Welcome to another edition of Crypto Trader News Roundtable where our editorial team gathers to talk about tips, trends, and issues in the digital ecosphere. Our topic of discussion is about scammers and what we can do to protect ourselves.
Dennis
Hello, everyone, and welcome to most awe-inspiring, eagle-eye cryptocurrency roundtable of the interwebs! Today, I want us to take on THE number one, biggest problem that the crypto/blockchain industry faces… THE SCAMMERS!
So, let me start things off with a few questions for each of you:
1. Why are there so many scammers in crypto?
2. What can we do to send them off to the gulags?
3. Can our industry overcome this some day?
Brandon
1. New technology, so people are still unaware of safety issues. Scammers take advantage of that.
2. That’s the million dollar question, isn’t it?
Alan
1. There are scammers in all segments to make a lot of money quickly, the stock market, penny stocks, the dot com era… General interactions in the WWW can still have a good percentage of scamming. Crypto is just the latest wave.
2. Sending them off to the gulags started happening last year with SEC and other government agencies stepping in and placing fines and arrests on ICO scammers, even early individuals who sinned (Karpeles) received punishment.
3. We’re already overcoming it. Like Tony said, more education is needed. Scammers thrive when greed trumps reason…and due diligence.
The slow-down of ICO’s is one good indicator of progress.
Tony
1. Because it’s kind of easy to trick people into giving you money, especially those who aren’t very experienced in the field – plus their lack education.
2. Kind of goes back to last week’s topic. If we kill anonymity we suddenly have a way of identifying scammers and we can go knock on their doors.
3. Yes.
Tristan
1. Crypto is still so unregulated which attracts a higher amount of scammers. Less regulation makes for easy scamming.
Meredith
1. Even though crypto was developed by egg heads, let’s not forget that in the beginning, many of its users were using it for the silk road. There’s an “easy” criminal element. “Anonymous” transactions, fast money. Now we’re trying to mainstream it and there’s a fairly steep learning curve for people.
Dennis
Well, here’s my take:
1. It’s easy. Once you’ve sent the transaction, it’s gone. No recourse, no appeals…
2. To take effective action, maybe we need to be more specific about types of scams.
3. Either we’ll overcome this or we’ll go down in flames
Brandon
I agree, Dennis.
Alan
Agreed.
Dennis
Why don’t we identify a few “scam prototypes” to discuss?
1. The fraudulent ICO
2. The send me crypto and I’ll do X but then in reality I disappear…
3. The “give me your private key” and I’ll help you out…
4. The send your funds to this address
Brandon
To be honest, we can stop 2 and 3 with education. The first one is the problem.
Meredith
I don’t think crypto is going to disappear. IMHO, it’s the next generation of money. Government will impose their regulations, keep us “safe” or repressed, whatever your mind think is of the topic.
Does anyone have hard numbers how many ICOs launched last year and failed – taking all the funds and disappearing?
Dennis
It’s probably easier to count the ones that DIDN’T disappear…
Tony
All of those can be stopped with education to be honest. I can see how number 1 can get tricky sometimes… But good serious projects (the ones where you want to put your money in) make it really easy and simple for you to trust them. They aren’t afraid of being public; they conduct interviews, webinars, podcasts… You can tell that they are REAL people.
Brandon
That is true too, Tony. Plus there more accountability when people are in the public view. You can’t just disappear.
Dennis
I believe that there’s still a fundamental flaw with the ICO paradigm.
Can anybody tell me WHY a project needs $20 million (or more) up front especially when NOTHING has been proven?
The distributed ICO technology that we’ve been talking about for a while is one way to resolve this.
Alan
Well, for the varying millions up front, we can say the same thing happens in startup land (Theranos, Fyre Festival, etc).
Meredith
Because here’s the thing… You have really smart developers who are working on the next best thing, right? They get seed funding. Launch an ICO for dev costs, server fees, overhead, whatever. Yes, it could be a quick money scheme. Suddenly the project fails for some “reasonable” explanation. The next thing you know, the same people are opening shop on the next project. Maybe it’s a slightly different iteration. More people buy into it. And the hamster wheel keeps spinning.
Dennis
Project needs and investor needs need to be aligned. I agree, Meredith – but maybe that’s another topic. Lots of projects fail, not because they’re scams, but because they don’t have the business skills they need to succeed. Four programmers doesn’t a viable project make.
Meredith
And who’s to say that these same groups of developers and angel investors aren’t luring people in to keep the money flow going?
Dennis
Very good point – there is a very real complicity between some scammers and the “whales” that churn the waters. Lots of early investors are only looking for quick turnarounds when a token hits the exchange, instead of long term viable projects.
