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This will be the longer form article about the red flags I found for YieldNodes and why you should not be scared, but adapt your investment accordingly.
Find the short (and reduced) form in my thread on Twitter:
In this article, I will be looking at:
- Limited growth
- High return rates
- Affiliate program
- Not your keys, not your crypto
- Locking of funds
Regarding risks and chances
Let's dive in!
Limited growth
If you look at the website or on Twitter, this doesn't give a good first impression for YieldNodes.
YieldNodes is not growing as fast as they could and according to interviews with Steve (the CEO) this is intentional. They are not investing in a shinier website or official support groups, but rather use all their energy to create profits for the masternoded balance. It makes sense, everything they earn is put into a pot and split 15:85 to YieldNodes and the Investors respectively.
To me, it makes sense, especially when you read the risk statement, this is how these guys operate. Still, I think this could be optimized to attract more mainstream people that are more risk-averse.
YieldNodes is not audited by a credible third party. So far, they have done two community audits, which means flying in investors and showing them the numbers and how the company is set up and operated.
According to them, they couldn't find an official company to audit them as all their balances are in BTC. This kind of makes sense but inviting existing users who know nothing about auditing doesn't leave the best impression. Still better than nothing?
Of course if they were doing a very simple pyramid scheme operation they would not be willing to do this, but still.
They are planning to get a "real audit" in the future.
High return rates
YieldNodes is currently offering and advertising past returns from 5-15% per month. In traditional terms, this is a lot if you look at traditional stock market returns of ~8% per year.
For the early phase of crypto, also from my experience, there is a lot of untapped potential.
Example:
You can buy a coin with solid fundamentals that you expect to slowly go up in value due to demand growing and supply shrinking relatively. Now you can stake this coin in a masternode, securing the network. Now you are still exposed to the potential growth of that coin while earning a percentage of the network fees. If the underlying coin now rises in value, you have a big leverage and potentially exponential gains.
Check out my last point on risks and chances to read the quote from the founders.
Affiliate program
Isn't this what Multi Level Marketing schemes do? Yes and no. YieldNodes only offers payouts to direct referrals, there is no further downline where you profit from members your downline referred. Also, there is no "buy-in" or something you need to buy to participate. You earn on all your funds you deposit.
I really liked the explanation from the official site, so I quoted it here:
According to the founders:
YieldNodes is NOT MLM or multi-level marketing... the affiliate program offers 5% of deposits as an incentive to grow our reach, but we are NOT dependant on new members and distance ourselves from such unsustainable practices.
Not your keys, not your crypto
Sending your Bitcoin to another wallet can be the easiest way to lose your funds. There are so many scammers out there who make millions of dollars by offering "I will double all the Bitcoin you send to me". If you have been in crypto for a while, you might have noticed those.
In the case of YieldNodes it's the easiest way for them to acquire funds which are ready for them to be swapped into the masternoding coins. Keeping everything in Bitcoin makes it efficient for them, especially when you consider there are only 21 Million Bitcoin and the value of Bitcoin should go up in the long run.
Locking of funds
This is well explained in their FAQs or in my withdrawal article: if people could pay out daily or weekly, they would need to keep much more funds liquid, resulting in less efficiency.
Regarding risks and chances of YieldNodes from the Risk Assessment
This is a direct quote from the Risk Assessment mentioned earlier in the article:
Important:
As much as you are lead to believe, through marketing or hype, MONEY IS NOT GENERATED OUT OF THIN AIR
If something goes, something else has to give.
We're in a unique position right now - a seismic shift of value from the FIAT System into cryptocurrencies is occurring and, while this continues, you can make previously unimaginable gains. As capital flows and ecosystems emerge from the outdated, shady, and inherently corrupt FIAT monetary system into accountable, transparent and visible blockchain technology, early adopters can profit handsomely from this shift as huge amounts are being moved at this stage of the evolution.
But... it's still a highly-experimental and risky adventure, and we know of no-one else who has attempted a similar project of such huge scale.
Profits are currently large, but will eventually shrink (they have to) as systems get adopted and made sustainable with use cases that turn regular profits from sales / memberships fees, usage, etc. - it's like being in front of a tidal wave... more waves will follow, but of lower magnitude.
We saw that agressive acquisition was the way to move forward as, right now, the high returns that some find unbelievable for a legitimate program go hand in hand with growth (I have to thank Urs for this - his foreseight into aquisition and expansion have made YieldNodes possible).
Conclusion
I am making the absolute bear case for YieldNodes in this article. I tried to give arguments and explanations for why these red flags are no deal-breaker for me, and I decided to invest with YieldNodes anyway. Check out my first article on YieldNodes here.
Steve, CEO & founder, says he has 25% of his personal funds invested with YieldNodes and says it is a risky investment. I think this gives you a good idea on where YieldNodes lies on the risk scale.
I personally love that everything is Euro nominated and that just the returns fluctuate a bit each month. Furthermore, I think it's a very healthy diversification for almost every portfolio.
Want to get started with YieldNodes?
- Do your own research on YieldNodes, in the end I am just a random guy on the internet!
- For example, I got most of my trust in YieldNodes from an unofficial German telegram groupEnglish Version here) where 643 members answer all questions
- my affiliate link (click here) to register, and I earn 5% of your deposit with no extra cost for you. Thanks in advance!
- Only invest what you can afford to lose
- Make a deposit via Bitcoin - check my full deposit guide (click here)
- Decide whether you want to pay out your earnings or compound them!
- Let me know if you would like to know more, you can reach me on
That's it for today folks, thank you for reading and have a great day!
If you want to learn more, check out my other blogs on YieldNodes
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