Phoenix: Smart Contract Financial Algorithm Cryptocurrency?

Phoenix is a decentralized autonomous organization (DAO) built on the Ethereum blockchain. The purpose of Phoenix, for lack of a better term, is to provide investment opportunities by depositing ETH into the organization for a promised ROI. However, how Phoenix actually accomplishes this is never truly explained to a sufficient level.

The Phoenix Team & Company

There is absolutely zero information regarding the development team behind Phoenix. Whatever company is behind the technology is likely somewhere within the Russian Federation, however, based on the fact that the site’s registration information points towards a Russian-owned private domain name registration company.

Other things about Phoenix point towards a Russian headquarters for the business as well, or at the very least a place of business located outside an English-speaking country. The most obvious of these is the sometimes shaky use of English in the website’s content and in the Phoenix whitepaper. With Alexa site rankings revealing that nearly 25% of the site’s traffic comes from either Russia or the Ukraine, it’s a safe bet to say Phoenix is a Russian company.

Phoenix Technology and Purpose

The purpose behind Phoenix as a DAO seems to be a money-making investment opportunity. The organization uses smart contracts to encode its behavior; investors who wish to join Phoenix need to deposit a set amount of Ether into the system, which will then double after the end of what Phoenix refers to as a “round” of investment.

These rounds are individualized and can last as long as 365 days or until the requirements of ending the round – accumulating double the amount of ETH deposited – have been met. In the event that a round expires before doubling an investor’s ETH, the original deposit is returned.

Unfortunately, neither the Phoenix website nor the Phoenix white paper explain where, exactly, the ETH to double an investor’s initial deposit actually come from. We have some suspicions, but since there’s literally no information available it’s just speculation; however, with the only demonstrable source of revenue for the company being investor deposits, the only explanation is that any given investor’s rounds are being filled by the deposits made by investors that come after them in almost textbook Ponzi methods.

Is Phoenix A Worthy Investment?

Right now, we would be hard-pressed to recommend Phoenix as a safe crypto investment.

First, there are limitations placed on membership according to the Phoenix white paper. Individuals from the United States, China, and Singapore are all banned from using the system based on laws in those jurisdictions; this minimizes the number of people that can invest in the system.

Secondly, there’s just too much ambiguity in the system to begin with. Examining the activity on the smart contract reveals that, at this writing, there’s about 264 ETH invested in the Phoenix DAO. That’s equivalent to around $246,000 USD. There have been 116 transactions depositing into Phoenix since its creation (roughly 4 days ago from this time of writing), but only 7 payouts from Phoenix to users in finished rounds in that time.

Interestingly enough, these 7 payouts, if they do represent finished rounds, took only hours. Yet for some reason there have been no payouts for 4 days straight, despite the fact that new investors keep pouring money into the system. It’s almost as if there’s something going on behind the scenes that’s preventing rounds from being fulfilled.

Phoenix stresses that this system is safe and secure since smart contracts are hard-coded and can’t be fiddled with, so therefore there’s no untoward activities going on. However, let’s be honest here – with Phoenix’s admins being completely anonymous, they can easily ensure that their own pockets get filled by investing in the DAO themselves at sufficiently high rates that prioritize their payouts in rounds – if they were the first depositors, they would consistently be the first investors to be paid out, especially if investors are queued up in chronological order.

Obviously, in the examples illustrated above, there are still ways to game the system even if the behavior of the system is pre-programmed. Thanks to the anonymity of Ethereum transactions, though, we’ll never know the identity of the individuals receiving these payments. Even worse, not knowing who’s behind Phoenix in the first place makes it a double-blind – you couldn’t link payments to Phoenix developers even if you wanted to.

Finally, there’s still no proof that existing investors aren’t being paid out in funds from new ones, as there’s no other demonstrable revenue stream for Phoenix besides investor deposits. All these factors make Phoenix much too dangerous an investment. We’d give this one a firm pass.

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