Nothing captured the public’s attention in 2018 quite like Cryptocurrencies and Blockchain. It was discussed at conferences, braais, dinner parties, gym sessions and possibly during intimate moments between couples in bedrooms.
The main thing that was asked was: is it a scam or not? Let’s look at it in more detail courtesy of a few articles from The Next Web.
Living it up?
According to an article on The Next Web’s website, Dubai’s $323M Bitcoin luxury real estate development has reportedly hit a snag.
According to an article published on thetimes.co.uk, the world’s first luxury development to be sold using Bitcoin is on hold.
The Aston Plaza development in Dubai was promoted by Baroness Mone, a controversial lingerie mogul whose past business ventures have been called into question.
According to the article, Mone launched the $323 million (£250 million) project in September 2017 alongside her billionaire partner Doug Barrowman. At the time, marketing materials said the two residential towers would be finished by summer 2019.
The development, where a two-bedroom flat would set you back approximately $240 000 in Bitcoin, is described on its website as being 25% done.
But, according to government inspectors who visited the site in January last year, the venture is on hold, and construction has seemingly ceased.
Previous dabbling’s.
According to the article, Mone has been involved in the cryptocurrency industry for some time. She founded Equi Capital, which issued an Ethereum-based token to allegedly make investing more accessible. Apple co-founder Steve Wozniak was working directly with the project.
As previously reported by Hard Fork, Mone’s Equi project was originally set for launch as an initial coin offering (ICO) but failed after a short pre-sale.
The article added that it initially raised $7 million through private token sales, but by the time it was set to go public, interest lessened and targets were missed. The ICO was cancelled and refunds were issued to investors.
To make up for the missed fundraising opportunity, the company launched a marketing bounty program which would issue public tokens to advertise Equi. The marketing firm running the program cut all ties with Equi soon after launch. Participants in the bounty said they had missed out on lucrative rewards promised by Equi Capital.
Red flag.
One of the biggest concerns regarding cryptocurrency is its potential to encourage fraud.
According to the article, Australian fraudsters earned $4.3 million (AU$6.1 million) with cryptocurrency scams last year—a revenue increase of 190 percent when compared to 2017.
The Australian Competition and Consumer Commission (ACCC)’s new report details the extent of the nation’s problem with cryptocurrency fraud.
In total, it fielded 674 reports of scams that requested cryptocurrency for payments in 2018.
The article added that almost half of all losses were reported by men aged 25 to 34, and over 80 percent were contacted via the internet (social media, forums, or email).
Great success.
The article pointed out that the most successful cryptocurrency scam category was investment fraud, with $1.8 million in reported losses.
“To avoid the fraud and scam detection systems employed by banks, scammers are now increasingly asking for payment via unusual payment methods such as gift cards and cryptocurrencies,” wrote the ACCC.
Some victims reported being tricked into buying cryptocurrency through the scammer‘s own software, but when they tried to cash out, they were either unable to make contact or were given excuses.
The article added that other scams requested payment in cryptocurrency for forex and commodities trading, and other investment ‘opportunities.’
“Scamwatch has also received reports from victims of various types of scams being directed by a scammer to the nearest Bitcoin automatic teller machine to convert money to Bitcoin and then transfer it to the scammer,” said the ACCC.
On the rise.
The article pointed out that, overall, incidents of the scammers impersonating the Australian Tax Office rose an eye-watering 900% by late 2018, with tens of thousands of reports surfacing of an automated ‘robo-calls.’
The ACCC received 177 516 scam reports last year, worth a combined $75 million. So, while revenue generated by cryptocurrency scammers increased, it still represents a small fraction of Australia’s fraud.
The article added that Apple iTunes cards remained the most requested form of payment, with demands for other gift cards (as well as Google Play) increasing rapidly.
The report warned the international nature of fraud today can make bringing scammers to justice incredibly difficult. This renders education and public awareness the primary defence.
The ACCC maintains a “Little Black Book of Scams” featuring many examples and case studies, which you can find here.
The article pointed out that the most successful cryptocurrency scam category was investment fraud, with $1.8 million (AU$2.6 million) in reported losses.
“To avoid the fraud and scam detection systems employed by banks, scammers are now increasingly asking for payment via unusual payment methods such as gift cards and cryptocurrencies,” wrote the ACCC.
Some victims reported being tricked into buying cryptocurrency through the scammer‘s own software, but when they tried to cash out, they were either unable to make contact or were given excuses.
The article added that other scams requested payment in cryptocurrency for forex and commodities trading, and other investment ‘opportunities.’
“Scamwatch has also received reports from victims of various types of scams being directed by a scammer to the nearest Bitcoin automatic teller machine to convert money to Bitcoin and then transfer it to the scammer,” said the ACCC.
Korean ninjas.
An article from coindesk.com pointed out that Korean Crypto Scam Fleeced Investors for Over $18.5 Million.
The article pointed out that Individuals behind a cryptocurrency scam in South Korea have cheated around 56,000 investors out of $18.5 million, police say.
According to a report from Korea JoongAng Daily on Monday, the Seoul Special Judicial Police Bureau for Public Safety has arrested the CEOs of an online shopping website and a bitcoin firm, identified by their surnames Lee and Bae, as well 10 other people said to be involved with the Ponzi scheme.
The article added that the police bureau said that the CEOs formed a “members-only” shopping website and a cryptocurrency exchange in the Gangnam district of South Korean capital Seoul last year. From May to October 2018, the accused reportedly recruited members for an annual membership fee of 330,000 won ($288) or a “premium” membership fee of 990,000 won ($864), also offering 10-year membership that included discounts on items.
Notably, the police bureau used artificial intelligence (AI) “investigator” to track down the Ponzi scheme.
