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Sunday, 6 August 2017

Scam Alert! - How To Avoid The Pitfalls In The Bitcoin Craze

Scam alert

I am a huge lover of cryptocurrency and the benefits it could bring to every suffering family in the world. Others hate it for the same reason but that’s not the subject of this piece. I am assuming that you have at least a faint idea of what cryptocurrencies are so I will not define it here but if you don’t, a little research would help. The first, most known and most valuable is bitcoin. Currently, the value of 1 bitcoin hovers around $13,000 and $16,000 on a daily basis and has not fallen below $10,000 since December 17th 2017. Some experts believed then, that, it would rise above $10,000 in about 5 years but 5years cae very early. Now, therein lays the danger! Already, several websites are springing up daily claiming to have some ‘magical powers’ of doubling bitcoins. Some go as far as promising ridiculously high weekly returns of 250%. They claim to have the ability to inject exploits into pools and blockchains. Simply put, they have the ability to exploit mining pools and blockchains probably by some hacking ability in order to mine bitcoin quickly hence justifying their ability to pay high returns on investment (ROI). Think about it, if you have the ‘powers’ to invest in personal mining technology and exploit pools to mine bitcoins at an insane speed, would you waste time inviting others on board or would you simply quietly mine away??? The nefarious activities of these websites only serve to sink the reputation of cryptocurrency and provide ammunition to the critics and those who fear the impact of this potentially life changing technology. The MT Gox episode should still be clear on everybody’s mind. Note that, by the end of this year, about 80%, the equivalence of 21 million of all bitcoins would have been mined already. There are a lot more people mining today than there was 5 years ago and they are using far stronger and expensive hardware. This has raised the bar in terms of mining difficulty, making it extremely difficult to gain 1 bitcoin. Therefore beware of anyone promising you bitcoin doubling.

So what are these people really doing?

This is based on some background investigations, assumptions and observations but I may be wrong.

1.    Based on the information in the introduction, if we are to assume without admitting that these people are really exploiting a system to mine more bitcoins, then, they are probably hacking mining hardware/systems and directing the mining efforts of hundreds, probably thousands of machines to their benefit. They may also be hacking wallets and stealing bitcoins. Don’t forget that, in this day and age, it’s easy to hack all ‘internet of things’. That is why even Mark Zuckerberg would cover his webcam. Hacking is illegal and someday when they are caught, the websites would shut down and they will vanish with your bitcoins or earnings. On top of this, most of these websites have conditions that you must fulfill in order to withdraw your earnings and you can easily be blocked. And come to think of it, the blockchain technology is one of the most highly encrypted technology today, therefore trust me, no one can hack it. This can only be done through social engineering (being convinced by people on social media and forums to give away your wallet ID and password so that they can mine crypto-currency for you).

Test Case 1 – An Investigation

So, here’s a test I conducted using one of these websites. I was asked to just insert my wallet address and click start on a supposed online software bitcoin generator. Some progress bar appeared and run for a few minutes, then bingo, I was told my wallet has been credited with 0.1 BTC (over $200). I visited my wallet and there was nothing there so i came back to the software and found a notice asking me to send .000227 in Bitcoins (a little over $6 at the time of writing this piece) to the owners of the software for the confirmation of the transaction. Note that, it’s normal to pay transaction fees in crypto-curency transfer but here’s a little bit of common sense. If you have possession of funds that you generated on my behalf, why would you request I pay transaction fees before you forward the funds to me when you can simply deduct it from what’s in your possession and forward the balance to my account??? See?? Basic!! The fees have been deliberately set at a little above $6 to make you think it’s nothing. But, think about it, if just a 1000 people fall for this every day, these criminals would be smiling to the bank at the end of every month. To top it up, they have a live chat room on the site saturated with bots singing their praises. How did I know? Well, I tested that too. I went into the room several times with different names typing different messages on the board and I kept getting the same replies. Yes, from automated bots…. They also have a persuasive narrative on the site claiming they don’t know when they would be found out for the software to be shut down by ‘the authorities’. This is intended to create an urgent effect on you to pay the .000227 BTCs, don’t be fooled.

2.    Any investment firm promising you huge daily Returns On Investment far beyond the going market rate in that industry is very likely running a Ponzi or Pyramid scheme. Basically meaning, they are taking investment from others and giving it to you based on the amount you invested (the higher the amount you invest, the higher the percentage interest gained). They are not mining!! Such a business can shut shop at any time and vanish into thin air especially in this case where cryptocurrency is not under any regulation.

What most of you don’t realize is that, for as little as $3 a month, anyone can create a so-called bitcoin doubling website with a life-span of 3 months which would collect as much bitcoins as it can and vanish when the domain expires, smiling to the bank with all your bitcoins. They may probably metamorphous as another bitcoin generating website and steal more bitcoins. Wise up!

Test Case 2
Scam advisor

I investigated another website offering the doubling of bitcoins, a registered website in Europe, beautifully created and professional looking website, that is. The narrative is persuasive although couched in some technical financial terms that would confuse the ‘ordinary’ person. However, there was one problem! They have blocked scam advisor (an online software used in checking the reputation of a website; you would learn more about scam advisor in the next paragraph). That’s the first red flag. Any website that blocks a reputation checking software has an ulterior motive, I suspect. Then again, a little background check from the registrar in that country proved that the website is only 1 month old and registered as offering financial investment services. There was nothing in there about bitcoins. The catch here is that bitcoin is not regulated so if they vanish with your earnings, they can’t be prosecuted. I seriously suspect a pyramid scheme here.

How to Avoid Being Scammed

A while back I wrote this piece Avoiding online scam, which I really suggest you read immediately. It’s a guide to finding the right tools online to investigate the background of every website before you give them your money or profile. Here are two main characteristics that you should spot:

a.    Making wild claims of getting rich overnight

b.    Having landing pages that lead you to sign up without showcasing the details of what the business or website is about.

Read the full guide on that article.

How To Make Real Bitcoins

1.    The only way to benefit from bitcoins without being scammed is to set up your own mining rig and store your coins on a hardware wallet or a credible virtual wallet. There are several cost-effective ways to do this by investing in energy efficient hardware. The positive news is that, top hardware and software manufacturers like AMD and Nvidia have ventured into the market with some great graphic hardwares intended for that purpose. You can mine solo or join a mining pool where you bring on your mining effort and take a share of the profit based on your contribution. However note that, solo mining bitcoin is not cost-effective anymore at this point.

2.    You can also buy, store and sell at the opportune time if you have the resources.

3.    If you don’t have the resources to do all of this, then you will have to take the hard road of doing some online work that pays in bitcoins. My favorite is Paid To Click (PTC) where you just click on ads or do surveys and get paid for it in bitcoins. This article may interest you How to make free bitcoins. You’re not going to be paid so much overnight for viewing an ad but it’s low risk if you’re risk averse. The good in it is that, you can put all your earnings together and wait for the day the price of bitcoin appreciates and then strike.


It’s possible that the real intentions of these new websites are good and would be clearer when they have been in business for 3 years and beyond at least. However, be wary of unreasonable promises in the bitcoin world. In the wake of the appreciation in value of bitcoins, these numerous new websites may be preying on human greed to satisfy their own. Just because you got paid on a bitcoin doubling site, does not mean there is no fraud scheme here. It only means you are one of the early birds who might have benefited. The day that the value of Bitcoin depreciates steeply or appreciates significantly is when your earnings will also vanish if you still have it with them, of course. Do due diligence and don’t fall for it. Good luck!

Resources  scamadvisor.com