Dear YieldNodes friends and critics,
Since the topic of how YieldNodes masternode rental services really work in detail comes up repeatedly; especially in comparism to a ponzi scheme, I would like to describe things on a factual and economic basis.
Find below the background why YieldNodes always was and of course still is legit and must be considered separately from non-legit schemes.
1. Absolute Transparency
A recurring argument is, that parts of the deposits of investors were used directly for the reward payouts.
We communicated this procedure from the very beginning, means it is not related to any scheme. It was always very clear to us that such transaction histories could be seen on the blockchain. We therefore deliberately – as part of our “open door policy” – did not conceal it. As well as we publish pictures of us, real names and do official company registrations.
2. Professional YieldNodes Masternode Pool
Basically, all of our partners’ money were invested in choosen masternodes. Small parts were used for server setup, rent (mostly VPS), running costs and partly for the associated collaterals.
Once the masternodes were active and enabled (after 24-72 hours), they generated rewards. These ROIs were from 60% to over 200%. To be clear: all masternodes are still running and will do in the future.
That ROI is calculated based on the coin value depending on the actual exchange rates coin/BTC and USD/EUR. We offered these masternodes as a pool in which investors could participate by renting proportionally to the generated rewards.
3. Visible BTC Liquidity Pool
Professionally created with a BTC Liquidity Pool, to handle economically meaningful investors depositings, cashing out and exchanging the masternode and staking rewards as well as the BTC reserves.
We thus had a relatively stable and calculable system for paying out the rewards of our pool to our partners in BTC and other cryptocurrencies. The BTC Liquidity Pool is certainly composed of various wallets
4. Backed BTC Reserves
Reserves of 3-5% of the total value are needed to have the necessary liquidity for the payout flows and the protection of prices against dumping campaigns. E.g. if the market was under a lot of selling pressure, we used the reserves to be able to make timely payouts, then cash out the masternode coins at a later date, when the market was rising again.
5. Important role of Binance
Professionally managing our BTC reserves and hedging risks, we deposited a large part of the BTC reserves to Binance., They have the necessary volume and the technical possibilities to hedge our BTC reserve with USDT against strong price drops.
6. Constant optimazation of the YieldNodes working principles
From the beginning we noticed to lose a relatively large amount of revenue if we would mak separate deposits and withdrawals.
I will illustrate this by a simplified example. If a withdrawal request of a YN partner corresponds to the deposit of another partner, we had 2 possibilities to basically do that trade:
- 1st course of action by dissolving
We dissolve the corresponding masternodes for the payout request, whereby they no longer generate rewards. Then we exchange the corresponding coins on the exchanges into BTC and provide the BTC (or other cryptocurrency) to the payout partner.
On the other hand, the side that makes a deposit, we exchange the depositor’s BTC into coins for masternoding, set up a new masternode, start it and it generates the first rewards after 24-72 hours, depending on the coin.
This solution leads to the fact, that although the capital is available, the masternodes do not generate 100% returns and in the event that there are more withdrawals than deposits, there is a price pressure on the coins due to the withdrawal.
- 2nd course of action by transferring
We transfer internal the existing masternode (or share) to the new investor. This generates immediately income for the investor – he gets the best out of it! After that we transferred the deposit from the depositors account to the payers one.
This simplified illustration shows why this obviously made sense and was the financial best for our partners to redirect deposits directly as payouts. Since this was all handled by our BTC Liquidity Pool, it happened automatically and was finally our working solution.
7. September 2022 with strong selling pressure
Until August 2022, our system was running very well. At the beginning of September 2022 our coins were exposed to a very strong selling pressure. This made it hard and harder to cash out the masternode earnings. Therefore, the main inflow to our BTC Liquity Pool disappeared gradually. Expecting this as an only temporary issue, we decided to compensate that with our BTC reserves.
8. The great vision of a decentralized economy – DECENOMY
Due to the mentioned facts, we decided to push the long planned DECENOMY concept, where all coins are backed by real economic assets. We had already made some arrangements way before and started to speed up the planned process. Many partners were and are interested in contributing their own assets. One huge strategic partner who had been supporting DECENOMY for a long time was the IPI Group with its chairman Uwe Kuhnle. At no time any of the YieldNodes partners’ funds were invested in any of these assets. These assets were and are always financed by third parties or private money from Steve and me.
9. Oktober 2022 with Binance freeze and paused withdrawals
During the September withdrawal process, Binance freeze our account. As an important result, we now only had inflows from new investors. As this would have turned us into a ponzi scheme, we immediately decided to suspend deposits and withdrawals to avoid a bank run. Means: We decided directly to solve the whole problem fundamentally by giving our coins real value through real economic assets.
10. Current Situation
As described above this is the current situation we are in. Now we are in the planned restructuring phase, where we should finish the fundamentals within a year. We are firmly convinced, that together with our appreciated community and our strong partners, we are able to build a new & fair economy, the so called DECENOMY.
Yours
Urs
Urs Schwinger
COO and CIO Exceptional Media Limited, Hong Kong
