This year we saw the Summer of Scams in Altcoin City.
New coins were launching at an alarming rate, and many of them were created by serial scammers who lived to feast on the innocent.
Ghostcoin Releases Too Many Coins
There was almost a sense of helplessness when it came to dealing with scammers. After all, since cryptocurrency is peer to peer and decentralized, who gets to decide if something’s a scam or not?
In the last few month’s there’s been a hardening on that stance. Investors have been demanding a lot more proof from coin Devs and the number of launches and scams slowed down to a trickle compared to the tsunami in June and July.
Yesterday, Ghostcoin was automatically flagged by Bittrex for having too many coins in the wallet. This simple check is very helpful because it can stop the fraud before it becomes too large. This is important because stopping the crook from getting away with the ill-gotten funds is a dis-incentive for them to continue scamming.
Bittrex discovered a massive influx of coins into the wallet to the point where the total on the exchange exceeded the total coin supply. Once they did, they shut down the markets. At that point, people who have invested in the coin faced a total loss. However, the amount of the loss could have been greater if they had let the influx of coins continue. More and more participants would have rushed into the market, buying the bogus coins and giving their hard-earned BTC to the scammer.
Shutting down a market like this is not a perfect solution, but it definitely helps to minimize losses. The only safeguard against being scammed in the altcoin market is total abstinence.
Investing in or mining new altcoins is risky. Even with safeguards like the so-called ‘Proof of Dev‘ concept, there’s nothing that guarantees a coin will rise in value. The whole system of earning profits trading altcoins is predicated on a flux of volume pushing the price up on a small total coin supply. In January, it was common to see coin counts in the billions. Now many coins release with total coin counts in the millions. This means it only takes a few hundred BTC in order to sop up the supply. With shortened PoW periods, new altcoins are literally built specifically for the pump and dump market.
Leave No Trace
At that point, trading is merely a game of musical chairs. If the music stops, and you’re left holding, you get the bag.
The biggest danger is that something like what happened with Ghostcoin happens. The music stops and there’s no way to recover so your bag becomes virtually worthless.
That’s why people need to risk only funds that they can willingly afford to lose. It’s inevitable that anyone who plays the new coin launches will eventually run into a Ghostcoin now and again.
Interestingly enough, the Ghostcoin Dev has re-appeared and claimed that this disaster was not his fault. Ironically, his custom title at Bitcointalk is ‘leave no trace.’
In any event, the Ghost Protocol has been initiated with trader’s money. Be careful out there and keep your wits about you.
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