Eight Common Bitcoin Scams
Bitcoin is a type of cryptocurrency or digital currency in which units are generated via encryption techniques. It’s a type of peer-to-peer transfer called mining. It’s not backed by the government or any regulatory body.
It’s ripe for scams since there is no real regulation on it, and in some people’s mind bitcoin is a huge scam in and of itself. But, if you want to get involved with the cryptocurrency trend, be aware of these common bitcoin scams.
1. Fake Bitcoin – The way this scam works is that someone offers to pay you for something with bitcoins, but you don’t know how to use bitcoin and they know it. They attempt to teach you how it works, assuring you that it’s legitimate. But in the end, they get your merchandise and you end up with fake bitcoins that are worthless.
2. Ponzi Schemes – In this scam, someone offers you an investment deal. You will give them money or bitcoins in exchange for getting a big return on investment. Sometimes these scams are very elaborate, and you’ll even be able to see your account grow until you try to cash out. Only then will you know it’s a scam because you won’t get the money.
3. IRS Scam – This scam works the same as most IRS scams. A convincing person claiming to work with the IRS calls you and says you owe a lot of money. They tell you to go to a certain website to purchase bitcoins and to pay them with the bitcoins. The truth is, you’re not really buying bitcoins and they’re not really letting you pay your IRS bill with bitcoins. Instead, they’re taking your money.
4. Switch Scam – In this scam, they want you to buy their new cryptocurrency with your bitcoins, but their currency doesn’t even exist. They claim it’s the next best thing and that it’ll out-earn bitcoin overnight. They may even have records that look like proof but it’s all fabricated.
5. Malware – You stumble on a fake site where you think you’re buying bitcoins when you’re not. You’re just infecting your computer with malware that will "mine" your computer for bitcoin units and your computer will be messed up. Plus, you’ll give them actual money.
6. The Celebrity Scam – If you’re online and see any celebrity offering "free bitcoins" or a good deal on bitcoins, it’s a scam. No one is going to give away extra bitcoins; it doesn’t make sense. If Tom Cruise says they want to give you bitcoins for a low price, you know it’s not true. Why would they do that?
7. Ransomware Attacks – If your computer gets hijacked with a threat to pay them in bitcoins to release your computer, this is a common way to get money. Obviously, it’s a scam but it’s a very easy scam to fall into. If your computer is locked up, you will be tempted to buy your way out. Don’t do it.
8. Fake Wallets – To spot a fake wallet, it’s important to ask around on social media to ensure that the wallet is real. Install the right anti-virus software on your computer to avoid any malware. Use a good wallet application yourself so that you can have multiple wallets, thereby avoiding having problems if one is compromised.
To avoid scams, it’s best to find someone you really trust who already understands bitcoin fully. They can be your mentor or guide to help you avoid a problem. Because if a mistake is made, there is no one who can help you out or give you a refund. You’re just out of the money.
Eight Facts about Bitcoins
Let’s talk a bit about bitcoins so that you can ensure that you know what you’re getting into before you start trying to use or buy bitcoins for your transactions. Bitcoins can be quite confusing, so ensure that you truly understand everything before you move forward. Here are eight facts to consider.
1. Bitcoin Is Programmable Money – To have programmable money, you need to have normal money. Normal money today is not backed by anything at all other than someone said it’s worth what it is. For example, a $100 US dollar bill is only worth that amount because someone assigned that amount to that paper. With bitcoin, the value is determined by the buyer and the payer, and the bitcoin is created when both agree terms have been met and the so-called miner verifies the transaction.
2. Bitcoin Is Created Via Mining – Miners use software that finds keys that open wallets or padlocks. Basically, they are transactions that are happening between people, and the miner certifies the transaction.
3. Bitcoin Has Real Value – Bitcoin isn’t fake money. It has real value. The value is determined by the users, both buyers and payers, not an outside entity. There is a protocol that has to be followed and is impossible to change.
4. Bitcoin Lets You Pay Locally and Globally – You can pay in more places than you may think with bitcoin. You can even use bitcoin online at sites like Overstock.com. You may be surprised that some of your local stores are taking bitcoin. You only need to ask.
