As the title suggests, when talking about cryptocurrencies, the word scam appears rather frequently. Sadly, the reality of a business we are a part of is that crypto is ideal for scammers who hide behind the nature of the industry, and, instead of growing smaller, cryptocurrency scams are more frequent than ever.
How so? Well, let me explain…
What, in part, initially propelled Bitcoin towards the wider audience was the privacy aspect of the game. Finally, there was no ever-watchful eye that was scrutinizing transactions. No more hated middlemen. No more high transaction fees. Only cryptocurrencies based on an everflowing chain of blocks called blockchain.
Since the beginning, anonymity was in the very core of the system. Satoshi Nakamoto as a founding father of encrypted digital money shown the way. However, that didn’t turn out to be enough. Therefore, other ingenious developers provided us with ways to transact between ourselves in more private and anonymous ways.
Needless to say, that was, and still is, ideal for various scams and illegal activities running around the internet.
Unacceptable business behavior leads to cryptocurrency scams
It’s not just about using privacy-focused cryptocurrencies, but also about formerly unacceptable business behavior now becoming acceptable.
Since the crypto community highly values privacy, many scammers try to defraud their victims by not doing things “by the book”. We can recognize them as people who do not need contracts for work you hired them to do. Moreover, not using adequate channels for payments, but prefer direct payments instead.
Sometimes you can recognize them by offering their services under nicknames and aliases. The main excuse is that it is a layer of protection against evil governments who want to rob them of their hard-earned cash or even imprison them for practicing the dark art of blockchain coding.
Not that this never really happened, but if something’s not permitted in your country, just move somewhere else. In the end, you can’t be a sea fisherman in Hungary, can you?
Difficult to (self)regulate cryptocurrency scams
The Civic Key’s Vinny Lingham once stated that one of the biggest problems of the cryptocurrency business is that it failed to self-regulate. Partly, because it is difficult to self-regulate something that is so privacy-oriented as crypto is. Still, when businesses don’t self-regulate, governments will.
It is a fact that it is still difficult to find top blockchain developers through normal channels like LinkedIn, UpWork, or Fiverr. Partially because they are a few, but mainly because they do not use those regulated services. By not using regulated channels, real blockchain developers leave room for cryptocurrency scams to utilize their channels for their malicious actions.
It is understandable that cryptocurrencies are all about decentralization and financial freedom, but the scale of technology misuse is of grand proportions.
The other problem is the global nature of crypto assets. Theoretically, anyone can trade and accept any cryptocurrency regardless of the country they live in. Laws can do little to prevent that.
The best way for the crypto business to start cleaning itself up is to start self-regulating, making it hard for scammers to thrive on the flesh of unaware victims. Everyone has to be involved, especially cryptocurrency exchanges because they are the ones over whose hands the majority of funds are conveyed.
A legitimate question would be, how are they going to help cryptocurrency to self-regulate when some of them are scammers themselves?
That is a good question. However, a topic for some of the upcoming columns.