Is It Legit? -Well, If You Have to Ask...
Photo by Michael Geiger on Unsplash

Is It Legit? -Well, If You Have to Ask...

By Whiskey | Adventures in Blockchain | 12 Feb 2020

If you're new to blockchain and cryptocurrency, then you are probably worried about losing your money. 

You should be

There are a couple of great strategies to helping detect scams. It's easy to say 'if it sounds too good to be true, then it probably is' but how do you know? There are so many scams out there because people don't understand blockchain and some are just greedy. This article has two sections:

  • Principles for avoiding scams
  • A very incomplete list of scam sites
  • (Secret bonus section for reading to the end)

I want to help raise awareness about specific sites as well as give people tools to better evaluate if a site's claims are trustworthy. Join the conversation by sharing you're tips and sites that deserve to be blacklisted. 

Principles for Avoiding Scams:

Understand the economics - 

The best way in my opinion to avoid scams is to understand a site's own economics. If you understand how they make their money, it can be much easier to spot a scam. From a high level can you understand it's costs, revenues and where you fit? Let's start with a grocery store as an example:

Costs: Rent, Employees, Inventory (food)

Revenue: Proceeds from selling inventory 

Your input: Cash

You receive: Food

They might make money by buying at wholesale, adding a retail markup, and then selling to you in smaller quantities. As a brick and mortar, it's more clear cut because you give them money on the spot and receive your purchase at the same time. You receive the benefit of buying food in quantities you prefer, say 4 bananas instead of 400 and the grocery store gets the markup.

Now let's look at the bitcoin doubler scam. If they are the real deal, then it would like this:

Costs: Mining equipment, website fees, programming/development fees

Revenue: Your bitcoin "mining" fee

Your input: Your initial BTC and the mining fee

You Receive: Double the initial BTC minus the mining fee

If a company has the ability to take an input and almost double it in a very short timespan, as these sites claim, then they wouldn't be interested in your input. Here's why, if they can double any amount of BTC, with a mining fee of even 50%, can run this process 10 times a day, and started with $1 of BTC, then in a day that would be an unexciting $11.390625, but by the end of a week that would be worth $1,413,503,456,554. They don't need your mining fee, they are on a beach somewhere sipping top-shelf liquor. The economics don't make sense because it's a scam.

How long do they make you wait for payout? 

If you recall our bananas at the grocery store, the transaction is immediate, you pay and receive at the same time. Some sites put restrictions in place on when you can withdraw your cryptocurrency. While it's true that BTC transactions do incur a network fee, it is suspicious when sites require you to wait to withdraw until a minimum is met. This is common with cloud mining sites because many of them are scams. There isn't a technical reason you can't withdraw crypto the right after the transaction fee is met, so any minimum beyond that is not a good sign. It's likely they are just a Ponzi scheme with a fancy website. 

The Following Sites are Scams:

Please reach out to help me add to the list! 


Bonus Section!

Here is a couple of sites that can be helpful in checking site legitimacy: - this site is devoted to helping people make a few extra bucks, and so there is a lot of discussion about if various sites and processes are legitimate.

ScamVoid - not the only site, but a useful one to verify a site's legitimacy.

Photo by Michael Geiger on Unsplash

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Crypto appreciator, also crypto noob. You can follow my journey staking PRV w/Incognito and stablecoin with Nexo. Links are probably affiliated.

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