5. No One Has Control Over Bitcoin – Bitcoin isn’t run by any person or government entity. There are rules, but the users are the only ones to enforce them. As of now, there are over 16 million bitcoins in circulation.
6. Bitcoin, Unlike the Dollar, Is Limited – There are only 21 million bitcoins and no more will ever be created. The value can go up or down, but there will never be more. This is unlike the American dollar, which the government can choose to print more at any time.
7. You Must File Taxes on Bitcoin – Technically since bitcoin has value, you must claim the dollar value on your taxes in the USA. Nearly 1000 people have done so as of 2017 taxes.
8. Don’t Lose Your Wallet – If you aren’t careful, you can lose all your bitcoins by not saving your hard drive. You’re the only one with proof of your transactions, so you must guard it carefully or you can lose it all.
Using bitcoins without losing your money can be a great way to invest and earn more money. But, before you get started it’s imperative that you learn everything you can. You can learn a lot by going to the Bitcoin.org website and reading everything you can about it. Also, find a mentor to help you navigate the new terms and money system.
FAQs about Bitcoins and Where to Find Out More
Learning all you can about bitcoin is an important endeavor before you get started mining for it, using it, or buying it. Without knowledge, you’ll be more likely to fall for a scam or make mistakes due to misunderstanding. Keep learning about this important programmable currency so that you can succeed.
Are Bitcoins Legal?
Because bitcoin has never been made illegal, and more and more businesses are taking bitcoin, it's considered a legal currency. Because of that, you should be careful not to use it for illegal activities that may end up causing regulation.
What Happens If You Lose Your Wallet?
Losing your wallet means you’ve lost your bitcoins forever. You could lose a lot of money if you do this. There is no recovery and no entity to help you if this happens. Guard your bitcoins carefully.
Do New Bitcoins Get Created?
Every 10 minutes, a new block of coins is solved. At that time a block reward is determined that states the worth of the block. This is the only way that new bitcoins are created. This takes a lot of electricity which is a factor in the value of the bitcoins.
Are Bitcoins Secure?
Some people worry about the security of bitcoin, but the truth is it’s very secure. The important part is to use trusted software, only work with people you trust, and not trust just anyone on the net. That’s why there is a system in place to prove the work.
Is Bitcoin Data Traceable?
The block chain technology is transparent and makes bitcoins very traceable. Block chain acts as a public ledger for every single financial traction on the bitcoin network. However, everyone uses a pseudonym during transactions, and your wallet key is secret and should be known only to you.
Can You Get a Refund from a Bitcoin Transaction?
There is no refund system. Therefore, you can’t get a refund if you accidentally send the wrong amount of money in a bitcoin transaction. Check your math and check your numbers before you complete any transaction.
Who Can You Pay with Bitcoins?
Some schools around the world are taking bitcoin for tuition payments. Schools like Simon Fraser University in Vancouver, Canada, and Mexico’s Universidad de las Americas Puebla and others are taking bitcoin.
Even companies like Dell are taking bitcoin. You can actually pay in bitcoin to over 300K stores and companies around the world.
Do Bitcoins Use Energy?
Using bitcoin takes more energy than a credit card by almost 400 times. That’s a lot of energy and factors into the worth of the bitcoins.
An interesting fact about bitcoin is that Finland exempts bitcoin from value added tax (CAT). This is a tax that is added to goods and services automatically in some countries. Finland has exempted bitcoin from VAT because it is considered a commodity.
Bitcoin is complicated, to say the least. Hopefully, these facts help you think about bitcoin in a new way. The more you learn about bitcoin, the less likely you are to fall prey to a scam and the more likely you are to use it wisely. You can find out a lot about bitcoin from various websites. Try Bitcoin.org, bitcoinmining.com, and Blockgeeks.com.
Making Money with Bitcoins
Believe it or not, you can make money with bitcoins - and in more than one way. Even though there are only a total of 21 million bitcoins, the value of each coin goes up over time (and down sometimes) depending on the market. You can make money by mining for bitcoins, buying and selling, or getting paid in bitcoins. Let’s look at some options for making money with bitcoins.
* Micro Earning Sites – These are websites that pay you in bitcoin for doing tasks. They will pay you to do small tasks, but you will be paid very low amounts. The idea is that the bitcoins will increase in value. It’s the easiest but most time-consuming way to earn bitcoins.
