With all the buzz surrounding Bitcoin of late, cryptocurrencies, in all its many variants, are benefiting in terms of public awareness. Whereas, just a few years ago, concepts such as blockchain technology (the underlying technology behind Bitcoin) and mining are concepts only understood by a very tiny minority, today, the situation is totally different. Because of somewhat exaggerated claims of ‘rags to riches’ stories of some individuals who benefited from the rapid rise of Bitcoin’s value, many small investors, who also want to cash in on the ‘next big thing’, are starting to jump on the bandwagon.
Because of somewhat exaggerated claims of ‘rags to riches’ stories of some individuals who benefited from the rapid rise of Bitcoin’s value, many small investors, who also want to cash in on the ‘next big thing’, are starting to jump on the bandwagon.
As of this writing, there are 3,840 cryptocurrencies in the market today, according to coinlib.io. This figure is nothing less than staggering considering there are only 156 fiat currencies (dollars, pounds, peso, etc) in the world. The fact that there is a general lack of understanding of virtual currencies, coupled with the absence of regulations, makes for a ripe environment for some unscrupulous individuals to take advantage of an unsuspecting prey.
There’s plenty of opportunities in owning a cryptocurrency, provided you choose the right one! So, for an average Joe and Jane, who are interested in owning a cryptocurrency but want to avoid being scammed, we’ve listed down 8 common characteristics of a scam coin. Take note!
1. Guarantees steady and high return on investment. ANY investment product ALWAYS entails some risks. It’s the job of the investor to assess his risk appetite and invest accordingly. Cryptocurrencies are no exception to this. Never be lured into hype and technical jargons. Just because one coin is supposedly technically superior over the others doesn’t mean it can provide guaranteed high returns. Owning a cryptocurrency is a long-term game and if you’re just out to make a quick buck, the chances of success are slim and very risky.
2. Ambiguous and unverifiable details on how it works. A credible cryptocurrency should be able to illustrate, in detail, how it works, the underlying technology behind it, and its overall nature. There should be clear documentations that are readily available and can be verified against any third-party verification procedure. If any of these are not available, you have every right to be suspicious.
3. Lack of information on the management team. The management team running a particular cryptocurrency should be known to the public. These individuals must have a solid reputation and must be accessible at all times. Be wary of any cryptocurrency organization whose management team are not very public or are only composed of very few untraceable individuals.
4. Difficult withdrawal of funds. Granted, blockchain, the technology underpinning cryptocurrencies, is highly secure. This doesn’t mean that withdrawal of your own money should be difficult. A good cryptocurrency would usually have a secure wallet – an app that facilitates movement of your coins. Without this, it will be quite difficult to manage and control your coins. Usually coins are traded and converted on independent exchanges and hence allow you at any time to convert those back into FIAT currencies. Assess very carefully if withdrawing your coins is difficult. If it is, then it should raise some red flags.
A good cryptocurrency would usually have a secure wallet – an app that facilitates movement of your coins. Without this, it will be quite difficult to manage and control your coins.
5. Non-existent technical paper or whitepaper. The existence of a technical whitepaper is generally a good indication that things are in order, but not a guarantee as it can be easily copy-pasted. As the whitepaper is a technical document that can be peer-reviewed (and debunked, if necessary) this becomes an effective tool though to assess whether or not you’re dealing with a good company. If the whitepaper is perpetually on a ‘draft’ mode, not of original content or if it’s totally non-existent, then it’s safe for you to go the opposite direction.
6. Code base is non-existent or not available for public scrutiny. Considering that the majority of cryptocurrencies are open sourced, projects that do not share their code base can appear less credible. Of course, this doesn’t mean that only open source projects are legitimate but scams usually don’t divulge their code base simply because they don’t have them in the first place.
7. Limited transparency to the community. Launching a cryptocurrency usually entails a lot of community engagement. In order to turn it into success, there must be a great deal of transparency on the development, timeline, plans of activities, etc. Company website and social channels must be regularly updated so the public can keep track of the progress. If there is an information that you can’t easily find, then it’s time to start asking yourself why.
8. No physical office location. While everything is going digital, it is still important that a company has a physical office location. Be careful of cryptocurrency companies that do not have an office address or companies that operate in a tax haven country with a P.O. Box address only. This makes the legitimacy of a mother company quite doubtful. Make sure you scrutinize everything before giving these companies some serious attention.
At Ducatus, we put a high premium on integrity. Our aim is to build the world’s most popular cryptocurrency through the combination of world-class digital infrastructure, a powerful network distribution system, and a suite of related Crypto-Economy businesses. To find out more, visit our website at www.ducatus.net for a whole host of information including: Ducatus management team, the Ducatus crypto economy, Ducatus network, and more. To read our whitepaper, click here.