again, the same situation. No one (machine or not) can sell their position here.
I could keep posting more screenshots from the orderbooks, but they’re all (except Dash & ZCoin) illiquid until the point that there’s not only any chance to sell the main stack (in full or partially), you’ll have a bad time even if you try to sell only the rewards from the MN’s alone.
In the case of Bonorum, for example, only the rewards alone for 46 nodes accounts to ~14,000$ daily (~1,5 BTC or ~25% of the full orderbook. DAILY!).
Why Kuailian is a Scam; Conclusions:
- Kuailian holds a prominent amount of their total equity (~27% according to the report used as reference) in illiquid masternodes which are impossible to sell at market rates. Even with extremely cautious ‘limit sells’ would be very difficult to unload big amounts fast. The crypto markets can be very volatile and the MN niche is no exception.
- The liquid MN’s (Dash & ZCoin) represents ~70% of the smart pool, but their profitability only covers ~0,52% of the monthly rewards of KUAI holders. Assuming a ~4,2% monthly profit, from where it comes the remaining ~3,68%?. (These disparities are even more extreme if we take in consideration the profitability of ‘Medium Risk KUAIS’ with a low end of ~14,1% monthly profit for the user).
- Seeing that current numbers doesn’t add up; How Kuailian can handle to pay 20% direct comission (after every KUAI purchase) & the ~35% profit of the ‘Smart Pool’ to uplines?
- What if any of the before mentioned projects close down their doors? How Kuailian manages these kind of situation? (The only response that I got regarding this is ”the machine learning would sell before”, yeah, sure).
The only ‘logical’ response to all of my inquiries is that Kuailian is a scam.
The fresh money coming into the system from new users is used to pay their oldest users, operating a classic ponzi scheme. The system only lasts as long as new users keep joining and investing into the platform.
The ETH deposited into the platform ends in Kraken/Binance from where Kuailian distributes the corresponding ‘daily earnings’ as I show in the following diagram extracted from Tulip Research:
- Assuming that someone invented a ‘revolutionary & profitable ‘Machine learning tool’ able to trade masternodes, why that person/team would make available that tool to the general public for the joke price of ~50,45$??
Quick answer: Because the business is in your pocket. They want your 50 bucks… to run with them.
- Why I need to join through referral link? This alone raises eyebrows and red flags. Money is falling like a cascade into uplines hands. There’s MORE incentive to build a referral network rather than purely ‘investing’.
- Theoretically the ‘machine learning tool’ is running in the Ethereum network. Given the fact that this network is ‘decentralized & public’, where I can see the this code in action? Where is the Github repository? Spoiler: that code doesn’t exist.
In the back office I can only see this ”0x469503159DdF6Bfd0a9ec8Eba8e97A84Fd3eaE5b” and as long as I see (I’m not a programmer), this code only splits ETH between a few wallets. This contract doesn’t clear up anything.
(No, I’m sorry, if the code is closed source it isn’t public nor transparent.)
Kuailian is a scam among many others operating as a ponzi scheme. All the facts that I stated above are easily verifiable as all this information is publicly available. The problem is that people forget about doing their own research & end up trapped in destructive businesses like this one.
Once you put some money in and attract friends/family to invest ‘with you’ it’s easy to forget that money doesn’t grow on trees. Specially if you’re receiving daily payments, which can be addictive. When that happens, we see greediness at their finest expression. It’s common to see ”leaders” encouraging their own referrals to ‘reinvest’ earnings with the objective of keep compounding paper earnings.
Usually, If it’s too good to be true, probably is. Nobody gives away nothing for free.
There’s no business out here able to pay ~5% monthly profit to their investors. Legally registered or not.
Stay safe, fellow readers. And don’t forget: ‘Slow & steady wins the race‘.
Focus on building wealth steadily but securely, the first rule for ”making money” is to avoid losing it stupidly.
Distrust people offering you miraculous investments, because you have high odds of ending as ‘the fool’ of the story.
- If you wish to learn more about masternodes, I recommend you to hear this awesome podcast from my beloved friend @lunaticoin which covers the field very well (spanish content).
- I also took a couple of media resources from @TulipResearch (thanks!) who also made their review about the matter, they covered more deeply than me the legal inconsistencies from the scam. I recommend you to check their content to learn more.
You enjoyed my post? Let me a comment for feedback if you feel nice today.
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