* Bitcoin Faucets – These websites give away small amounts of bitcoin to users when the user views an advertisement or completes a survey. You won’t make a lot of money doing this, but again the idea is that the value of the bitcoin should increase over time. If you’re not doing anything else, it’s an option.
* Micro Jobs – You can use websites like CoinWorker.com to complete tasks such as testing a plugin, retweeting someone’s post and other acts to gain bitcoins. Your pay will be a lot lower than you could make in dollars, but the potential is there to earn more.
* Earn Bitcoins by Writing – You can get paid in bitcoin by writing about bitcoins. There is a need for more education. You can choose to accept bitcoin on your own site or you can join a freelance site that pays in bitcoin such as WorkingForBitcoins.com.
* Buy and Sell Bitcoin - Like any other type of currency, you can buy and sell it. The trick is to buy low and sell high. This can be tricky but it’s totally possible to make money with bitcoins in this manner if you know how to follow the market.
* Build and Manage a Bitcoin Faucet – Some people earn up to $800 a month with their own bitcoin faucet. It’s complicated but you can find a guide online that teaches you how to do it effectively. There is even a bitcoin faucet plugin for WordPress.
Links:
Guide - https://99bitcoins.com/complete-beginners-guide-make-money-bitcoin-faucet/
Plugin - https://99bitcoins.com/bitcoin-faucet-wordpress-plugin/
* Create a Bitcoin Information Site – Put information about bitcoin on a webpage and then put advertisements on the page. You’ll earn money via the ads on the site because people are desperate for information about bitcoin. And the site will get a lot of traffic if you do it right.
* Selling Your Own Products or Services – Naturally, you can set up your business to accept bitcoin. By doing that, you’ll earn more bitcoins and hopefully be able to trade them for cash as the price of bitcoin gets more expensive over time.
* Bitcoin Mining – Miners are the ones who are building the public ledger. They create new blocks and when they do so they’re rewarded with new bitcoins. This can be an expensive way to earn bitcoins because you have to buy a mining rig or join a mining pool, but it’s a good way to do it - as well as the oldest way.
As you can see, there is money to be made with bitcoins. You just have to jump in after you learn all that you can about bitcoin, its uses, and the system. It can be confusing at first because it all seems theoretical, but it’s very real. And once you get going, you’ll understand it and be able to earn more money than you may have thought.
Other Digital Currencies
Bitcoin is the main digital currency that everyone is talking about right now. But, as investors close in on the 21 million coins that exist, other currencies are gaining in popularity. Whether this is a good thing or a bad thing is still unknown. But, when you think about it, any type of money is risky - not just digital currency.
If you want to invest in digital currency, you should learn about the many others that exist. Follow what’s happening, pay attention to the news and what financial investors are saying, and you can be very successful with this type of investing.
1. Litecoin (LTC) – You can learn about Litecoin at Litecoinpool.org. This cryptocurrency is a peer-to-peer online currency that enables almost zero-cost payments around the world for goods and services. It’s becoming quite popular due to the high cost of transactions with other types of cryptocurrencies. Miners get 25 new litecoins per block, which is halved about every four years.
2. Ethereum (ETH) – In order to get more ETH miners, you can work to earn it, or buy it with fiat currency. First, you have to buy a mining contract, which means you agree to give part of your earnings to the mining company.
3. Zcash (ZEC) – This open, permission-free cryptocurrency lets you keep your transaction more private. It shields the sender and recipient as well as the value of the block chain. Yet, the transactions are still safe and fully encrypted. They’re very new, so watch them before you participate.
4. Dash – This digital currency allows you to have digital cash that you can use anywhere so that you can make instant payments privately online or in a store using an open-source platform. You make purchases from your Dash Wallet. Go to Dash.org to find out more, sign up to be a merchant, or to find merchants.
5. Ripple (XRP) – You can use Ripple to make fast payments all over the world online (and offline in some cases) and at a lower cost than bitcoin. The block chain technology that is used is much more scalable and secure than some other types of cryptocurrency.
