Yesterday a friend called out of the blue to ask for advice regarding a new, revolutionary cryptocurrency. He was at a conference (quite a high end location) where some of people were presenting a new blockchain. Now I know him for quite a while and I know he's not the guy to get inflamed fast, so I listened to him carefully.
2 minutes later I was like: "Wherever you are right now, get a firm grip of your wallet and RUN! Run for you life! You're in the middle of a massive scam!".
The "revolutionary coin" was DasCoin. Those of you familiar with OneCoin probably already know about it.
What's The Difference Between A Scam And A Legit Cryptocurrency?
Lately, riding the wave of the rising cryptos, a few scams have been spotted, some of them becoming so large (and toxic) that they had to be banned from certain countries (like OneCoin in China). If you didn't make your homework, if you don't know how a blockchain works, what's the potential ROI and what are the risks, then it's relatively easy to get fooled. In this article I'll try to draft a few basic filters you should apply for any new, "revolutionary" project you get exposed to.
But before moving forward, the main difference between a legit crypto-currency and a scam is: getting paid for recruiting new members. We'll detail further but if there's any red flag that you should be looking at, in every presentation, is this one: are you getting paid primarily to recruit new members? Then you're in a blockchain-camouflaged Ponzi scheme type of scam.
Now, let's write that bullshit list.
1. There is no real product, only words about "the blockchain" and you get paid to recruit new members
If you don't get something really consistent, down to earth, from their technical presentation, then you're being fed bullshit. What's consistent, down to earth? Well, for ZCash, that would be "private transactions", for Steem would be "speed, social media website on top of it" and for Ethereum would be "a platform for building other apps on top of it".
If the only "product" of the company is to get paid when you recruit new members, then you're in trouble.
These is by far the most sensitive point that gets exploited (using the wood language of revolutionary blockchain) and it's very easy to get fooled. Especially since all of the above legit currencies have been accused of being scams at some point in their history. Eventually, they proved to be legit, solid businesses, whereas OneCoins and its clones are still shady.
2. You have to buy upfront "packages"
For $500 invested, you get the Gold package. For $2000 invested, you get the Diamond package. This smells like MLM / Ponzi from a mile away. The goal is to get you hooked and to incentivize you to recruit new members, because you are paid when you bring in new members. These packages are usually blocked in some form of "share" that will yield results in the medium future.
Do NOT mistake these "packages" with ICOs. Again, there is such a thin line between these concepts and people are very easily fooled.
3. You are not getting tokens, but "certificates" (or "licenses")
That's also very common amongst blockchain scams. There's no real token. Or if there is, it's absolutely worthless. So instead of giving you real tokens for your money, you get some for of "license" to operate on behalf of that company, license which gives you the right to... of course, recruit new members.
4. No public team of developers (or fake lists)
If there is no list of developers, or no public names and faces behind the project, then you're in trouble. Usually it may mean that there isn't really a blockchain out there. Just words.
5. No product related roadmap
If there is no product related roadmap, then you're in a business which is based on accumulating new members. Usually, these companies are throwing at people roadmaps based on the number of members: "if we get to x thousands members in y months, then you'll be rewarded z amount of cash". Again, no real product.
6. Massive off-line promotion, via conferences, events
This smells again like MLM / Ponzi, from a mile. If the revolutionary coin is promoted via a tour of conferences, usually in high-end locations, but there's no update of the product, no update of the roadmap, just incentives to buy the package and to recruit new members, then you're being scammed. The buying decision is much stronger when you have real life peer pressure and events are the best way to enforce that peer pressure. I've witnessed quite a few MLM events and I know how it works.
7. No sign of it in coinmarketcap
Please, pretty please, with sugar on top, use coinmarketcap diligently. If you hear about a new coin, see if it's there, somehow. If it's not yet out, of course, coinmarketcap is useless, but if it's already launched it has to be there. If it's not, you're in trouble.
8. Googling "[insert coin here] scam" returns thousands of pages
There are a few places where you can search for scam reports, one of them being bitcointalk.org, but any Google search about "[insert coin name] scam" should give you an idea. Do your homework, folks. A search will cost you a few minutes, whereas a $500 "investment" will cost you far more than $500 (time, opportunities, self-esteem).
Have you ever been subject to such an offer? How did you react? Do you have any other points to add to those above? Feel free to comment, I'd love to know your opinion.
image source: Pixabay
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
https://steemit.com/~witnesses
If you're new to Steemit, you may find these articles relevant (that's also part of my witness activity to support new members of the platform):
@dragosroua - A complete check list for detecting scam-coins! I am so happy to see this list since, newcomers to crypto like me know just enough to get enticed but do not know the pitfalls. Your blog provides all the 'red flags' that we need to look out for. I have recently, just barely avoided, by a stroke of luck, investing in a 'package' deal for a crypto. For some reason, my bank payment did not luckily go through. When I noticed, the scam (an ad based coin) website was already shutdown! For future - I will use your blog (which I am bookmarking) to detect any scams before I invest. Thanks. Upvoted.
Update at my end - I have posted a blog with a question on Innocence- Does it really exist? based on my original wildlife photos and musings. I would be honored if you take a look when you have time. Your valuable comments will be eagerly awaited. Thanks
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I've been curious how many of the hundreds of emerging crypto currencies might be scams. I read somewhere that there's close to 1,000 types of currency now and who knows how many of them are legit. Whenever there's growth potential due to high demand for a product, there's gonna be fraudulent entities born of it.
