Yield Nodes Review: Scam or Just Highly Risky? Part 1

This will be part of a series of blog posts reviewing the Yieldnodes service and I will update this post with links to the other posts once they are live.

Signup, KYC, and Deposit

Signing up on Yieldnodes was pretty easy. Set up MFA and submitted by documents for KYC. Just need ID, proof of residence document, and print sign and scan a agreement to upload to get the KYC process.

Sent some crypto to the platform. I had to generate a temporary address and send to it within 7 days. You can extend the time the address is valid in case for whatever reason you can’t get funds in time or generated it too early. You can fund via traditional bank sources as well

My funds were recognized quickly and displayed on my dashboard. There is a 7 day hold period before funds are put to work. There is a 6 month lock-up before you can release your initial investment.

Performance

There is a tool once you’ve logged in to put in an initial starting amount in EUR and calculate what your return might have been if you had been with Yieldnodes since 2019 when they first started. You can compare against other investments like Gold, BTC, or the Dow Jones averages. This shows the yield compounded and uncompounded which is being honest as you can’t compare this to something like BTC since there is no yield there unless you are depositing it in a centralized exchange. Of course this is an exponential graph due to compounding.

Audits

There is an audit section where you can review the YieldNodes audit materials. October 2021 an audit was completed. The auditors were listed with their bio’s and signed statements. They disclosed that these people were also investors/influencers which is why they were picked. I’ve seen enough rug pulls to know that this means almost nothing it isn’t necessarily and proof at all. The plan is to audit 2x a year.

The audit described by the company itself:

“Stefan Hoermann – CEO and partner of YieldNodes had a 10-15 minute video call with all of the Auditors*, logging into the administrative area of Yieldnodes (admin) showing the general balance of deposits (plus compounds, withdrawals, and the numbers of active and registered users. The video call also covered how we work, how we see the history, how we can check what was deposited (and when), etc.
No individual data was disclosed for privacy reasons, except the account of the auditor on the video call.”

Afterwards:

Urs Schwinger, Masternode Architect of Yieldnodes and partner, met with all of the auditors in the Decenomy / YieldNodes offices.

Urs showed wallets, staking balances, the nodes at work, how much capital is allocated to the various chains, the balancing, the tech, etc. in a transparent manner.

IMPORTANT:

The auditors could calculate and confirm that the balances held in the Decenomy ecosystem match and exceed the amount necessary to cover deposits and compounded profits.

https://members.yieldnodes.com/en/audits/fall2021

I would like to see a 3rd party auditor come and take a look at the YieldNodes books and certify. In the Contact Us section I was able to find a link to a Risk Assessment document with a little more information on this.

Why are you not hiring an independent auditor?

We enquired, but since we work blockchain only, there is not much choice. YieldNodes doesn’t hold company bank accounts as we only work in the new economy, and auditors shy away from what they don’t understand. We did a members-based audit as this is ultimately whom we feel we should appease (members, not prospects) in February 2021, and we plan to have one more in October 2021 to show the feasibility and generation of returns reflected in account balances. By choosing a diverse range of members who are not affiliated with each other, we feel it makes for quite a good representation of our client-base.

While this might appear biased versus hiring an outside party, YieldNodes is not a multi-level referral program, so there is little incentive for members to misrepresent or misread the program.

https://members.yieldnodes.com/en/risk-assessment

Its likely a manner of money to hire an auditor who actually knows what they are doing in this space. If a centralized exchange can get an audit, they certainly can.

Another odd statement that is Yieldnodes doesn’t have company bank accounts. Since they are converting my crypto to EUR it seems unlikely they do not have a bank account as then why report my deposits and earnings that way. If they are holding crypto, this seems even more risky should there be a large fall in crypto values without a large war chest of funds to backstop a 80% drop in values which has happened in the past. That would require a 5x value of assets in liquid or near liquid assets. On the flip side, they also get a all the upside if this increases in value and they just need to pay out in EUR. They get to keep all the appreciation. They likely convert a portion of funds every month to pay their expenses if this is the case.

I have an MBA and know a little about accounting and have set up businesses before. I’m not sure how you can get away without a bank account at all. Even the guys on Bankless can’t get away with having a bank account. I know DAO’s can get away with this, but they have a much simpler operating model. A P&L and balance sheet should be a minimum of what you can provide. They have to be paying for things like electricity, office space, equipment, salaries, and other costs. They must have a detailed accounting of this in order to determine the variable rate that they pay out.

Email Archive

There is also an archive of Yieldnodes communications that they have sent out to their clients. I liked this and went through them and see what kinds of information was sent out. I was able to go back as far as March 2020.

Contact Us

They have an extensive FAQ section that you have to scroll through in order to get to the contact information. At the end of the page, they present you with the general support email address. In addition they have the Whatsapp and Skype contact information for the CEO.

Affiliate Program

There is an affiliate program and they provide a good amount of marketing materials. They have a “pay it forward” program where you can send someone 100 EUR of profits as an incentive for them to sign up. If they sign up they claim these funds and you would get a % of funds they deposit after that. This currently is in beta.

Links you generate can only have 5 active at one time and they have to use within 3 days. Certainly a setup for a sense of urgency for the recipient to set up an account and claim. I would be more interested in this if they only got to claim the funds after they made a deposit. The idea I am guessing is as they see the yields month after month they would commit more funds to them to earn more. I wouldn’t only use this for my closest friends who may be skeptical.

Final Thoughts

Things seem fine on the surface as they always do with scams or risky things, but ultimately a solid audit would be what would give me much more confidence. If they had an option to pay out earnings in the crypto’s that they are ultimately running nodes for would be a great feature.

I want to keep exposed to the overall cryptocurrencies themselves and in this model I really don’t get that directly. I plan on withdrawing profits to BTC as soon as they are generated. Once I exceed my invested amount, then let the rest compound.

This seems more like someone selling picks and shovels during the gold rush rather than someone who is committed to crypto. I am optimistic though.

If you want to check this out as well, use my affiliate link.

I am open to hearing from the management of Yield Nodes to have a further discussion and clarification on this.

At this point I am going to say Yieldnodes is just very risky.

Have experience with Yield Nodes? Please let me know in the comments. I will moderate comments that are not part of a productive conversation.