The yet another Asian story - ICO Scam
Disclaimer: This article was posted on JUNE 11, 2019.
The Story of Bitsdaq
In December 2018 a new Chinese exchange popped out of nowhere, they called it Bitsdaq.To put short Bitsdaq cloned the existing code to utilize the infrastructure of Bittrex. Bittrex is one of the biggest custodians for Bitcoin in the world holding over 1 Billion USD worth of Bitcoin.
As such Bittrex introduced one of the best security protections of any exchange. It was a smart move for Bitsdaq to partner up and clone to tech as it reduced their work effort to basically nothing.
Soon after Bitsdaq started to report an impressive user growth. Within just 4 months they reported user login and KYC numbers that can compete with those of binance. Quickly people started to talk about this upcoming Chinese exchange and a potential IEO. Fast forward to March 2019, and IEOs started to pop up left and right the recent success of the Binance launchpad got everybody excited. It was to be expected that soon after Pre-sale pools for a new upcoming exchange were popping up left and right.
“Bitsdaq will do an IEO on their own Exchange, that has millions of users!” is what was pushed out on all the underground discord channels.
We did not give into the hype and just ignored it as it seemed to be yet another Asian scam. However, the hype grew more and more until their IEO so did its userbases. It became quite interesting so we started to do Due Diligence. Real Due Diligence
Lesson in Feigning Metrics
Bitsdaq’s traffic and user-base figures are nothing more than a contrived product of shockingly over-valued reward campaigns.
Bitsdaq has given away millions of dollars to drive mere account-creation, not legitimate user base growth. These expenses have come in the form of BQQQ token distributions, thereby displaying the exchange’s lack of regard for its own utility token’s true value.
The heavy issuance of reward tokens will inevitably dilute the circulating supply without adding any real value to the exchange or its real user base.
Paying for Fake Numbers
In order to deceive investors and partners into believing the exchange has incredible demand, Bitsdaq has launched campaigns that pay incredible sums in the form of airdrops or candy campaigns. Such campaigns incentivize people to sign-up and pass KYC in order to claim their rewards.
For an exchange that supposedly has 2 million accounts Bitsdaq’s volume is incredibly low; this evidences the lack of value of Bitsdaq’s purchased user accounts.
Campaigns for Exchange Sign-Ups
Airdrops used to be a popular way to attract attention in the cryptocurrency space. However, nowadays, a generic airdrop brings interest from primarily airdrop hunters. However, Bitsdaq’s key reason for popularity has been a mass influx of airdrop hunters hoping to cash-in on the BQQQ rewards.
In fact, the top Google result for Bitsdaq is its airdrop. Two of the three recommended videos are also about BQQQ give-aways.
YouTube is also flooded with videos covering Bistdaq’s airdrop and candy campaign.
Much of the exposure Bitsdaq is receiving due to the rewards it is offering to airdrop hunters. Even much of the content being created about the exchange is primarily targeting airdrop hunters. Such exposure adds little value and only offers vanity figures to appeal to investors.
Bolstering Verified Accounts
While website traffic and fake sign-ups can be bought on various black-hat platforms, verified accounts are difficult to acquire in large sums as it can be difficult to acquire enough KYC documents. Thus, Bitsdaq has flooded airdrop channels with the promise of free BQQQ tokens. While such a tactic draws in traffic, the traffic largely low-quality and the accounts fail to materialize into genuine trade volume. This is evidenced by Bitsdaq’s largely dry order book.
While exchanges do offer rewards to new users, there’s typically a requirement of minimum trade volume or deposits that must be fulfilled. Rewards on the sheer basis of sign-ups do not screen for users who participate for the sole purpose of free tokens. This is evidenced by Bitsdaq.com’s steep traffic increase and decline.
The fraction of traffic, compared to peak volume, that has remained is due to the exchange’s offer to reward users who log-in everyday with additional tokens.
