Onecoin was perhaps the biggest scam in the history of the cryptosphere. The latest popular BBC podcast series by Jamie Barlett throws light on the whole scale of that pyramid scheme as well as some of the mechanics of how it functioned and how it managed to become as big as it did.
In one of the episodes, Barlett mentioned that some of the former Onecoin MLM leaders have recently switched to promoting another cryptocurrency project called Dagcoin. Hence, given the possible urgency of it, in our first potential scam alert, we will cover Dagcoin.
Dagcoin’s time of public appearance is suspicious
It is interesting that the public appearance of Dagcoin took place in August-September 2017. The first official tweet was posted on 26 September 2017. The first blog entries date to August. This is the time when the Onecoin Ponzi scheme has started to face serious problems, which leads us to Dagcoin’s significant connections to it.
Participation of prominent Onecoin figures, MLM tactics and Success Factory
By far the biggest red flag about the Dagcoin project is its resemblance to Onecoin in several important respects. Like the latter, Dagcoin is mostly promoted not through the usual blockchain public channels (known cryptocurrency exchanges, blockchain events, Reddit, etc.) but through an MLM scheme involving a network that does not even have the same name. The network in question is called Success Factory.
Jamie Barlett in his series on Onecoin nicely demonstrated that the secret to that scam’s massive success was its recruitment of some of the most prominent network marketers from all over the world. Those marketers had previously sold things like Amway or Oriflame products were persuaded to switch to Onecoin, even though they appear to have had doubts about the presence of the actual blockchain and cryptocurrency from the start. Those people brought their massive networks with them, too. They also brought in their questionable promotion practices, including constant motivational content, massive events resembling a hybrid between Oscar Academy Awards and a cult gathering.
One can find all of this in the case of Success Factory/Dagcoin if one bothers to look on Youtube. Down to some of the same prominent showmen such as Kari Wahlroos (Onecoin then and Dagcoin now) and Igor Alberts (then and now). The CEO of the Estonian company behind Dagcoin Nils Grossberg had also apparently been involved in Onecoin.
The adoption of Dagcoin also appears to mainly proceed through the MLM channels, namely, the sales of educational packages (described in more detail on p. 17 here). The supposedly existing coin is not listed on Coinmarketcap, and thus any cryptocurrency exchange tracked by it.
Dubious whitepaper and the relationship to Obyte/Byteball
The whitepaper of the Dagcoin project looks strange, to say the least, and almost nothing like a legitimate project’s one. It mostly consists of extracts from the whitepaper of another, seemingly legitimate project, Obyte (previously, Byteball).
Obyte is a relatively unknown blockchain project aiming at developing a DAG-based alternative. It appears to be a legitimate and active project with a running distributed ledger and listings on Coinmarketcap and certain exchanges.
While it is beyond our technical acumen to opine on the merits of Obyte’s technology, the odds that it is a groundbreaking project capable of taking a significant market share are probably slim. Even among the DAG-based platforms under development there are the giants of Hedera Hashgraph and Avalanche, just to name two. This will be important for the final conclusions. It also appears to be a semi-centralized platform meaning that the maintenance of the ledger is ensured by a limited number of publicly known nodes called witnesses. This aspect probably hampers its prospects even further.
Getting back to Dagcoin, its whitepaper does not even hide the heavy reliance on Obyte but it does not explain in which way Dagcoin is an upgrade on Obyte. It merely states that Dagcoin had first been an asset on top of the Byteball platform before the Dagcoin fork of the Byteball tech was presumably created.
Both projects appear to have ledgers running. The DAG explorer available on the Dagcoin website looks like a carbon copy of the Obyte’s one but appears to track transactions on a different ledger.
Project’s code on Github
Dagcoin has code published on Github but it has not been updated since February this year, and most repositories since 2018. There is no mention of the code having been moved elsewhere. Obviously, this is a matter of significant concern, too.
Project’s coverage in cryptosphere
To our knowledge, despite the claims of being the best investment opportunity since Bitcoin, Dagcoin has not been covered by any remotely respectable crypto or non-crypto news outlet. Almost no respected blockchain expert has opined on it, the only comment we have seen was from Sergio Lerner who dismissed it as a scam. Interestingly, he had, perhaps, been the first person to propose using a DAG for a cryptocurrency, and even called his proposed project Dagcoin.
