How To Identify Scam Coins
As interest and value of bitcoin and other popular crypto currencies continues to soar, there are many who want their share of the pie but do not have the required resources to invest in established crypto currencies. The speculation surrounding crypto currencies has also created a sense of fear among non-crypto users that they would miss something important if they do not act fast and secure some crypto coins.
To make things worse, the technical complexities and jargon used to discuss crypto currencies and other blockchain based systems may confuse any normal person. All that would probably register is how secure blockchain based systems are.
Novice users need to realize that the technology may be inherently secure but the intentions of people who are using it may not be always secure. There is always a possibility of losing your cryptocurrency investments as you invest in different start-ups and exchange platforms.
In this article we will discuss some common criteria for identifying which new crypto coins are safe for investment and which look risky.Crypto currency scams are usually propagated by creating an entire fake eco-system to spread information about the new coins. Fake websites and fake mobile apps to resemble some other brand, fake social media accounts and scam emails are created to help gullible users feel comfortable about the whole set up.
Scam coins usually exhibit certain distinct features as follows that should help in identifying them.
- Multi-Level Marketing: Companies that used multi-level marketing or pyramid marketing for selling products have been around for decades now.
Companies like Amway and Tupperware have used MLM schemes to entice housewives to join their network by promising them huge profits. mScam coins use MLM referral schemes to drive traffic to their websites. Investors are encouraged to share/post referral links to their social media accounts by promising them referral rewards.
This article gives more information on how MLM schemes have been used for some of the biggest scams in the industry.
- Unrealistic Guarantees: Scam coin start-ups try to dazzle their consumers with claims of quick and huge returns.
They use the same old trick of playing on peoples greed, that has been used by con-artists over the centuries. One has to wonder how they would generate the required revenues consistently to offer such returns to all their investors
- Absence of information: Real crypto coins would have whitepapers detailing how they actually work. Information about founders and development team members is also easily available. Genuine whitepapers are very technical in nature and explain both the purpose and technical details about the product.
Absence of a whitepaper or presence of a very superficial whitepaper should signal a scam coin.
Similarly if you are not able to research for information about the founding members or the code base, then it is better to avoid these coins.
If you are not able to find a coin that meets the above criteria, It is safer to stick to traditional, tried and tested financial investments which are getting simpler by the day and allow you to convert or instantly transfer your returns to usable income.
EITN note: This article was contributed by David Smith, Independent Consultant At Smart Card Institute.
He is a Cryptographer with 12 years of experience in both the public and private sectors. Currently working on second startup (currently in stealth mode) that will track and interpret the use of Contactless payments in the Greater China region. David’s expertise includes: system design and implementation with contact and Contactless smart cards, Smart card Personalization, mobile payments, and general knowledge and experience with APAC market trends and consumer preferences.