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How To Identify A Scam Cryptocurrency? (Article and Video)

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How To Identify A Scam Cryptocurrency?



How To Identify A Scam Cryptocurrency?

There is a growing trend in the cryptocurrency industry, with more and more new coins being offered that extraordinary promise payout. The greater the variety of cryptocurrencies in the world, the more difficult the selection process is. Fraudsters use this feature of the market by offering counterfeit or fake currencies.

All fraudulent schemes are designed for those who want to get rich quickly. These include those offered on the market today, fake altcoins, or Scamcoins - altcoins with "guaranteed growth" in value.

Such a "new" coin is positioned as an improved, new bitcoin or a completely new cryptocurrency, the potential of which is very great, and its implementation is yet to come. Users are encouraged to become the first owners of a new coin, while it is little known and inexpensive, and, by analogy with bitcoin, to wait for an excessive rise in their asset price. We also recommend reading Why Cryptocurrencies Should Not Be Valued By Market Capitalization.

Thus, Reuters announced the closure of the QUID PRO QUO association for the distribution of fake E-Coin cryptocurrency. Swiss financial regulator FINMA claims to raise at least $ 4.2 million in exchange for E-Coin from several hundred users. The currency officially started on 01/01/2016. Simultaneously, the association kept the cryptocurrency on its servers and did not use blockchain technology. Nearly $ 2.1 million of funds donated by users to the association have been blocked. The regulator FINMA has warned three more companies about suspicious activity in the field of cryptocurrencies. FINMA now suspects 11 companies in the distribution of counterfeit cryptocurrencies; they are under investigation

Another sad example is pseudo-cryptocurrency Swisscoin. It's another case of a company trying to capitalize on cryptocurrency's appeal, even though the company has virtually nothing to do with digital currency. Affiliates are investing in a fake currency that doesn't exist outside of the Swisscoin ecosystem. Even worse, the value of that fake currency is an arbitrary number set by the company. Swisscoins are not traded on any crypto exchanges and cannot buy anything outside of the Swisscoin website. The Prosecutor's Office of Ukraine has opened criminal proceedings with the qualification of "large-scale fraud." By spreading false information about the receipt of super profits, in the case of investors transferring cash when buying swisscoin, advertising swisscoin as a cryptocurrency, scammers seized funds in more than 500 thousand US dollars.

Discerning such fraudulent schemes using cryptocurrencies is often difficult for both a novice user and an experienced one. However, there are certainly certain signs that you are facing a fake currency.

The main signs of a fake cryptocurrency:

1. Centralized currency. A cryptocurrency is issued or managed by a specific company. The administrator can influence the financial transactions of the system participants. The company usually dictates the terms itself. For example, a company may report waiting times of several months for customers to receive their money.

2. Lack of liquidity. If the exchange is offered only within its platform, the cryptocurrency has no recognition. You cannot use the currency outside the community or the group of people who own it. It is not an official currency, so it cannot be converted to any other cryptocurrency. More often than not, you will not find it on exchanges with an available API.

3. Closed source, closed blockchain. There are only vague hints as to what the cryptocurrency technology is based on its servers' location. Or who controls the creation and accounting of the coin. Open source is a must. –ílockchain, first of all, is a secure electronic register for storing data on transactions, property rights, and other information that is always in the public domain. So, if you invested in cryptocurrency, buying tokens, as a rule, for bitcoins, a record of this will be saved in the project's blockchain. In the future, you can receive income from a successful investment and the growth of tokens' value.

4. If any, user wallets are located on the cryptocurrency website and not installed on the wallet holder's computer. If you have discerned these factors in a certain cryptocurrency, it is most likely not genuine and requires a more thorough collection of information about it.

How to double-check the characteristics of a cryptocurrency and determine its truth? In any professional community, there are reputable sources that can help you when choosing an investment. The crypto community is no exception.

You can check the reality of the cryptocurrency and its main features on well-known resources:

Cryptocurrency source code: On public repositories like GitHub.com, you can check for source code for all declared cryptocurrencies.

An indirect sign of a cryptocurrency's reality is its presence on the Chainz.Cryptoid.Info resource, and its presence on the CoinMarketCap.com website will confirm the rating and capitalization of cryptocurrencies.

Availability of cryptocurrency on the WorldCoinIndex.com website. This platform monitors the cryptocurrency market news and prices. Information is collected from over 35 cryptocurrency exchanges. All prices are in BTC and 13 currencies: USD, EUR, CNY, GBP, RUB, CAD, JPY, HKD, BRL, IDR, AUD, KRW, and INR.

Also, through social networks like Twitter and Reddit, you can get access to up-to-date information about the cryptocurrency as a rule.

Description of the coin mining algorithm: when creating any cryptocurrency. The number of this cryptocurrency mined for a certain period is set. This algorithm regulates the rate of coin mining. Exceeding the given number leads to an increase in difficulty in slowing down the production. If, during this period, fewer coins were mined, then a decrease in complexity leads to faster production of cryptocurrency.

The fundamental principles of cryptocurrency include decentralization, privacy, unrestricted use. And transparency with an open-source, public blockchain. If your chosen cryptocurrency does not meet the requirements given above, it is most likely Scamcoins, fake.

Therefore, be careful and discreet in your choice.

Article and video on the topic: How To Identify A Scam Cryptocurrency?.

Author: Jonathan Burroughs

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