It kind of reminds me of the penny stock market in the United States when some states started legalizing marijuana...In the beginning of winter of 2014 some of these stocks gained 1000's of % in mere days even though most were pump and dumps / scams. It was nothing but empty promises and a lot of hype then the CEO and the stock promoters dump their holdings onto the gullible public that bought into their scheme as the price of the stock was soaring. After a few months, there were literally hundreds of new or newly active ticker symbols on the OTC stock market related to MJ and everyone and their dog wanted in. Predictably, pretty much all of them came crashing down and the people who bought in were left holding the bag--a bunch of worthless stock in a market where much of the liquidity dried up after so many months.
I'm still learning about crypto currencies and I found your post informative. Some of this I already knew / suspected but I did learn a few things so thank you!
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there are many person who make foolish the people to the name of cryptocurrency and many people make but after they know about that these are scams
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What do you think about Bitconnect coin
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At the first glance it looks like a fork of Bitcoin / Nova Coin. It also has PoS on top of PoW. Don't know what to say, to be honest. Will have to look into it for a while.
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In my opinion they could be running a very sophisticated scam on top of a crypto. There are elements of a pyramid scheme along with some other red flags that people have pointed out. You have to "lock up" your funds for 299 days if its less than $1000. Additionally you have to buy in with BTC and then trade it for their BCC (Bitconnect Coin) which raises the price. Then you trade that coin to their "trading bot" which gives back variable interest rates daily. Their coin has gone up to $65 now from $10 in less than 4 months but they only pay out in USD not in their coin which is now gone up in value (and you happened to trade them).
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Thanks for pointing these out! I always think when in doubt, just google the coin you are interested in and add "scam" in google, like you said. Usually these coins disqualify themselves when you can scroll through numerous posts about the bad vibe these tokens give.
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I wrote two articles about scams on steemit and realized by reading comments that many people are not aware of them. The main reason for that is they do not differentiate real cryptocurrencies (tokens available on exchanges) and certificates. Also, they believe in too-good-to-be-true ROI (3% a day, 50% a week etc.)
So, in my opinion THIS ARTICLE IS BASELINE FOR SCAM IDENTIFICATION.
It definitely deserves RESTEEM @dragosroua
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Thanks and keep educating, people need to make informed decisions.
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Thank you, too.
Keep writing and producing valuable content. I am following you.
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Great checklist @dragosroua. All very good points. To me no 5 is the deal breaker key. If there's no product, then there's no tangible value or potential for value. Some ICOs are punted on the idea of a product, with a roadmap etc. laid out, and some have the product and are looking to expand. Be wary of the former as the product may never eventuate either. If there is any doubt, RUN!!
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Coinstarter is of them. Scam ico. No product just go out and recruit to get paid.
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How do these scam companies keep getting away with this kind of thing over and over again? Isn't there some kind of legal recourse like class action law suits or something?
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Thanks for the heads up @dragosrou. Lately, there have been so many ICOs going on and some of them have already run away with all the money. The latest that I know of is Superior Coin which was quite popular among crypto communities.
Your list is a great way to detect BS and run away from it. ICO is an easy way to get millions of dollars in a few hours and then run away with all the money. The trend has gone up since June. I would request your opinion about investing in ICOs.
This post is a great contribution to the community so the resteem is well deserved. Glad to have read quite a lot from you and looking forward to reading more. Always on point!
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I am very, very reluctant to ICOs. I will only follow up on an ICO if:
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Thanks for your opinion. I won't invest in an ICO may be. Established coins are enough if we know how to invest properly.
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This is so useful to be able to reference, especially for someone like me who knows a little about cryptocurrency but gets quickly confused when trying to delve a little deeper.
Having said that, the ponzi schemes are easy to spot as they are the same the world over regardless of what currency they take. I think one point that may be missing here is the "It sounds to good to be true" test. When they offer guaranteed high returns on investments, like the bitconnect lending program. Not only do they give you rewards for recruiting new members, but they offer unrealistically high returns. It just stinks of ponzi to me.
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Yeah I think now people only discover those small "amateur" scammer. The biggest one are probably still hiding and functioning and the gonna get reavealed in some near future.
Great post @dragosroua
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Many people new to the crypto world can fall subject to these scams pretty easily and I think this is a great to way to get people aware of the specific dangers and what to look out for before investing into a coin.
Thank you for all the tips and suggestions @dragosroua to avert me from a scam coin.
I hope this saves people some money.
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From my short time I've been in this world, the number one thing anyone new to this should always remind themselves to think about is...
When you see people give advice or opinion you don't only have to consider if they know what they're talking about, if they just want to influence buying patterns for their own gain, if they're trying to sell you on a scam. It could all be perfectly true and they could make excellent predictions of the market, but you still can't follow their advice unless you know if your intentions are the same as there's. Even a "scam coin" or some worthless tokened project can still be profitable in the right circumstances but you wouldn't want to confuse it with a long term investment or you come back leisurely a few days to find nothing but tumble weed with prices kissing the floor.
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That's Some Huge Differences
in between them thanks for
telling all about this in details
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This post has been ranked within the top 50 most undervalued posts in the first half of Jul 27. We estimate that this post is undervalued by $14.54 as compared to a scenario in which every voter had an equal say.
See the full rankings and details in The Daily Tribune: Jul 27 - Part I. You can also read about some of our methodology, data analysis and technical details in our initial post.
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That's a very smart list to look out for potential scam on cryptocurrencies. Thanks and I will be forwarding this to friends who are new to the crypto world :) I'm sure this will keep their eyes open and save quite a few heartaches :)
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Hi friend, very good !!!!!
You would help me with a vote in my post., Thanks !!! ;)
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thanks a lot. really useful post.
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