A Façade of Metrics
Bitsdaq’s campaigns try to murk more than just the platform’s verified users and traffic. The platform’s candy campaign rewards users for daily log-ins. The reward is earned merely by logging in. Such a campaign could be justifiable if users had to log in and participate in trades in order to bring liquidity to the orderbook; as this is not the case, rewards for merely logging in achieve nothing but an inflated and ingenuine user retention rate.
Moreover, such a tactic also murks external analysis. It implies high pageviews per each session and low bounce rate, but the true cause of these positive figures is simply that airdrop hunters are logging in to grow their reward and then simply log out. The action involves just enough pageviews to feign positive user activity statistics. However, the heavy spreads on trading pairs display the reality of Bitsdaq’s illiquid order books and lack of user retention and engagement.
New Campaigns for App Downloads
Given that the general cryptocurrency market perceived Bitsdaq’s paid-for (fake) metrics as an accurate representation of the exchange’s popularity, Bitsdaq has now also launched an airdrop campaign for the newly launched application.
The maximum achievable airdrop for downloading and positively reviewing the exchange’s application is approximately $7 in tokens. While purchasing fake verified exchange accounts can be quite difficult without running a mass rewards campaign to airdrop hunters, application reviews are easy to buy for a dollar or less.
Given that Bitsdaq’s application launch airdrop rewards, again, for no real exchange activity, there is no difference in the review that will be received for a $7 payment in tokens and the review that could have been received for less than $1 in fiat.
Fake reviews could have been acquired at a much lower cost than the payment of $7 worth of tokens per review but Bitsdaq’s decision to offer a much higher payment in tokens for fake reviews shows the true value the exchange associates to its tokens. The exact numbers that Bitsdaq is potentially giving away in tokens are unclear, but it can be assumed that most to all signups that happened is due to the airdrop.
Assuming that 80% of all signups are due to the airdrop then 7 * 2.500.000 = 17.5 Million USD plus another 12 Million for continues login requests in bitsdaq website.
More than 30 Million USD worth of BQQQ tokens are being promised to airdrop hunters, tokens that either will never be paid out to them or will completely destroying the token value for investors.
The approximate value USD value in BQQQ Tokens that was promised to bounty hunters and airdrop people can be anything between.
BQQQ IEO Genius Marketing or Mass Fraud?
Looking at all the facts it should become clear that Bitsdaq created false demand for their own IEO by promising millions to bounty hunters, to inflate the numbers. Those inflated numbers were then used to present BQQQ to influencers and Poolers to collect money in the private sale funds. Using the funds that Bitsdaq received in the private sale they then continued to pay a lot of “independent influencers” to review Bitsdaq to create real demand for the IEO.
As airdrop users will only receive their tokens much later there is a good chance that the fake demand that Bitsdaq created by lying to everybody might actually be enough to pump the token price initially after the IEO. Pools and private sale investors believed that there is a real user base that will buy their bags after the IEO, a userbase that never existed.
They might actually receive tons of users that can sustain the token price and generate a well-working ecosystem in a genius yet very immoral marketing stunt. Due to the low hard cap of BQQQ’s initial exchange offering, the token may appreciate in value at the time of listing. However, the valueless payments of reward tokens that have been given out will eventually dilute circulating supply. Meaning maybe everything will go well for BQQQ investors and Bitsdaq.
The worst aspect of Bitsdaq’s rewards campaign is not that they led to a dilution of supply with little added value to the exchange, but that they displayed an inaccurate picture of the exchange’s usage and popularity to the cryptocurrency community.
While a vast portion of the audience has taken the façade of Bitsdaq’s metrics as accurate, the exchange’s illiquid orderbook is sufficient evidence to erode the claim of two million users. Bitsdaq has two million sign-ups but the number of users is excruciatingly lower.
The only thing Bitsdaq’s misleading marketing campaign has achieved is the clear display of the exchange’s lack of regard and value for its native token.
FUN FACT (This part was added 13/11/2019)
As DAOMAKER's we are ICO AGENCY. One project that was planning to do IEO on Bitstaq reach out to us and asked us about our opinion on Bitstaq. When we presented the Bitstaq story, aggressive marketing, and fake numbers decided that this project canceled the Bitstaq IEO.
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