I was writing my previous blog post about mining through a stake when I noticed some coins that were promising huge returns with masternodes. Hundreds of percents or even over one thousand percent.
See a few tier 2 nodes in the screenshot below from ginplatform.io. These nodes were completely missing from the Stakingrewards site, but were present in many others. I was curious and wanted to investigate them more. Were they just new projects that were starting up?
After looking at some of those high-return projects, I noticed a few projects that had very similar web pages, and even the same teams! I took screenshots from their webpages and combined them into one big image below. In the image, I have marked similar parts with red rectangles. Click the image to extend it and investigate it yourself. See the page structure (sections), page elements (menu row, icon placement, used images), used social media channels and, of course, the team composition.
So, it is very clear that there is a single team just creating crypto projects with good-looking web pages. These projects have also github accounts (indicating open source code), whitepapers and active social media presence in several channels like real projects. However, there is no way one team could be working on so many different domains at the same time. If you look through the whitepapers, it is also very clear that they don’t have any solutions. There is just the pitch, more about mining rewards, and repetition of the webpage content.
The only logical conclusion is that they are giving a false perception and trying to mislead people to join their projects. All the projects are heavily promoting their masternodes. There are links at the top of the page and the linked pages explain staking rewards in great detail.
It also seems to be working. If you have a look at the screenshot above, you can see that each of the listed cryptos has at least 100 hosted nodes in the ginplatform service. Other master node hosting companies have probably more.
How does the scam work?
Masternode scams work so that the project authors pre-mine their cryptos and then sell them to others who want to run masternodes. Or, they arrange a pre-auction and let you start mining earlier (as everybody knows that earlier is better). Assume that a masternode needs a stake that is worth 1 BTC/4000 USD. If there are 40 people who want to run masternodes in order to get the huge ROI promised, they will need to buy 40*4000 = 160,000 USD’s worth of tokens that the project has printed themselves for free. As buyers come in, they will sell and push the price down. In general, people are bad at realizing their losses, so they will hodl, while the project authors continue selling. At the same time, they post updates in communication channels and give the impression that the project is going fine, implying that it will soon get steam and the price will start rising.
See below how all of those projects have dumped the price.
Above, I only reviewed LightPayCoin , LRMCoin, and LogisCoin (https://logiscoin.cc/), but I am quite sure that also BlacerCoin, Proxynode, Gentarium, SnodeCoin, SafeInsure and 1×2 coin are the same… and because there are already so many and some of them are for supporting others, I am very sure that there are even much more. A quick count shows that there are about 100 projects in the masternodes.pro service that have a return percent over 100. I looked at about 10 of those and deemed 9 to be scams.
The scam project team has been evolving and improving their work. Later project pages are no longer done with the same page template from which I took the screenshots. The same images are not used anymore, and the team section has also been dropped out. However, other elements beyond the web pages are still there.
How to spot scam projects ?
Based on my investigation, masternode scam projects have the following characteristics:
- The web site is made to sell masternodes and not the product/solution
- No information about the team
- The project doesn’t have a location (address) or phone number
- White paper is full of stake reward stuff
- White paper contains very little information about the business case
- No info on how the project is financed
- Broken links in contact media
- Social media (Twitter, FB, Reddit))
- Project announcements are mostly updates that the project has been listed on some masternode listing service or crypto exchange. (Projects that pay get listed)
- Project don’t announce any business developments
- There is no discussion with the users
- Forums (bitcointalk)
- Questions in forums are not addressed. Connections are directed to some other channel, e.g. (and especially in this case) to Discord where users can then be banned nicely.
- Respective threads are spammed so that real comments are buried. See e.g. this case where bots are filling up the SafeInsure announce threads by talking to each other here (boomer and kk777) or here (amanai, Klacik and a1471989).
- Code in Github
- No active development in github (just initial code dump)
- Only one (or few) github author(s)
- Github authors that don’t have a history
- Github author has the project name as their own name
You can also check if the coin is marked at IsThisCoinaScam.com, but it seems that new projects are slow to get there.
Keep your eyes open
The highest-ranking project among the projects I listed above was coinmarketcap at position 400 something. So my comments in the previous post were even more valid than I thought. Stick to the well-known projects (in top 100 or 20), or keep your eyes wide open, as there are lot of scams out there.
Update: I started to wonder why LightPayCoin continues to push business-related updates on twitter, although the price was already dumped to zero.. It seems that they trusted the wrong people, and are now recovering from that with a new web site. So it seems that it is not a masternode scam project anymore.
However, I am not sure that is their current project fine either, as there is a complex net of companies that have the same guys in charge (xchainz.io, Coinlogiq, lightpaycoin). Usually that leads to high costs. Also their finances are not transparent. Where did e.g. the money from masternodes went ? Community ripped anyway?