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what to look for – Irish Tech News

by Aziz Zainuddin, Master The Crypto

The technology behind cryptocurrencies can be extremely complex for many of them. The technical nature of cryptocurrencies and the use of complicated computer jargon could easily confuse anyone, even individuals who are inclined to technology. The absence up to now of any regulations and a general lack of understanding of cryptocurrencies further aggravates the problem, creating a favorable environment for bad actors to create coins and schemes that serve to exploit the bad guys.

With the huge number of cryptocurrencies and tokens to choose from, it is difficult to distinguish between good and doubtful ones. In an environment with few checks and balances, the encrypted world is a fertile breeding ground for scammers. The most important thing to consider before going into this potentially revolutionary yet childish industry is knowing what NOT to invest.

Unrealistic statements

It is quite common now to know about investment opportunities in the cryptic world that promises a daily or monthly rate of return. Offering fixed returns requires a steady revenue source and, unless they sell a product or service to fund their revenue, the only way to support high and guaranteed profit rates is through a Ponzi scheme.

There are generally three common fraudulent schemes in the cryptocurrency community that promote unrealistic claims, which include:

Cloud mining services
Fraudulent cloud mining sites offer anyone the opportunity to participate in a Bitcoin mining operation and earn mining profits simply by providing initial start-up capital without the need to purchase their own processing hardware. It's a Ponzi scheme that pays you as long as there's a continuous pool of new users, and if it dries out, it all collapses and you lose all your funds.

Bitcoin investment packages (BIP)
PIFs are high-yield investment programs that promise high returns with small payment structures. Begin by buying a subscription package that qualifies you to receive a constant payment every day or every week and is usually very profitable at the start. However, due to the Ponzi structure it uses, BIPs have a limited life cycle and close when there are few new users left. The BIPs will tend to use complex words of order to confuse those interested in knowing how they actually make profits, in order to seem credible.

Multilevel marketing schemes (MLM)
A common feature of MLM is the ambiguity of their actual offerings or services, which largely depend on reference frameworks. Some typical reference structures involve people who promote a certain investment scheme linked to cryptocurrency and the only way to participate is to click on their reference links. MLMs are extremely easy to identify because the main source of revenue generation is through affiliate marketing rather than dealing with current cryptocurrencies.

In summary, here are the common features to pay attention that could indicate a scam:
Guarantees of high profits / interest rates
Affiliate / affiliation schemes
Ambiguous details about how it really works
Minimum or no information on the team or founding company

No existence of the basic code

Since most Cryptocurrencies are open source, projects that are of close origin or those that do not disclose their code base may seem less credible. Although not all the coins that are closed-source are scams, all the coins that have been dubbed as scams do not seem to reveal their code base or simply do not seem to have one. A huge reason why these were closed source could also be due to the fact that there is no code base at all. You can check their codes on Github and, if the cryptocurrency does not provide links to the code, this could mean that the project is shaded.

An open source code makes it possible to make the basic code freely available to anyone and can be redistributed and modified. The nature of open source codes is that it allows anyone to watch and review the codes. Not only is this more transparent, the community can inspect the protocol and suggest improvements to the basic code. Leveraging the community could be very useful for the project, since "a thousand brains are better than one".

Absence of key information:

Without white paper
A white paper shows all the information you need to know about a particular coin or token, from its purpose to its mechanics to its coin dynamics. White books form the basis of every coin, and its absence can signal a huge red flag. Since most coins have no record of a functioning product, it is even more important to design a white paper to publish the information needed by investors.

Ghost team members
This refers to the absence of information about the founders and the development team. The credibility of any project can depend heavily on the experience, the stature and the competence of the founding developers. Coins and fraudulent schemes will not publicly disclose information about the founders and this can be a sign to keep an eye on.

After all
There are some unique features of a cryptocurrency that includes decentralization, full transparency through a public ledger and an open source code that anyone can see. Scams and ponzi schemes do not have these common characteristics and are generally centralized and opaque. The best way to avoid falling into these various scams and obscure patterns is to identify common features as listed above. More importantly, it is worth acquiring the knowledge and understanding of how cryptocurrencies work and the underlying technology that feeds them. It can also help you get independent financial advice before making any investments. Arming yourself with the right knowledge can help protect you from the risk of scams.

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