20+ Bitcoin scams and how to spot and avoid them Comparitech
20+ Bitcoin scams and how to spot and avoid them Comparitech
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Why I went from Bits to Butts
About a year and a half ago I learned about Bitcoin just prior to The Great Run Up of April 2013. I was immediately captivated by the idea of making an insane ROI of +500% and let greed cloud my perception from the start. To be fair though, I diligently studied Bitcoin: how it worked from mining to transactions, the economic implications, and the freedom it offered from banks. After a few months of research I was sold. I began to pour the little money that I had saved into it, convinced that in a few months time, my investment of $3,000 would soon hit $10,000+. I was right for all the wrong reasons. From the beginning, I thought I had stumbled upon the financial equivalent of the Internet in its infancy. This was going to be the greatest decision of my life. Bitcoin offered a system that allowed people to be their own individual bank while making money in the process. I was also convinced that the US Central Bank was devaluing the dollar through inflation and it was my duty to protect myself and my future. In reality, Bitcoin offers no advantages over the traditional banking system, which I will detail below:
Transaction Fees - Since when has this hurt a consumer other than moving money through the ACH system? In reality, I can pay for everything with my debit and credit cards while receiving rewards points of 2% AND having fraud protection. Be responsible with your money and pay your bill off in full every month and/or set up overdraft protection with your bank. Financial responsibility is a great skill that you will need to have for the rest of your life. Learn it. In reality, the lack of transaction fees only helps sellers while preventing the consumer from filing any charge backs. This sounds ripe for shady businesses to be perfectly honest.
Transaction Speed - Waiting a few minutes for a large sum of money doesn't seem like an issue, but standing around for 10 minutes while your transaction for a $3.50 coffee is confirmed makes you look like an idiot.
Mining - Of all the things that could be done with countless amounts of energy and an insane amount of processing power, people choose to mine Bitcoin. Why not donate your computing power to a better cause like helping find cures for Alzheimer's, Huntington's, Parkinson's, and many cancers through protein folding at Stanford University?
Anonymity - Bitcoin isn't really anonymous, but in fact pseudo-anonymous. All transactions are recorded on the Blockchain so there will always be proof of a transaction occurring. You can get around this through tumblers (Great for money laundering!) that pool a bunch of different transactions into one address and then disperses the money to the respective recipients. But really, who the fuck needs this unless you are buying drugs or don't want your SO seeing porn charges on your statement? If you want a little weed or coke it's really not that hard to meet a local connection and stop living in the stone age and use PornHub (NSFW).
Security - Bitcoin's ideology revolves around the idea of a "trustless" system. The problem is, Bitcoiners blindly trust the institutions that they do business with. Mt. Gox, Silk Road, Butterfly Labs. The list goes on. Consumers need protection and storing your life savings on your computer hard drive that is prone to failure, physical damage, and hacking is not secure in the least. Not to mention the ridiculously long and tedious steps that need to be followed to create a paper wallet. FDIC insurance and consumer protection is what the general population wants and needs. If a 5 year and old and an 80 year old can't do it, nobody can. Let's also not forget that the entire system has a huge flaw in that a 51% attack (currently prevented by ghash.io's word) would destroy Bitcoin in a heart beat.
Currency Devaluation - Of all the things that I have gained from Bitcoin, an interest in economics is by far the best. Reading a ton of crap from a bunch of crazy Libertarians will bend your perception of economic reality though. I was berated with the idea that the Federal Reserve was the devil and that monetary inflation was robbery. Although there are legitimate concerns with FED policy, I am extremely grateful for their independence from partisan politics during the 2008 financial crisis. Nothing was done by Congress in crunch time and barely anything has been done by them since. Without the FED we would have been completely screwed. As for inflation, the economy we live in today would not exist without it. If money were deflationary (like Bitcoin) everybody would hoard it with the idea that they would be richer tomorrow, effectively stunting the growth of the economy. This is exactly what is happening to Bitcoin. People are treating it as an investment with the hopes of its value increasing dramatically. Bitcoin-USD exchange volume hasn't been this low during a 3 month period since just before the last run up in price which suggests that people are treating it as a commodity rather than a currency.
Payment Processors - Companies like Bitpay and Coinbase seem to serve a good purpose in creating liquidity for Bitcoin. Unfortunately, when a major company (such as Overstock, Dell, Virgin, etc.) chooses to accept Bitcoin through these services they are undoubtedly converting 99% of the money directly into dollars. This does nothing for Bitcoin other than promote it, subsequently fueling the pyramid scheme.
Ever since the last run up in price during the month of December, I have become disillusioned by Bitcoin and the incessant promotion over in /Bitcoin. None of the above mentioned flaws are actually good for Bitcoin. Nor is Bitcoin a safe investment if you are looking to store your money. If you want Bitcoin to be a currency it has to be relatively stable during periods of high volume; which is the exact opposite of how it acts. I sold my initial position in Bitcoin and now am sitting on a decent amount because I know that the pyramid scheme will continue for the near future and will look to cash out during the next run up. To be honest though, I think the technology is quite amazing (especially how it has overcome the double-spend problem) and would not be surprised if future financial instruments or other technologies are based off of the original concept. I do however think that Bitcoin is a pyramid scheme and I am grateful that I have come to this conclusion before it's too late.
Idea: how to solve Bitcoin theft by a tech entrepreneur
The problem: The last few weeks have seen over $500m of bitcoin theft as we all know. Highlights:
Mtgox implosion. $450m+ of bitcoins lost or stolen.
Flexcoin shutdown last week when ~800 BTC from its hot wallet were all stolen.
The CEO of First Meta, a singaporean bitcoin exchange, commits suicide, leaving the exchange in uncertain waters.
These are not isolated incidents. A quick wikipedia search will reveal a dozen other bitcoin exchanges that have been hacked and forced to shut down since 2010. As a relatively new bitcoin user, I'm personally shit scared about my coins getting stolen or lost. It's my #1 concern. And for new people getting into BTC, this is the main thing that scares people. Exchanges going under, OR coins getting stolen somehow during storage or transfer. Never before has money been so easy to steal, with so few consequences. If $450m were stolen in a bank robbery instead of MtGox, I'd bet several people would be in jail by now. But b/c of the pseudo-anonymous nature of BTC, there are less consequences for online criminals. My background is that of a tech entrepreneur. I enjoy solving hard problems. When I look at this situation, I see security as the main short-term hurdle that will prevent people from saving large amounts of money in BTC. My solution: create an insured FDIC-like cold storage service where people and companies can save their BTC, just like a savings account. I've worked with specialty insurance companies before such as Lloyds of London, and I believe someone would be willing to write a large insurance policy covering people's deposits. Each person's deposits could be insured upto say $100,000. Provided we do a good enough job with security and cold storage (NO trading, just cold storage), and given the FDIC-like insurance protection, I believe this might assuage a lot of fears people have about losing their BTC to scams, malware or fraud. What do you guys think? What would you call it? Do you think this would help drive BTC adoption as a whole by making the average mom-and-pop person feel safe about their deposits?
Bitcoin heist: NiceHash hacked for $68 million in bitcoin - TomoNews
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