One of the biggest obstacles to the general acceptance of bitcoin and other cryptocurrencies is the presence of scammers. Many people are afraid to invest in the coins because their accounts might be hacked. This is ironic because Satoshi Nakamoto designed bitcoin to be impervious to hackers. However, that’s true only of the blockchain itself. Most people lack the technical knowledge to keep their public keys safe. This creates a demand for cryptocurrency online exchanges such as Coinbase, but they are the targets of many hackers.
Also, some of the Initial Coin Offerings (ICO) are scams. The con artists put up a website and say they’re starting up a company to do something worthwhile and interesting. It sounds good, so people hand over their money, and then the company disappears. It has happened, with Prodeum. The blockchain technology is not proof against that because the scammers are in control of the ICO. They wrote the code that’s under the blockchain hood. South Korea recently began cracking down on cryptoscams. They uncovered $600 million worth of cryptofraud. Read more about Ian King at medium.com for more info.
One of Ian King’s pieces of advice in a recent article is to do business only with trusted cryptoexchanges. He specifies Coinbase, Bittrex, Cryptopia and Kraken are currently trusted.
He also says to be very careful when investing in an Initial Coin Offering. Those are companies that say they’re raising money to fund their businesses. Most of them are legitimate, or at least honestly intentioned. If you buy into an ICO and the coin or token becomes successful, that’s a good way to make millions of dollars. However, as mentioned, some are scams. You have to make sure an expert in cryptocoins has vetted the ICO first. With some of them, the actual code of the blockchain will reveal whether it’s designed to serve a real, legitimate purpose or whether it’s just a scheme for the originators to raise money for themselves.
And King mentions the exchange Tether might be risky. The Tether coin is allegedly backed up by U.S. dollars, making it a “stablecoin.” However, there are now 2.2 billion tethers in circulation. Is the owner of the Tether exchain holding $2.2 billion to back up these tethers? The last company audit was done on September 15. On that date, Tether had $443 million on hand to back up 420 million tethers. But the accounting firm has since stopped working with Tether, a red flag.