Oct 29, 2019 02:27 AM | Justin Cai


Multi-level marketing (MLM) systems, in which early “investors” are paid off with the buy-in money from investors further down the line, have a reputation as often being scams.

Large-scale crypto projects like Plustoken, which critics have accused of being scams, have grown in popularity and provided good returns — at least for investors who got out at the right time

Many crypto scams operate in a distributed fashion, meaning it often takes a long time before they can be shut down by law enforcement. For example, a local police bureau in Changsha, Hunan investigated and punished a local chapter of the Plustoken project for running an illegal pyramid scheme in March 2019. However, that event did nothing to prevent the spread of Plustoken to other localities and countries. The project continued operation until its website went down and funds disappeared on June 29.  

But the line between a “scam” or a “Ponzi” and a legit project isn’t always clear, and many fall into a gray area. Particularly in China, some investors have grown tired of what seems like perpetual disappointment from altcoins that fail to “moon.” Instead, they’re intentionally investing in MLM-style projects, who promise excellent returns, and can sometimes actually deliver them (if you time your investment perfectly). 

Baer Chain

Two gray-area projects that have made headlines in China this year are Baer Chain (BRC) and Egretia (EGT).

These two projects are similar in that both offered virtual real estate games promising players guaranteed passive income with ultra-high ROI. In both cases, players invest “hard” currencies such as USDT and Ether, but earn returns in the form of BRC or EGT, which have both seen huge drops in value over the past few months. 

What distinguishes these schemes from brick-and-mortar multi-level marketing companies is that players earn rewards in the company’s ERC-20 tokens, whose price can be artificially manipulated through locking or burning or with purchases from the secondary market. As the token price increases, players are happy with earning fewer tokens because the USD value of the rewards remains constant, creating a virtuous cycle where selling pressure actually may decrease when the token price rises.

Baer Chain started off as a guaranteed passive income game. It released its first game, Super Rich, in October 2018, right after its private token sale was closed. In Super Rich, players purchase virtual stores, hire virtual employees to run their store, and upgrade both the store and the employees by spending USDT or ETH. The store then earns them passive income in the form of mined BRC tokens. According to a screenshot of an official slide, it was advertised that within 100 days, investors could recoup the original capital they invested in Super Rich, and over a one-year period one could earn 360% returns. 

In March 2019, Baer Chain released a second game, Universal City. The only difference between this game and Super Rich is that Universal City players were allowed to use BRC tokens to purchase assets, effectively recapturing a lot of the BRC token supply generated by the “mining” in Super Rich

On July 30, 2019, Baer Chain announced that it had temporarily disabled BRC token mining in all of its games as it prepared for mainnet launch. On Aug. 15, its mainnet went live, but BRC token mining did not resume. A subsequent “thank you” letter from Baer Chain CEO Vincent appeared on Weibo, in which it was announced that on Aug. 31 BRC token mining across all games would be officially shut down.

Many investors reported huge losses from both the fact that BRC tokens lost over 90% of its value in roughly a month, and the fact that the in-game assets they invested in stopped generating BRC tokens. Many had originally expected to hold the assets and earn returns for at least a year. 

Instead, they stopped earning returns much sooner, and the value of the tokens they did earn collapsed.


Egretia was started with the goal of creating a HTML5 gaming engine for the blockchain. The project team had a good reputation within the mobile gaming industry in China. It only pivoted in a suspicious direction in early 2019, when it announced a collaboration with game development studio LGame. 

According to Egretia founder Jun Huang, LGame first approached him in March 2019, and then independently developed and launched Mega Merchant, a real estate game with more pronounced multi-level marketing features, on the Egretia platform in May of 2019. Like Super Rich, the game promised 1% passive daily return in EGT tokens on funds invested, and thus an annual return of at least 360%. 

Unlike Super Rich, Mega Merchant had a three-level referral program with tiers called Boss, Entrepreneur, and Mega Merchant. To become a Boss, one must refer three accounts, each with a minimum balance of 48,000 USDT. To become an Entrepreneur, one must refer three Bosses, and to become a Mega Merchant, one must refer three Entrepreneurs. Any player could get 10% of the mining rewards generated by their signed-up users on the tier below them.

This may have raised some red flags at Egretia, but the game wasn’t deplatformed. Jun says he believes that as an open blockchain gaming platform, Egretia was in no position to judge whether its ecosystem projects were suspicious or not. 

One week after BRC mining officially shut down, Mega Merchant was “merged” with another game operated by LGame, Hollywood Tycoon. In effect, all in-game assets in Mega Merchant were transferred to Hollywood Tycoon, and the original Mega Merchant was shut down. 

Then the EGT token price collapsed, and many investors suspected and accused LGame of flooding the secondary market with selling orders, which LGame CEO John He vehemently denied. According to an open letter he wrote, LGame purchased 1.8 billion EGT tokens from the secondary market over the winter and spring of 2019, and has not sold any of them in the secondary market since then, although it has distributed them through in-game mining. 

In the letter, LGame also promised to use 1.5 billion EGT tokens to pay back investors who suffered losses by investing in assets in Mega Merchant. It’s not clear whether or not the company has actually done this. 

On-Chain Analysis

Superficially, Baer Chain and Egretia look like similar projects. But analyzing the on-chain data reveals some major differences between them.

To start, we examined the trading price and the number of holding addresses for both tokens. Comparing these two plots, we can see that while Baer Chain’s meteoric rise was preceded by a huge influx of new holding addresses, Egretia’s new holding address growth seems to have a much less significant link with its price. 

This seems to suggest that Baer Chain was the more successful of the two projects in driving user acquisition, while Egretia’s price rise may be due to a rise in purchases from existing users or an increase in the hype surrounding the token.


egr- hist.jpg

A closer look at the transaction history of some of the most important addresses reveals a deeper story. 

Baer Chain’s largest holding address is a token burning address. In the graph below, we can see that substantial token burning has occurred throughout the lifetime of the project, and burning plateaued only after the price had collapsed. Since token burning reduces the available supply, it can be used as a tool to inflate a token’s price.


Part of the token burning can be attributed to Super Warrior, a first-person shooting game where players could purchase virtual firearms with BRC tokens and kill monsters in return for rewards. When a player died in the game, their BRC tokens got burned. This game was the first released in Jan. 2019, months before the real estate games went live. 

For Egretia, we did not find a large burning address of this kind. But we found something else: a large holding address (0x6cc5f688a315f3dc28a7781717a9a798a59fda7b) that accumulated tokens when the price was low, and started selling when token prices were in the early take-off stage. 


We don’t know who’s behind this account, or on what they based their trading patterns. But it’s clear that the big whale trader behind this address seems to have timed their entry and exit perfectly. 


Even though Egretia and Baer Chain look superficially similar from the outside, they have some major differences.

Baer Chain has some features that make it look more successful, at least in some ways. It had exponential user growth and maintained price growth for a time, probably helped by the substantial token holdings locked up/burned. 

Egretia had neither the exponential growth nor the price-inflating token burning, but its on-chain activity does suggest it may have been used as a pump-and-dump by the trader behind that large wallet. Lgame’s Egretia real estate game was probably more of a marketing gimmick aimed at aping the popularity of Baer Chain. 

This article reflects the opinions and analysis of its author. LongHash is not alleging criminal wrongdoing on the part of any project.

Acknowledgement:  Amberdata graciously provided the on-chain data we accessed for writing this article. We encourage those interested to check out their top-of-market blockchain data services at amberdata.io

If you have a good idea for a data story, please don’t hesitate to reach out! Please send pitches and tips to:

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