OneCoin will be the next after Bitcoin

Crypto crime thrillerThe onecoin scam: there was nothing

One summer evening in 2016, a queen took to the stage at London's Wembley Stadium to speak to her subjects. Flames shoot up in front of the stage, Alicia Keys ’song" Girl on Fire "thunders out of the speakers. A corpulent woman with black hair struts on the stage, the fire goes out, the rhinestones on her red dress sparkle in the spotlight. "Thank you," she says with a slight Eastern European accent, then Dr. Ruja Ignatova, 36, founder of the cryptocurrency Onecoin, gave her presentation.

The appearance, which can still be found on the Internet as a video, is a single promise of happiness and prosperity. "Over a million merchants worldwide will accept Onecoin in two years," says Ignatova, who calls herself the "Cryptoqueen".

At that time, Onecoin has not been around for two years, but it is certain: In just two more years Onecoin will be the crypto currency with the most transactions worldwide - even before the much better known Bitcoin. She shines. She raves. She preaches. She speaks to her followers like a group of disciples who are to be saved. Only: Almost nothing of what she says is true.

A millionaire with Bitcoin?

Prosecutors around the world are investigating Ignatova today, her brother and other accomplices have long been in jail. The Cryptoqueen themselves have gone into hiding, and it's not just their disappearance that makes their story into what is believed to be the most spectacular fraud that investors fell for in the euphoria surrounding Bitcoin and other cryptocurrencies. By October 2016 alone, the disciples of the Cryptoqueen invested more than 3.3 billion euros in their idea - which has now turned out to be largely worthless.

Düsseldorf in spring 2015: An acquaintance tells Heinrich Koch, a pensioner, academic, beard of mustache and then 67 years old, about Onecoin. This is a "crypto currency", says the acquaintance, a retired banker. Koch (whose real name is different) doesn't know what cryptocurrencies are. He informs himself. The really big hype about Bitcoin has not yet broken out, but it is already a time of amazement about this first kypto currency: Within a few years it has turned from worthless alternative money for computer freaks to a world-famous object of speculation, its price since its introduction in 2009 by more than increased 6000 times. Those who invested early enough could become a millionaire with just a few Bitcoin. The would-have-pain gnaws at everyone else.

The second largest market capitalization after Bitcoin

The friend hands Koch a Powerpoint presentation that Koch has printed out in front of him today when he talks about his experience with Onecoin in a hotel lobby. On the slides it says, for example: "Onecoin is still in the early stages of development, because production (...) only began on January 20, 2015 and is therefore extremely interesting for investors - whereas with Bitcoin the chance is no longer so great."

The presentation describes Onecoin as a crypto currency, which at 880 million euros is said to have the second largest market capitalization after Bitcoin. Here is a sample calculation that shows how quickly it grows investor money. Very few investors will have understood it straight away.

For 5,000 euros, according to a table in the presentation, investors receive 60,000 one tokens. The next line of the table shows so-called splits, which double the number of tokens. And so, it says again two lines further, 60,000 tokens would become 240,000 tokens after two splits. From the one tokens, in turn, a process called mining could be used to mine a total of 6000 Onecoin with a difficulty level of 40. At the Onecoin rate of 3.95 euros at the end of 2015, that would correspond to 23,700 euros.

So understandable?

The only thing that everyone can understand right away is the last number: the promise of quick money. Even if the price of Onecoin did not continue to rise, the money invested would multiply thanks to the technology alone.

Koch studies it until he has actually understood the concept - and he likes it. “As a pensioner, you have a short investment horizon,” he says today. Koch puts in 500 euros, then another 1000 euros. Then he convinces friends and acquaintances to put another 7,000 euros in Onecoin.

In fact, the cryptic slang hides a not entirely unusual procedure that is used when cryptocurrencies are introduced. Basically - and roughly simplified - crypto currencies like Bitcoin work like this: Unlike normal currencies like the euro, they are not issued by any central bank. Anyone can participate in the cryptocurrency, anyone can use it, and everyone can provide the computer capacity for the so-called mining, through which the transactions in the Bitcoin network are documented and new Bitcoin are calculated.

However, the larger such a network becomes, the more difficult mining becomes, and it quickly exceeds the capabilities of a single computer. That is why investors often receive a type of voucher for new cryptocurrencies - the tokens. They can later be exchanged for the new currency by transferring them to professionals who then mine the currency.

Koch will soon have 60,000 tokens that will one day become Onecoin. That there is still practically no possibility to exchange them for euros or to pay with them - free. The network is growing so fast that Onecoin will soon be accepted worldwide. At least that's the promise. And when Koch logs into the Onecoin platform, he can see how the price keeps rising.