6. Monero (XMR) – This secure, private, and untraceable cryptocurrency is used all over the world. You act as your very own bank, and no one can see how much you have. You cannot be blacklisted by vendors. It works sort of like the old gold standard that fiat money used to use.
Even though there are other digital currencies, remember that right now bitcoin is the leader. Having said that, it doesn’t mean the others won’t catch up. Many others are becoming popular as people try to think of new ways to pay for what they want.
The Pros and Cons of Using Bitcoins
Whether you call it cryptocurrency, virtual currency, or digital currency, bitcoin is a type of new currency that you should learn all you can about before you buy it, mine it, or use it to pay for products and services. There are pros and cons of using bitcoins that all users should be made aware as they move forward. Let’s look at the main ones here.
Con
* Security Issues – There are some issues with hacking where people have lost their bitcoins. Additionally, there have been issues of fraud where someone misrepresented themselves and were really sending you to a fraudulent website to pay money for non-existent bitcoins.
Pro
* Anonymity Protections – You can buy using your private key, which is essentially a password, up to 78 digits long (and you can have more than one). This is how you make a bitcoin transaction, and you cannot make one without your key.
Con
* Private Keys – This was just a positive and now it’s a con. The reason is that you cannot recover your private key. If you lose it and can’t remember it, you’re out of luck because they are unrecoverable. The best place to store your key is by printing it out on paper and keeping it locked up in a file cabinet or even a safety deposit box.
Pro
* Wallets – Your bitcoins are stored in a wallet that is accessible via the cloud, an internal hard drive, or even an external storage device. You cannot save your wallet on paper, only electronically.
Con
* Hacking – Wallets are great but if you don’t sign in often and you don’t watch your accounts, you’re making yourself vulnerable to hacking. Anytime you store anything on a computer it’s vulnerable to hacking, so it’s essential to use only super-secure servers.
Pro
* Finite Supply – This is a good thing. Fiat money (the money sponsored by governments) is not backed by anything and most money is valued based on the US Dollar. Since there are only 21 million units of bitcoin and there will never be more, it’s just like the old gold standard which is seen by some as superior than fiat money.
Con
* Black Market Activity – Bitcoin is often used for nefarious reasons on the dark web. This means that it can have a bad reputation due to some of its users. This is a shame, because it can erode bitcoin’s reputation and value.
Pro
* It’s Unpolitical – There is no central bank, and no state agency controls bitcoin or its value. A government cannot freeze your bitcoin, and bitcoin isn’t even regulated by its creators. It just exists and can be used by the users the way they want to use it.
Understanding the myriad of issues surrounding cryptocurrencies and all the pros and cons of them is essential to know the potential risks and rewards. That way you can move forward with an understanding of what you’re doing. When you do that, you can protect yourself from fraud and make better decisions.
What Are Bitcoins and How Do They Work?
Bitcoin is the most popular cryptocurrency out of hundreds of others. Cryptocurrency is a type of digital or virtual currency that you can use to pay for goods and services. The value is determined by a myriad of factors. Bitcoin is literally one of the most versatile cryptocurrencies around the world.
Essentially, cryptocurrency is supported by code using complex algorithms that prevent unauthorized copying or fraudulent use or creation of bitcoins. The way it works is that "miners" use a special code to find new bitcoins based on transactions. It’s essentially a digital token that has no physical body, and it represents some unit whose value is usually based on fiat money such as the US Dollar.
Bitcoin is the name of the network that the tokens are stored on, and is essentially a payment network not much different from something like PayPal. The system is decentralized and not run by any overriding governing body or state. There are other open source platforms that are similar in nature that you may understand such as Wikipedia, Moz.com/ugc, and others.
Users are anonymous and identified by a public key. You can have more than one public key and they can be controlled by your pseudonym, or username, or handle - depending on what you want to call it. This enables you to privately purchase the products and services that you want to buy without even the seller knowing who you are in some cases.
You can accept bitcoin as payment, and you can trade bitcoin for fiat money or even other cryptocurrencies. Bitcoin value is subject to wild swings and can be very volatile. If you want to get involved in investing, it’s important to understand that upfront. It can be a wild ride with crazy ups and downs of the value of your bitcoins.
