Preface:- Before we get into this article, it is important to note that cryptocurrency is an outstanding opportunity in terms of investment and technological progression. I aim to purely highlight current areas of concern, which in time will be addressed and improved, bringing added confidence to the market. The risks highlighted are similar to the risks of online banking or trading using any financial instrument. Blockchain technology itself cannot be held accountable in my view, rather it is the surrounding technologies and platforms that need to up their game.
Way back in 2008, a mysterious figure (akin to a superhero to some of us), created a white paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System. This lead to the creation of Bitcoin in 2009. His/her name was published as Satoshi Nakamoto, known to be an alias keeping their real identity a secret. Soon after Bitcoin’s creation, Nakamoto faded into obscurity sending their alias to an early ‘virtual’ grave.
To this day, Nakamoto’s true identity remains a secret and the name is now legendary in cryptocurrency folklore. It is widely believed that Nakamoto created Bitcoin out of frustration for the global financial state at the time. This theory is further backed up by the fact that embedded into the coinbase of the genesis block (first block created) was the following text:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
It would appear that Nakamoto envisaged that his revolutionary creation would give birth to a new form of transparency and trust in exchangeable currencies through the use of the open ledger at the core of Bitcoin and blockchain technology and at the same time offer an alternative to failing fiat currencies.
Journey forward a few years to current day and the cryptocurrency space is saturated with scams, fraud and other criminal activity. One can assume that the current state of affairs is in stark contrast to Nakamoto’s vision and he/she must be turning in their virtual grave.
Whilst the vast majority of those involved in cryptocurrencies have honest motives, believe in the technology, vision and value of the blockchain and decentralization; unfortunately the number of unsavory characters and activities has grown exponentially since Bitcoin was first introduced.
The promise of extraordinary financial gains in this volatile market seems to have brought in a criminal element which will stop at nothing to deceive, trick and threaten unsuspecting investors to part with their hard earned coins. I list a few of the biggest threats to unsuspecting crypto investors below.
ICOs:- In recent times we have witnessed multiple ICO (Initial Coin Offering) scams where a vision is presented and backed up by marketing and hype. The aim being to encourage investment which with the promise of success once the project goes live and meets its obligations. Bitconnect and Titanimum are recent examples of these. In both cases they allegedly defrauded extortionate amounts of investment from unsuspecting, hopeful investors before vanishing. The legal investigations and cases against these 2 examples are ongoing.
Kidnappings:- There is the case of Skycoin employees holding their CEO hostage. On June 13th, nine members of the Skycoin team broke into the CEO’s home and in an effort to seize his stake in Skycoin’s holdings, the group tied up and beat both him and his wife.
Telegram Scammers:- Telegram is a social media platform which is the ‘go to’ tool for avid cryptocurrency investors. Telegram has been criticized recently for it’s inability to counter identity theft. Almost all Telegram users have been approached at one stage or another by users purporting to be someone either well known (such as a YouTuber)or a trusted admin of a cryptocurrency group. Offering help and advice with issues and promising improved deals, their ultimate aim is to get you to part with your cryptocurrency and send it to them. It is rumored that many of the scammers form gangs who receive a percentage of their ill-gotten gains.
Other social media platforms such as Twitter and Facebook are also fraught with false identities aiming to defraud us.
Ransomware:- Ransomware is a major issue for end users and corporations. It is malicious software which encrypts data residing hard drives. Without the encryption keys, the recipient of ransomware is unable to decrypt their data. It is generally delivered by either email or malicious code in web sites. Once a user’s computer is encrypted, a message is displayed demanding that cryptocurrency (normally Bitcoin) is deposited to a wallet. It is usual practice to set a deadline for payment. If payment is not received by the required time, the ‘ransom’ increases. Almost all the criminals involved in delivering ransomware demand cryptocurrency.
In summary, whilst the cryptocurrency space has a large element of risk, it will improve as new technologies, processes and procedures come to fruition. Blockchain itself is not where the risk lies, it’s the accompanying applications and platforms. We must all remember we are at the early stages of adoption and given time, blockchain and decentralization has the ability to remedy all areas of concern that currently exist in the world of fiat. The aforementioned criminal activities are is not just apparent in crypto, these same practices and tactics are also used in banking and other areas of online trading. They are part of everyday life, crypto or not.
Given time, Bitcoin and cryptocurrency in general, will change our lives forever and for the better. Whilst Nakamoto may be turning in his/her virtual grave at the moment, the future is bright and Bitcoin will almost certainly realize the original vision of a fairer and more accountable financial environment where shady financial personnel and practices will be a thing of the past.
Keep the faith and stay safe….
Is Satoshi Nakamoto Turning in his Virtual Grave? was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.