Scams and Crypto Currencies

One of the scariest things about dealing with people online is that you might get scammed. It does not even matter if you are sending the item or the cash; you are always at risk. When we bring crypto currencies in to the mix, things get even more scary. My goal with this article is to help better understand the concerns you should have when dealing with people online. I am not trying to push people away from cryptos, but rather educate on how to properly evaluate situations and to fully understand what is going on before getting involved. This will save a lot of headache and will be much better in the long run, potentially saving you money in the process!

Cryptos Are Not Reversible

Read the heading one more time. They are not reversible (at least as of right now, although some people have proposed some new coins that may be able to address this in some way). In other words, once you have sent the funds, there is nobody that can make the person give them back. It does not mean that they will not send them back to you if something happens, but there is no guarantee here.

The best way to relate this is to think of it as being like cash. Once you have handed someone cash, what happens if you do not get your goods? You have to take them to court and deal with that before you can get the court to order anything. And even then, collecting the money becomes a bit of a chore. Cryptos are just the same way; you can get someone ordered to return the funds, but at the end of the day they still have to do it on their own. There is no automated system to handle it.

The opposite of this would be credit cards. Here, when there is a dispute you get a third party to review all of the details of the transaction. That party will then determine who was right and who was wrong, and will either allow the seller to keep the funds or will return them to the buyer (and revoke them through the seller). In this case, that third party does have the ability to take the money back and force the reversal; no courts are needed here.

It is important to make these distinctions because credit cards are what we often rely on in the world. This gives us the consumer protection when dealing with people, since we know that if they knowingly try to steal our money, we can just file a dispute and ensure that it is returned to us. We have gotten so reliant upon this, that some people will even go in to situations without doing any research, just because they have no fear that either the situation will go as it should or that they will have their money returned. Changing from this mind set to one based on cryptos takes a lot of work, because they are so vastly different in how they operate and what it means to consumers.

Cryptos Can Be Anonymous

When dealing with cryptos, you do not always know who you are dealing with. This is really different than cash or any other payment method: with all of those you have some sort of identifiable information of the other party. With cryptos, you have nothing but a generated address that could have been created anywhere. Let us take a look at why this is so much different from the other payment methods.

Cash. When you deal with cash, you have two methods: in person or have it mailed. If it is mailed, it can be traced back. If it is in person, you know what the other person looks like and they are (likely) going to be on some cameras as well. This is especially true if you only deal with people in public places, which is highly recommended for safety reasons anyways. While the cash itself is not being traced at that point, you do have information on who the other party is in case you have to deal with the situation through the legal system.

Credit cards. Credit cards all have to go through a processor. This means that the other party's information is in someone's system, as they have to have accounts set up in order to accept the payments. If you send a credit card payment and someone does not follow through on their end of the deal, there is now a trail that goes back to them. This can be followed in the case of needing to go through the legal system.

Checks, wiring, EFTs. All of these go through bank accounts. In order to set up a bank account, someone has to give their information to the bank. This one is even more reliable as a source of information than the other two are, because banks require proof of identity to make deposits and withdrawals. As such, the person who you are sending the funds to has to have proof of who they are, which you can then use if you need to take the situation to court. Furthermore, this one is great because if you win a court case judgment, you can actually have the bank lock down the account of the person and garnish payments from it.

Now back on to crypto currencies. These are problematic because absolutely anyone can generate their own address, and anyone can create as many addresses as they want. While they still have to “identify” themselves to make withdrawals (by knowing the proper private key, password for the wallet, etc.) there is nothing that really links a real world identity unless they created their own tracks. For all intents and purposes, someone can send and receive payments through the crypto world without ever having anything linking their real world identity to their wallet addresses.

A Scammer's Paradise

As we looked at, there are two pretty big parts about cryptos that can make them scary: they are not reversible and anyone can send and receive them anonymously. This creates a scammer's paradise, being that in a lot of cases there are no fears on the receiving end as long as someone has covered their tracks well enough. Of course, we have also seen some pretty high profile cases where people thought they were anonymous but were not, but this is really going to be hit and miss. Of course, the alternative to all of this would be to get rid of anonymity altogether and allow people to dispute their transactions, but that goes against most of what Bitcoin (and the various alternate currencies) represents and what it is trying to do. Instead, we have to practice using due diligence instead of continue throwing money to people in the hopes that they are legitimate, with no real reason to trust them other than our hope. While this may seem like a pretty bad thing to say, it is true; sadly, in the crypto world we can not automatically give people some trust. Instead, they have to earn it.

Practicing Due Diligence

In order to help protect you and your money, practicing due diligence is important. This means researching the opportunities that arise, before you even think about sending over any payments. This means researching the companies you are dealing with and the people behind them. It means evaluating the opinions and experiences others have had with those companies. It means following the age old saying that “if it seems too good to be true, it probably is.”

All of these things tie together to help ensure that you protect yourself. The more time you spend trying to evaluate who you are sending your money to before you do it, the better the chances are that everything will come out okay and you will end up without losing all of your funds. At the same time, if you rush through it to get a deal done fast, especially when you are trying to rush ahead of others to snag a “great deal” before anyone else does, you are opening up the doors to disaster. While everything could come out and be okay, the chances are greatly diminished in these situations. In a sense, what you end up doing is taking a gamble, where you can win or lose depending on what happens.

Will the Situation Change?

This is a very tough thing to answer. While I do believe that we are moving to a more positive crypto world and that the currencies in their current state are very new, I think that how things work right now is likely going to be what we have to get used to. While the coins are not created to avoid things like taxes or necessarily allow people to commit crimes (such as buying illegal narcotics), they still have their uses as a peer to peer medium of exchange and anonymous transfer platform. They allow people to easily give someone else money without being tracked all the time, regardless of the reason. And this is something that I think is what makes them so awesome. I, for example, never use my money for any wrong purposes. At the same time, though, I do not believe that what type of phone I just bought or latest CD I bought is anyone's business other than my own. So for me, keeping these coins in their current state would be great. For others, there are different selling points to the idea of crypto currencies. We are all unique and we all have different things we like and look for. I do believe that this stuff will end up making its way in to cryptos and will help shape their future, but at this point it is pretty hard to determine exactly where that will take us and what it will mean in terms of the big picture. For that, we will just have to wait it out and follow for the ride!


When it comes to purchasing things from people, and especially when it deals with crypto currencies in their current form, you have to be careful. Automatically giving everyone the benefit of the doubt is a sure fire way to get yourself caught up in some bad situations, and in most cases they are just not worth the risk. Learning how to practice due diligence and research who you are dealing with before you do it will help you make much more efficient decisions when it comes to sending your money out.

It is also important to realize that we are not only dealing with people you send money to here, either. This same principle goes to when you are sending out items first in a sale as well. While you are not necessarily risking the cash itself, in all actuality it is still the equivalent (being that you could just as easily deal with a more reputable person and ensure that your transaction goes through smoothly).

I also want to stress that not all situations will lead to scams. I have taken chances with people myself, and some have gone great and some have not. What I do, though, is I evaluate what risk I am taking and I never make an assumption that everything will be fine (at least with cryptos). After all, there is nothing ensuring that it will. While I do believe that reputation means a lot to most people, there are some that hit a point where they just do not even care any more. When it comes to these situations, you are bound to lose more than you win. But at the end of the day, you just have to realize that it is almost like going to the casino. You are putting money in to something in the hopes you will get something in return. Never risk more than you can afford to lose!


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