Every transaction ever made using bitcoin is recorded by everyone including miners, by following the bitcoin protocol maintained in the public ledger. The units of exchange can be very small, but they can never be bigger than the number of bitcoins determined to exist in the first place. There are 21 million bitcoins and that’s finite, but the value of each bitcoin and fractions of bitcoins is infinite.
Miners compile recent transactions into blocks, creating block chains that can continue to grow. When a miner solves and proves the work (confirms and records the transaction), new bitcoins are created. It’s an amazing process that some very smart people figured out and if you learn all that you can about it, you will be less likely to make mistakes and get defrauded. You can earn bitcoins by buying them, mining them, or earning them through providing services.
What Does "Mining" Mean?
One way to learn about bitcoin is to learn the terminology. There are very specific words that are used to discuss bitcoins, and knowing these words will help you not only find more information about bitcoin, but also to explain it to others and to use it properly.
Mining
This word is simple to understand because even though it means finding bitcoins digitally using specialized software and code, it is a lot like mining for gold. Gold is finite like bitcoin, so the idea fits. Each miner gets transaction fees for each transaction they confirm, and are also awarded bitcoins for each verified block (see below).
Private Key
This is like your handle or username, but it’s a string of numbers (up to 78 of them) that gives you access to a wallet that contains the bitcoins. It’s more like a password if you think of it, and is tied to a wallet via your alias.
Wallet
This is a cloud place that enables you to collect private keys and manage those keys to let you make transactions using the bitcoin network. It works just like a wallet that is physical. It contains and lets you access the bitcoins that you have. You can have more than one wallet.
Blocks
Blocks connect every transaction together, forming block chains that are verified every ten minutes via mining. This process ensures that you avoid double spending, since technically a bitcoin can easily be copied on your own computer inside your wallets. Using this method makes it impossible to spend copies.
Block Chain
This is the public record of the bitcoin transactions. It’s really a very orderly ledger of blocks, maintaining a chain in chronological order of all transactions. Anyone on the net can download the block chain to view with a block explorer.
Block Explorer
This is like a browser that lets you look at the contents of blocks so that you can view the transactions and the history of all the balances and addresses of the transactions.
Halving
Because there will never be more than 21 million bitcoins issued, they are halved every four years with the last one happening in 2140. This essentially means that the number of bitcoins it takes to form a block is decreased by half or 50 percent.
Confirmation
When a transaction is verified by a network, it’s considered a confirmation. The process that does this is what is known as mining (see above). Once a transaction has been confirmed, it cannot be reversed or changed.
Change
This is the same concept that you have with fiat money. You pay 5 bucks for something that cost 4.50 and you get back 50 cents. This is no different with bitcoin.
Address
When you use bitcoin, you provide an address for that particular unit or transaction. Each address can only be used for one transaction.
Signature
This refers to a cryptographic signature, which is really a mathematical formula that lets someone prove that they own the bitcoin. For example, your wallet and the private keys associated to that wallet, enables you to provide a signature so that no one can steal your bitcoins.
As you learn more about bitcoin and cryptocurrencies, you’re going to come across even more new terms that mean something important. Some of the terms seem obvious (like mining), but others are a little harder to understand. Take the time to learn all that you can so that you can make good choices when it comes to using bitcoin.
Where to Get Bitcoins and What to Buy with Them
The great thing about bitcoins is that you cannot fake them, forge them, or inflate them. You can use them for any amount of money in almost any part of the world, with small transaction fees. All you need is a bitcoin wallet, which no government can control or freeze. Plus, you control the bitcoins and no one else does (like a central bank).
Buying Bitcoins
You can simply buy bitcoins from people who have them and are selling them. Often people who mine bitcoins like to sell them. You can use a service like Coinbase.com to buy and sell bitcoin and other cryptocurrencies. Individuals and groups sell bitcoin; you can even sell them if you have extra to sell or want to sell because the fiat evaluation is high.
Before you buy bitcoins, though, it’s important to understand the risks. Bitcoin is very volatile and the value could go down or up by 50 percent moments after you pay for it. Don’t buy if you’re not ready to lose. Of course, the same can be said for any investment such as stocks. It’s a risk, but the rewards can be high too.
