Wouldn’t it be great to be an early investor into a blockchain and cryptocurrency that will achieve mass adoption in Africa and help bring the continent out of the state of underdevelopment and poverty? That is exactly the mindset that the creators of an extremely suspicious project called Zynecoin have been exploiting.
An unverifiable project team and the leader with a shady past
Four months ago, a reputable French magazine Capital published a report detailing the worrying signs about the Zynecoin project which was rapidly growing in popularity among French investors.
According to the report, in the beginning, the project’s official name was Zeencoin instead of Zynecoin but its French-Moroccan founder Karim Benabdelkader decided to change it, supposedly in order to tackle the undeserved bad publicity. Benabdelkader also has a shady past, with a French court having prohibited him from managing enterprises for 15 years in 2012. The report’s author and the experts he contacted were unable to verify the identities of the purported other members of the project’s team.
The involvement of Dieudonné
Successful major scams require some sort of a distribution channel that allows them to appeal to numerous unsophisticated investors. For Onecoin, the pre-existing networks of chain marketers have served that function remarkably well.
Zynecoin’s ultimate asset that seems to have allowed it to grow has been the involvement of the highly controversial French humorist Dieudonné M’Bala M’Bala, best known in the francophone world simply as Dieudonné. His Youtube channel with hundreds of thousands of subscribers enjoying his anti-establishment commentary was almost bound to become a scam promotion gold mine. Especially for a project supposedly in tune with his African roots.
One could hypothesize that because of his longstanding, multiple problems with law enforcement Dieudonné decided to engage in promoting Zynecoin. He has already made multiple videos promoting the project in increasingly shrill terms, promising massive gains and discounts to those who would purchases ZYN tokens directly via his distribution channel. He dismisses the experts who have denounced Zynecoin as agents of the establishment trying to keep ordinary people tied to their savings accounts with minuscule interest rates.
The project’s documentation
The project had apparently had a different whitepaper until recently from the one that is available on its website now. About the previous whitepaper, a crypto expert asked by Capital stated that the previous whitepaper did not provide any clear explanation of the project’s technology and thus, did not allow judging its ultimate soundness.
The current version of Zynecoin’s whitepaper does not seem to improve upon its predecessor. It contains no serious description of the Wethio blockchain technology that is supposedly under development. What it does provide in this regard is mostly contradictory nonsense. Among other things, it mentions a mining process in which miners could choose which block to mine depending on its mining difficulty. In fact, mining difficulty in proof-of-work (PoW) blockchains like is not related to the content of the blocks at all but to the mathematical properties of the cryptographic puzzle (in Bitcoin, the number of leading zeros in the number obtained by hashing the contents of the block with the nonce).
Even more damningly, the whitepaper, first, talks about what resembles a PoW algorithm but then abruptly invokes proof-of-stake, even though the two are incompatible. It also wrongly stipulates that the throughput of the blockchain increases with the number of nodes. The reality is exactly the reverse, however, as an increasing number of nodes tends to increase the communication overhead in transaction and block processing. This is the key reason why it has been so hard to make classical Byzantine-fault-tolerant consensus work for public blockchains.
Zynecoin’s team has also published a technical document for the Wethio blockchain. Its contents seem to be barely if at all related to what is described in the whitepaper. According to the former, Wethio is “a Proof-of-Stake Voting (PoSV)-based public blockchain which is built on top of the EVM (Ethereum Virtual Machine) protocol.” This statement is already nonsensical as EVM is not a protocol. It had also been built way before the Ethereum community started its multi-year migration to PoS. The document goes on to discuss an unintelligible mess of blockchain jargon including masternodes, mining, double validation and so on.
The project’s open-source code
At the moment, the open-source code for Zynecoin that is publicly available on Github is limited to the Ethereum smart contracts for its ERC20 token and crowdsale. Needless to say, those contracts do not evidence the project team’s technical capacity to deliver a scalable innovative blockchain, as they can be easily copied and deployed with small modification by anyone with a rudimentary grasp of Solidity and Ethereum.
We have to note, however, that a repository with some code related to the Wethio blockchain appears to have existed in the past but is not available anymore. We will not attempt to speculate on the potential reasons for its removal.
ZYN token on exchanges
Quite in line with the dubious nature of the project, its ZYN token has so far not been listed on any reputable cryptocurrency exchange. It was initially only listed on IDAX, the same IDAX whose CEO appears to have recently disappeared with the only means of access to the exchange’s cold wallets.
Impeded by the collapse of IDAX, Zynecoin’s team attempted to get the token listed on Latoken and even shilled the imminent launch there. Needless to say, Latoken is one of the most suspicious cryptocurrency exchanges in the whole space with its trading volumes unverifiable to the point that its trading pairs have no liquidity metric estimates from Coinmarketcap.
The Latoken listing fell through at the last moment, supposedly, because Latoken tried to value the BTC it required for market making at a price far below the market. Finally, the latest promise is to have ZYN listed on Whitebit, a little-known exchange with no liquidity metrics from Coinmarketcap, either.
The business case and economic model
Even if the project’s alarming lack of verifiable tech and the scammy promotion tactics are set aside, there is no clear explanation as to why it could achieve mass adoption, whether within Africa or beyond, ahead of multiple competing, clearly technologically sound blockchain platforms.
The project team’s key argument is that the adoption will be driven by the way the transaction fees are going to be distributed. According to the plan, miners (or is it stakers?) will only receive 50% of the fees. 25% will go to the treasuries of the African countries of the counterparties in transactions, and 25% will be allocated to charitable activities.
This distribution scheme is nothing short of ridiculous on its face. How is it possible to determine the country (of domicile?) of a public address, unless there is some sort of a centralized KYC regime for Zynecoin? The sort of which is probably impossible in the present African institutional context.
TestaCoin scam probability estimate
Our own machine learning-based tool for scam detection estimates that Zynecoin is highly likely to be a scam (with the probability of 87%).
Zynecoin’s plans to go beyond the francophone world
Finally, we would like to note that our potential scam alert on Zynecoin was prompted by their announced plans to promote the project outside the francophone space, especially in Japan, Russia and Switzerland. We strongly advise would-be investors to avoid investing in Zynecoin whether directly or through purchasing the ZYN token via Dieudonné or on whatever exchange it may be listed.