When I started this blog, I began by making it clear that there is no such thing as a free lunch. The main way to avoid scams is to pay more than you have to. There are lots of ways to do that: get advice from someone who knows the industry; use multiple sources of information; make sure you look at the terms and conditions before you sign up; never give out personal details over the internet unless you know it’s a reputable site; and hold off on investing until after the first year or two when things have settled down.
I try to keep things focused on ways to avoid scams, but in fact anything involving virtual currency is risky. They are not regulated in any meaningful way, for one thing, so if something goes wrong it can cost you a lot of money even if you are insured. You don’t know how long any given virtual currency will be around or what its value will be in time: there is no guarantee that a website will stay in business or that it will even be able to deliver on its promises.
But here’s the big one: there is almost no chance of getting your money back if something goes wrong.
When you buy virtual currency, it is like buying a stock. You are buying a piece of something that can be used to make money. The question is whether you will make money or not. There is no guarantee, because there is no physical stock.
The history of the internet is full of stories about people who lost money on virtual currency. Some of those stories are true and others are false. It’s hard to tell which ones are which, but there are some things everyone should understand before they buy virtual currency.
First, there is no way to verify that a seller actually has the currency in his possession. It could be held by someone else, in a bank account under another person’s name; it could be stored on an exchange that isn’t keeping track of what it has; it could have been stolen from the seller’s computer (and then sold under his name); or it could just be an empty wallet with nothing inside except a 1 BTC logo.
Second, once you’ve paid for the virtual currency, you can’t get your money back. No one will take responsibility for holding the coins and protecting you from scams and theft; if it turns out that someone has taken your money and run, then at least he will have gained your trust and made
Virtual currencies are rapidly gaining acceptance in the market. Many virtual currency schemes have been created which promise to make a fortune for their members, but unfortunately there is a high probability that these schemes would turn out to be scams. Therefore, it is very important for every investor to be aware of the risks involved with virtual currencies and to understand the possible ways of dealing with them.
All virtual currencies are not created equal. Some are more secure than others. Some offer faster transaction speeds but at a cost to your privacy, some offer anonymity but at a cost to your security, and some offer both of these things at a nominal fee. Furthermore, some virtual currencies are not mined in a manner as described above. On top of this, most virtual currency systems rely on centralized servers that can be manipulated by hackers or government entities or even just malicious users. There is no way to guarantee that the system that you are using will remain intact after your coins have been sent or withdrawn. Although there are many altcoins available on the market today, only a few can claim to be the best choice in terms of security and anonymity while maintaining reasonable transaction speeds.
Virtual currency exchanges may also be another area where you need to be careful when choosing an exchange platform or wallet service provider. There are many
Virtual currency is all around you. But money isn’t. When you pay for something, you assume that the seller will take the money and give you what you bought. That’s why cash is such a good idea: no one can cheat you.
But it’s not so easy to buy anything with virtual currency. The number of things that a currency like Bitcoin can buy is limited. And it’s not something people want to buy. Some places won’t let you pay them in Bitcoin because they don’t trust that the Bitcoins are real; some people who use Bitcoin as their main currency won’t accept it because they don’t trust others to give them what they paid for; and most people would be willing to trade in Bitcoins only if they could do it at a rate of about $1 for every 1,000 Bitcoins, which is about a million times more than anyone will ever be able to get for them. Again, the problem isn’t the money itself; it will always be possible to find someone who will trade in Bitcoins at an acceptable rate. The problem is that there just aren’t that many places where people want to pay with Bitcoins, and almost all of those places won’t accept it as payment because they don’t trust other people’s Bitcoins.
The most common scam, by far, is the sell-off of bitcoins for fiat currency. Bitcoin is a virtual currency that’s pretty much untraceable. Its value fluctuates wildly; if you keep it in one place you’re exposed to exchange rate risk. Bitcoin users are notoriously paranoid about scams like this.
There are some convincing-looking websites where you can buy bitcoins for PayPal or Western Union money transfer, but the transactions don’t go through, so you never get back the bitcoins you paid for them. This is a classic scam: You pay for something with PayPal, and it doesn’t happen, but you get charged anyway.
There are also websites that claim to let you trade bitcoins for goods or services. But these too are scams: They fool people into thinking they’re dealing with someone who has bitcoins, when they’re really dealing with a merchant who has nothing more than your bank account number.
It is now possible to buy and sell digital currency, in the form of Bitcoin (BTC) and Litecoin (LTC), at a growing number of sites that accept it.
Bitcoin is the first, and so far only, virtual currency to gain widespread acceptance.
It’s not hard to see why. Virtual currencies are anonymous, which makes them an ideal tool for money laundering, drug dealers and other criminals.
If you’re thinking about using this technology for criminal purposes, think again.
Virtual currency would not be necessary if the conventional monetary system worked well. But it doesn’t work well, and Bitcoin is trying to solve it.
One reason that conventional monetary systems don’t work well is that they don’t scale: their size and complexity grow exponentially with the square of the number of users. The simplest conventional monetary system is a barter economy. You do not need a bank account or any other financial instrument if you are trading only one thing each time.
The barter economy works very well when there are many small, simple people interacting with each other in person, or at most on a local network. But as economies get larger, more complicated and more impersonal, the barter economy breaks down. It’s no longer possible to trade just one thing at a time; you need to trade dozens or hundreds of different things just to get even close to the same total amount of goods and services.
Bitcoin solves this problem by creating a virtual exchange medium that can work with almost anyone anywhere in the world who has access to the Internet, whether they are small, simple people or not. Because this medium is so much more efficient than traditional currencies and payment systems, it allows for transactions of almost any size without incurring significant fees or delays.