Working to Earn Bitcoins
You can also earn bitcoins by working for people who pay for them. You can work in the bitcoin industry by looking for bitcoin jobs online. You can also go straight to some websites that deal with bitcoin and look at the jobs they’re offering. And, you can sign up for services like Jobs4Bitcoins and XBTFreelancer.
Links:
Jobs4Bitcoins - https://www.reddit.com/r/Jobs4Bitcoins/
XBTFreelancer - https://www.xbtfreelancer.com/
If you’re a service provider, you can start accepting bitcoin by signing up with a processing provider and opening a bitcoin account. It can be used at a brick and mortar store or an online store.
Mining Bitcoin
To mine bitcoins, you’ll need to choose the right mining hardware called an ASIC miner. Then you’ll need to choose a mining pool and check the numbers. You can engage in cloud mining or personal mining. It’s very important to learn the pitfalls of mining before you invest in doing it. It’s not cheap to do it either.
Learn everything you can about bitcoin mining before you invest the money and time. It can be a thankless task. Remember that there are only 21 million bitcoins, and slightly over 16 million have already been mined. That means that the fewer there are left out there, the harder they are to find.
Once you have some bitcoins, you can use them to buy things. Today, you can buy a lot of things with bitcoin. Many corporate sites accept bitcoin, even Overstock.com. You can travel with Expedia.com, you can buy games via Microsoft, you can buy space travel from Richard Branson, and buy from hundreds of more vendors with bitcoin. In many ways, it’s becoming mainstream. Whether that turns out to be good or bad for the value of bitcoin remains to be seen.
Who Uses Bitcoins?
Bitcoin is a digital or virtual currency first created by an anonymous person who uses the alias Satoshi Nakamoto. There is no middleman, no government control, no banks, and you can buy almost anything with it - from travel (space travel even) to clothes on Overstock.com.
It might be surprising, but bitcoin is mostly being used by people between 25 to 45 years of age, with the amount they have going up as their age goes up. People use bitcoin to buy all sorts of good and services, including illegal transactions for drugs, sex, and more. Since the transactions are anonymous and users don’t always identify themselves, that means it’s hard to know what people are buying.
Having said that, it must be in demand since hundreds of mainstream businesses are now accepting bitcoin as a form of payment. Let’s look at some of the businesses taking bitcoin.
* Overstock.com – They sell all sorts of things, from clothing to furniture. They have low shipping costs, and everything is cheaper than regular stores even though most items are name brands.
* Expedia.com – This is a travel site. You can reserve a hotel room using this service and someday you may be able to pay for all of your travel this way.
* eGifter.com – Buy gifts for people.
* Newegg.com – Buy computer and technology products.
* Shopify Stores - Some vendors that use Shopify, a shopping cart system, will enable their system to accept bitcoin.
* MyDISH.com – Get your DISH network with bitcoin.
* Roadwaymoving.com – This moving company likes taking bitcoin because they avoid some taxes this way.
* PizzaForCoins.com – Using this service is a little like using any of the delivery services. If they have a relationship with the place you want to get your pizza from, you can pay with bitcoin.
* Microsoft.com – That’s right, Microsoft takes bitcoin.
* CheapAir.com – Buy airplane tickets via CheapAir with bitcoin.
* Some Etsy Vendors – Just like the Shopify system, some Etsy sellers choose to take bitcoin for their products. Almost 100 do right now.
* Mint.com – This is bookkeeping software that will take bitcoins for payment.
* Bloomberg.com – This online magazine takes bitcoin for subscription payments.
* The U.S. Libertarian Party – Want to donate to the United States Libertarian Party? They take bitcoin.
* Paidbycoins.com – This service allows you to pay for a lot of things with bitcoin as a middleman.
* And Many More – Every day, someone else decides to take bitcoin. If you want to use bitcoins, you should find a way to start taking it too. The more ways it can be used, the more valuable it becomes.
This gives you an idea of where you can use bitcoins. Of course, you can always take bitcoins yourself and become a bitcoin vendor - whether you’re selling stuff from your home or you have a business selling physical products or services. It’s a great way to give people another way to pay. Plus, you can avoid sales taxes when you take bitcoin, although that is a seriously gray area that you should talk to your accountant about.
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