The Dagcoin official site makes no mention of the actual development team. The two listed authors of the Dagcoin whitepaper do not make the situation with the team clearer because the linkedin profiles of neither of them – Yary R. and Daniel Raissar – does not mention anything about Dagcoin. However, the Github profile of Yary R. does appear to indicate participation in the Dagcoin project. Another Github profile whose contributions to Dagcoin repositories are visible is attributed to Priit Kallas. A Google search of Priit Kallas and Dagcoin returns nothing and his Linkedin profile does not mention the project, either. We did not check the profiles of all the Github contributors to the project code but the pattern is clear enough.
The list of Dagcoin-related people on Linkedin does not feature any developers, either. Even the profiles of Dagcoin’s Chief Visionary (sic) Officer Kriss Ress and the CEO of the actual Estonia-registered company behind the project Nils Grossberg are silent about Dagcoin.
The situation with the project team of Dagcoin is, thus, extremely suspicious, to say the least. If Dagcoin were a legitimate breakthrough project, there would be no reason for its creators to hide their participation in it on Linkedin.
And even if the aforementioned whitepaper co-authors had really been the core contributors to the project, their listed credentials are not remotely sufficient for creating the world’s best, revolutionary blockchain platform.
A talk with one of the former Dagcoin developers
Our hypothesis was that the people who contributed the text of the whitepaper and the code on Github were genuine Estonian IT professionals only hired by their MLMer countrymen to do those specific tasks. We managed to contact one of them, and he appears to have basically confirmed our idea.
His version of events is that he and others helped to develop the Dagcoin platform, despite the concerns about the founders’ preceding involvement with Onecoin. The intentions of the founders were supposedly good and they only used network marketing to better distribute dagcoins than it is usually done with cryptocurrencies.
He further claimed that the code on Github has not been updated for some time because the founders had changed the devops team and that they were currently having some sort of “liquidity problems,” even as they were trying to genuinely build the promised breakthrough platform. He did not respond to the question whether some genuine improvements had been made to the Obyte technology underlying Dagcoin.
Why spreading the coin via an educational packages MLM is a bad idea
One of the biggest reasons to doubt the narrative that Dagcoin is a legitimate crypto project and not a cover is that spreading a crypto asset via an MLM scheme (assuming that the buyers of Success Factory packages are even getting the coins) is a rather poor way of achieving genuine adoption.
Given that dagcoins probably have no immediate use and the fact that the rewards for recruitment are in the form of other currencies than dagcoin, the main motivation for ordinary participants in the MLM scheme has to be the prospect of recruiting further participants. This means that Dagcoin adopters are not actually adopting a cryptocurrency or the Dagcoin tech.
Secondly, the price of packages does not seem to have any clear connection to some kind of price per token, in fact the token does not even have any price whose discovery takes place at actual markets. This complicates any future price discovery, even in the unlikely scenario that the listing of dagcoins will be attempted in the future.
On almost all counts, the Dagcoin project is extremely suspicious. It does not appear to be listed on any genuine crypto exchange, its Github code has not been updated for almost a year, its team is not communicating about the project like a blockchain project team is expected to. Most importantly, there is no explanation of why the Dagcoin technology is innovative or why it is promoted through an MLM scheme.
The most likely interpretation of the available evidence regarding the Dagcoin project, in our view, is that it is a post-Onecoin scam in which former Onecoin marketers decided that after Onecoin it would be more credible to add an actual blockchain platform for cover. It is an interesting question why they chose to fork the tech of an obscure project for that purpose but it is of secondary importance.
Even with the seemingly existing Dagcoin ledger and assuming that its development is ongoing, it is extremely risky to invest into dagcoin. Even if you manage to get hold of some coins, it is impossible to ensure that they will ever become saleable on any solid cryptocurrency exchange. Nor is it possible to be confident that the supply of dagcoin is not controlled by the project team and that they cannot increase it at will, substitute the existing ledger with another one or do any other manipulations that could make your coins worthless.
However, it is, in principle, possible that they actually decided to promote a genuine crypto project after the debacle of Onecoin. This does not, however, mean that purchasing Dagcoin education packages is a good idea. As we mentioned above, the Byteball technology that Dagcoin seems to have adopted without much modification is one of a mass of underdog competitors in the crypto space. If it is unlikely to get traction, a fork of it without any prominent technicians working on it is even less so.
On the basis of the above, we strongly advise you to consider avoiding investing into Dagcoin altogether, especially into educational packages. If you really desire to invest into the project, ask the promoters if it is possible to actually acquire the coins without packages. Try to verify that the coins actually exist on the Dagcoin’s ledger and which percentage of the ultimate coin supply they represent. But, as mentioned above, be aware that there is no guarantee that the dagcoins you would buy will not be diluted, replaced by another token, etc.