There is no doubt that digital currencies are a global economic phenomenon that aspires to shake up the international financial system. However, in the frenzy of hundreds of cryptocurrencies, various clever people are finding suitable ground to deceive unsuspecting users. See in the article what elements should warn us that a cryptocurrency is a scam.
When one digital currency is exchanged for another through its community
Each cryptocurrency can be exchanged based on the current exchange rate of its unit with other digital currencies or with conventional money.
There are several ways to do this. For example, we can redeem Bitcoin in recognized third-party online exchanges, such as Kraken or COINBASE ...
... but also to make the transaction by withdrawing cash in our local currency, in the available Bitcoin ATMs. We also have the ability to sell Bitcoin to other users using the direct sale method.
But if we discover a digital currency where its transactions are made only within a platform of the team that developed it, it means that cryptocurrency is probably a scam.
This practice usually leads to one of the most classic money combs, known as investor pyramids.
Each prospective buyer is persuaded to invest in the respective cryptocurrencies on the pretext that their value will soon increase. At the same time, it needs to attract new members to allow new capital to flow.
This whole closed system creates a pyramid-shaped chain. Promising profits never come, and digital currencies have no value other than "community."
As we understand it, the initial capital of investors ends up at the top of the pyramid, which is of course the responsible mind of fraud.
When its value never falls
A feature of currencies, whether digital currencies or official currencies, is the volatility of their exchange rates.
As we have mentioned in previous articles, the basic law of the market, which is supply and demand, fluctuates in price.
All currencies, such as the Dollar, the Euro, the Ethereum , or Bitcoin, are depreciating in value.
Therefore, if we happen to see an ad claiming that a digital currency is only on the rise, that particular cryptocurrency is 100% fraudulent.
The smart ones bet on the expectations created by the supposedly secure profit, in order to catch victims. In fact, there is no one-size-fits-all investment.
It does not have two fundamental features
Every valid cryptocurrency must have two key elements. One of them is to have the source code of his software made public .
This means that the way the digital currency works for transparency must be made available to the public. However, it is difficult for the average user to understand its structure and mechanism.
But what we can do is do research on the internet to cross-check the existence and authenticity of the source code of each cryptocurrency.
The second element that the technology of a digital currency must satisfy is to ensure the controlled supply of coins.
Simply put, there must be a definite stock of cryptocurrency units on the market at a given time.
What value would a currency have if everyone could generously procure quantities from their units at any time? The answer is no.
In summary, if we achieve a digital currency that does not meet any of the above criteria, then in all likelihood, this is fraud.
It is mainly based on promotion supplies
In case a cryptocurrency gives us "hares with petrachelia" if we invest and promote it, then this is a bad sign.
Most of these currencies have no market value, and they use supplies to entice users, leading them to the pyramid of investors mentioned above.
He does not have enough information about his identity
When launching a digital currency, the development team is accustomed to notifying an official document called white paper.
The document describes the purpose of the coin creation, its philosophy, but also technical details of its operation.
If when we read the text we do not understand what cryptocurrency stands for, and what innovation its blockchain technology brings , then two things happen:
- Our knowledge is not enough to understand this project.
- Those in charge give us little information, or try to confuse us because they want to hide something.
It is also a good idea to compare the authenticity of the text with an online logging application . If we realize that the same pieces of text have been copied by other white papers, then it is certain that cryptocurrency is a scam.
Do you know of any other evidence that a cryptocurrency is a scam?
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