Meredith
I think that segues nicely into talking about Distributed ICOs and how that can protect a project and its investors.
Adding to your point about long term viable projects… I think a lot of people desperately want easy money. It’s like Lottery mentality. “Dollar and a dream” for riches.
Brandon
So would you say that this is still growing pains because blockchain hasn’t attracted mainstream investors?
Alan
Talk more on this concept of Distributed ICO.
Dennis
Well, the point of a Distributed ICO is to make the whole process unattractive to scammers. A distributed ICO raises funds in installments as the team meats milestones and proves its worth to its investors. Likewise, the returns come as the project actually DOES THINGS in the real world and not just because there are a bunch of tokens available on an exchange.
Alan
Well, blockchain does have more mainstream investors (Tim Draper, Index Ventures, Goldman Sachs, JPM Coin), Adreesen Horowitz and more.
There’s more from the traditional markets stepping in some form or fashion by owning crypto startups or investing directly.
Dennis
It’s like talking climate or weather – lots of people are betting on whether it’s going to rain or not, while only a few are hoping to harvest based on crops growing and giving fruit.
Alan
Even Facebook coin, Square and Lightning Labs, and others, so it is becoming more mainstream.
Brandon
Good analogy Dennis. That’s kind of how I see it.
Alan
That was the early days of the dot com boom too. Probably early days of all big industries.
Meredith
I was just about to say that, Alan.
Dennis
So true, Alan. People were selling domain names for fortunes.
Alan
People still are (if there’s enough demand). But going back to the point of scamming, what further points did you have in that vein?
Dennis
Could we come up with a few simple rules to help people stay clear of the worst scams?
Meredith
RESEARCH. Look at the company. If they have NO history, look at the people operating it.
Dennis
1. Don’t share your private keys with anyone
2. Never invest your rent money
3. Don’t do business with strangers on Telegram
Tony
Research, research, research.
Hahaha on number 3 it’s kind of funny, Dennis.
Dennis
I’ve been taken.
Tristan
I think a lot of people have been scammed at one point or another.
Alan
There’re general principles to follow and that could be a post.
Meredith
Private keys are very important. Don’t lose them. Don’t give them out. Keep that information off line.
Brandon
Number 2 should go without saying. Unfortunately, people do it all the time.
Alan
My satoshi – never talk private keys.
Dennis
4. Don’t keep your crypto on an exchange!!!!
Tony
Yes, get a hard wallet. There are plenty of good options to pick from and most of them are always better than leaving your assets on someone’s exchange where you don’t really have control over them or what might happen to them.
Dennis
Leaving your crypto on an exchange is like keeping your cookies in someone else’s cookie jar.
Tony
LOL. Good analogy, Dennis.
Meredith
This also points to the learning curve to help mainstream it. People simply don’t know WHY they shouldn’t leave it on the exchanges; the difference between hot and cold wallets, etc.
Brandon
Piggybacking on that – keep your paper wallets in a secure location for god’s sake! Get a safe if you’ve got a lot of money invested.
Dennis
Also a good point, Brandon. So, can we wrap up a conclusion for people?
Meredith
Yes. Paper wallets in a fire proof/water proof safe. And PLEASE have a plan for your wallets after you die. I can’t imagine how much crypto is lost because of poor planning.
I think our conversation got away from the points we wanted to talk about: ICO and scams.
Tony
I can’t imagine how many people don’t have access to their family’s crypto mainly because they didn’t say/educate/explain how to access their wallets? I don’t know… I find this kind of funny and sad at the same time.
Meredith
I literally have a red book. It’s a binder with everything printed and a master copy of all things on a flash drive for my beneficiaries.
Dennis
Ok, but back to the point – before the whole world tries to find Meredith’s red binder, which I hope is really green or purple…
Meredith
LOL
Dennis
Anyways… Scammers are in the industry because they’ve found it easy to rob people. In order to solve the problem, we need to make people more aware of how to protect themselves, while at the same time developing systems and processes (like the distributed ICO) which incentivizes good behavior. Hopefully, we can clean things up before the government has to step in and impose harsh restrictions.
Tony
Agreed.
Brandon
Agreed. It starts with education.
Meredith
Education. 100%. Don’t judge an ICO by its cover story. Do research!
Brandon
Demystifying Crypto will have a lot of benefits to be honest.
Alan
In regard to scammers “The fool who thinks he is a fool is for that very reason a wise man; But the fool who thinks he is a wise man is rightly called a fool.” Use more reason when investing, less greed.
Dennis
Leave it to Alan to bring us to a philosophical close! Thank you everyone.
1 comment
[…] Cryptocurrency […]
Comments are closed.