“Through keywords such as Ponzi, loan and recruiting members, we were able to teach the AI patterns of Ponzi schemes,” a member of the bureau’s investigation team told the news source.
Typical methods.
The article pointed out that, as is typical of Ponzi schemes, the shopping website provided rewards to members for recruitment of new victims: 60,000 won ($52) in cash for each new member and 120,000 won ($104) to the initial recruiter if a new member persuaded another person to join.
Members were also rewarded in a cryptocurrency called M-coin issued by the associated cryptocurrency exchange. Lee and Bae allegedly targeted investors with the token too, telling them that its price would rise from 200 won ($0.17) to 600 won ($0.52) and that they would profit “immediately” if they invested.
The article added that the exchange reportedly had about 200 offices, with the managers of each being given cash rewards for each additional member recruited above 20 members, according to the report. The scam allegedly targeted investors with little knowledge of cryptocurrencies, especially older people, to invest in the illegal scheme.
The CEOs – who made about 21.2 billion ($18.5 million) won from membership fees and token sales – further hid their firm’s accounting information on a corporate server in Japan. When the investigation began, they apparently moved their accounting office to a private premises and concealed a computer in an employee’s car for use when needed.
Crypto philanthropy.
Despite the ever-present fears about crypto currency, eToro is giving away $1,650,000 worth of Ethereum for free.
The article pointed out that the social trading platform is giving away free Ethereum to anyone who opens an account in its standalone wallet app.
Once you’ve signed up for the wallet app, your account will be automatically credited with 0.1 Ethereum.
The article added that the eToro wallet is available for both Android and iOS, so you’ve got no excuse not to take advantage of this offer.
eToro first rolled out its wallet last November. A couple of months later, it released an update that made it possible to buy cryptocurrencies directly from the wallet app – without any need to go its flagship trading platform (it’s worth noting you will still need to be a fully verified eToro user to use its standalone wallet app).
The article pointed out that in addition to Ethereum (ETH), the wallet supports Bitcoin (BTC), Bitcoin Cash (BCH), Litecoin (LTC), Ripple (XRP), and Stellar Lumens (XLM).
Significant benefits.
The article points out that as cryptocurrencies such as bitcoin are used more and more in day-to-day business transactions, we look at some of the distinct advantages they can offer over more traditional forms of payment.
When cryptocurrency was first introduced, there were a number of early adopters from within the dark web. As a result, many businesses may view platforms such as bitcoin as slightly unethical and have reservations about using any cryptocurrency.
Benefits of note.
The article adds that, like all cryptocurrencies, bitcoin is currently unregulated. However, it is a secure payment method, and has some distinct advantages over more traditional forms of payment:
- Lower fees. Transaction fees are lower with bitcoin than with credit cards, and when cryptocurrency is not exchanged, it also eliminates the need for bank charges;
- Fraud reduction. A payment made with bitcoin cannot be reversed after the fact. This is different from credit card payments, which can be reversed using chargebacks, a feature often exploited by fraudsters;
- Instant payments. Credit card payments can take days or even weeks to come through. Meanwhile, cryptocurrency offers instant transfers;
- No barriers. Cryptocurrency makes international trade more accessible by removing barriers and restrictions to trade, ultimately making it easier to accept payments in different currencies;
- Attract new customers. As bitcoin is still a fairly new method of payment, offering it as an option for your customers could help you bring in new business; and
- Get ahead of your competition. By being an early adopter of cryptocurrency, you can gain a competitive advantage over your competition.
The article adds that, as cryptocurrency becomes more widely embraced, businesses should be keeping a close eye on how this technology develops and consider how it could be used to their advantage. If you’re new to blockchain, cryptocurrency and bitcoin, take a look at the guide from Sage below on how bitcoin works.
Additional benefits.
There are other additional benefits that can be seen when adopting a positive approach to cryptocurrency.
- Cryptocurerncies are digital and cannot be counterfeited or reversed arbitrarily by the sender, as with credit card charge-backs;
- Identity Theft. When you give your credit card to a merchant, you give him or her access to your full credit line, even if the transaction is for a small amount. Credit cards operate on a “pull” basis, where the store initiates the payment and pulls the designated amount from your account. Cryptocurrency use a “push” mechanism that allows the cryptocurrency holder to send exactly what he or she wants to the merchant or recipient with no further information;
- Immediate Settlement. Purchasing real property typically involves a number of third parties (Lawyers, Notary), delays, and payment of fees. In many ways, the bitcoin/cryptocurency blockchain is like a “large property rights database,” says Gallippi. Bitcoin contracts can be designed and enforced to eliminate or add third party approvals, reference external facts, or be completed at a future date or time for a fraction of the expense and time required to complete traditional asset transfers;
- Access to Everyone: There are approximately 2.2 billion individuals with access to the Internet or mobile phones who don’t currently have access to traditional exchange systems. These individuals are primed for the Crytocurrency market. Kenya’s M-PESA system, a mobile phone-based money transfer and micros financing service recently announced a bitcoin device, with one in three Kenyans now owning a bitcoin wallet. (Let me repeat that again. 1/3); and
- Lower Fees. There aren’t usually transaction fees for cryptocurrency exchanges because the miners are compensated by the network (Side note: This is the case for now). Even though there’s no bitcoin/cryptocurrency transaction fee, many expect that most users will engage a third-party service, such as Coinbase, creating and maintaining their own bitcoin wallets. These services act like Paypal does for cash or credit card users, providing the online exchange system for bitcoin, and as such, they’re likely to charge fees. It’s interesting to note that Paypal does not accept or transfer bitcoins.
The debate between the advantages and disadvantages of cryptocurrencies is as much down to personal taste than anything else. It is up to you to decide when it comes to value.