- 1 No matter how hard blockchain companies try to justify themselves, they’re often still seen as fly-by-night Ponzi schemes or vehicles for laundering money. As a result of this, it can be extremely frustrating for legitimate startups to get genuinely world-changing ideas off the ground.
- 2 5. Anonymity
- 3 4. The Silk Road
- 4 3. ICO Scams
- 5 4. Hacking, Phishing, Malware–Oh My!
- 6 5. Social Media Scammers
- 7 Final Thoughts
No matter how hard blockchain companies try to justify themselves, they’re often still seen as fly-by-night Ponzi schemes or vehicles for laundering money. As a result of this, it can be extremely frustrating for legitimate startups to get genuinely world-changing ideas off the ground.
But the problem is, there’s a lot of truth in a lot of the accusations. A few bad apples rotting the barrel, so to speak. That’s what scammers, gangsters, and hackers have done to cryptocurrency, turning it into a magnet for nefarious deeds.
Here are the top five reasons why it makes for such an excellent partner in crime:
The most obvious trait about cryptocurrency that attracts criminal agents to it is its anonymity aspect. Transferring unlimited funds around the world without creating an account is pretty attractive for money launderers and with cryptocurrencies like Monero, Dash, and ZCash making anonymity a priority, you have to admit, it looks kind of suspicious.
With that being said, many a criminal has tripped up by falling into the trap of assuming Bitcoin or Ether were anonymous, then being caught through their addresses. Moreover, many people argue that laundering physical money is actually much easier. The criminal’s money laundering bill of choice is the US dollar.
It’s far harder to detect a bag stuffed with cash than a transaction online leaving some kind of digital footprint.
4. The Silk Road
Ah, The Silk Road. Kind of romantic in a horrifying sort of way. Where criminals got together in an online marketplace to buy and sell illegal goods (including people) and paying for them with Bitcoin. The Silk Road reached its hay day around 2011 when Bitcoin was worth one dollar and things were easier to buy.
And just as The Silk Road rose to fame, so did the notoriety of Bitcoin–and the stain on its reputation that would live on long after The Silk Road was shut down. Weapons, drugs, counterfeit goods, hitmen–why would anyone think Bitcoin was for criminals?
3. ICO Scams
Even if Bitcoin managed to shake off its association with The Silk Road that was closed in 2013, the next big blow for cryptocurrency would soon follow. A whole new world of ICO scams duping investors out of their Ether.
From infamous Ponzi schemes like OneCoin and Bitconnect to fully blown exit scams like Pincoin, plenty of companies have sold promises they can’t keep. The general public has heard about Bitcoin millionaires, but they’ve also heard about the Bitcoin losers. Innocent investors falling victim to clever marketing and unscrupulous villains.
While regulation seems to be clamping down on unwarranted activities this year, whether it will be enough to eliminate scammers completely remains to be seen. After all, which criminal wouldn’t want to raise millions of dollars just from designing a nice website and PDF?
4. Hacking, Phishing, Malware–Oh My!
Cryptocurrency isn’t just a magnet for drug barons and sex traffickers, oh no. It’s the perfect vehicle for cybercriminals as well. In fact, cryptocurrencies like Bitcoin were the payment method of choice for many criminals last year for Ransomware attacks.
Then you have the cybercriminals using phishing techniques to trick users into entering a parallel site and stealing all their funds. If that wasn’t enough, there’s cryptojacking, as well. These are the “good” criminals, though. They don’t take everything you have–just a bunch of processing power that drains your device like a parasite.
5. Social Media Scammers
For those who survived all the ICO scams, they may have slipped up on Twitter instead. Imposters created (and still do) fake accounts of some of the top crypto personalities and asked investors to send Ether, promising to send Ether back–with amazing returns. Right.
Ever seen Vitalik’s Twitter profile and wondered why it says “not giving away ETH” after his name? Too many people have fallen victim to these type of opportunistic con artists.
There are clearly plenty of characteristics of cryptocurrency that make it particularly appealing to criminals. Anonymity, limitless funds, cybercrime, scams… As long as there are criminals in the world, they will use cryptocurrency. But they’ll also use regular banks, offshore accounts, and stay in luxury hotels.
Cryptocurrency may be a magnet for criminals, but it’s also a tremendous force to do good in the world. Hopefully, that will serve to rid Bitcoin of its tumultuous past.