Posted on July 12, 2021 in History, Trending

The World of Crypto Scams

Yep – it’s mainstream now.

What is Cryptocurrency?

A cryptocurrency is a digital currency protected by cryptography. Just like physical currency, the digital coin is representative of a certain amount of value – you own a Bitcoin, you have the equivalent of 36,000 USD. You own an Ethereum coin, you have the equivalent of about 2,500 USD.

Cryptocurrencies come with blockchains, which act as a sort of ledger for the transactions. The blockchains verify that transactions happened at the time and date the computers say it did. Each block in the chain contains the transaction’s identifying information (such as time, date, and hash) as well as identifying information for the block before it. Each block added to the end of the chain therefore reinforces the one before it, making data alterations nigh impossible.

The decentralized nature of the ledgers means that even if someone was to mess with the blockchain to steal a coin, it could be proven invalid almost immediately by others who have copies. Therefore, transactions are secure and un-duplicable, even with no central authority monitoring transactions for the users. Coins also can’t appear out of thin air under this system! You can’t spend a dollar twice in the real world, and with blockchain, you can’t do it digitally either! Bitcoin in particular rewards users for solving the blockchain and verifying the transactions on it are all complete and legit, although that takes an awful lot of computer power due to the math involved.

Cryptocurrency removes the third party, the bank, from transactions, allowing users to pass money to each other directly. No centralized authority needed! As long as the people using it agree that it has a certain value equal to something else (the way dollars used to be equal to a certain amount of gold, for example) the cryptocurrency will continue to function.

Unfortunately, no third party means no third-party protections, either. Money faces issues with valuation too, as inflation and deflation can wreak havoc on an economy, but the government will generally step in to prevent it from getting too out of control. The same isn’t true for decentralized crypto! If a big coin fluctuates, it generally fluctuates hard. Where the US dollar has stops in place, crypto doesn’t. Investing in crypto, therefore, is much more of a gamble than investing in bonds or stocks. It’s another form of currency speculation. The risks are great, but the rewards are great too.

The OG

Bitcoin was one of the first if not the first. It was created anonymously to avoid using third parties for international transactions online, which almost always came with long wait times and excessive fees. People used it for a number of things, but an unintended side effect of that ‘no third party’ thing from before is that Bitcoin was effectively untaxable and very difficult to track. As a result, it came to be associated with drug trades and other shady deals.  Don’t want anyone to know that your ‘gift’ package is actually mushroom spores? Does the seller not want to reveal where they live? Complete the transaction with Bitcoin, and nobody can watch the money change hands. The market needed a solid-but-untraceable currency, and BitCoin filled this niche.

Bitcoin exploded in value in the late 2010’s. People who owned Bitcoin were made millionaires overnight as 20$ turned into 20,000$. Ever since then, Bitcoin has been a looming presence in the online finance world – it’s effectively the shadow money from John Wick, but harder to forge.

The Second Gen

A cryptocurrency known as DogeCoin hit the news for making it to 50 cents a coin, from below one cent a few years ago. It’s really a special kind of coin: it launched as a joke after BitCoin made it big, it’s based off of an ancient meme, it’s not particularly well-backed… but it’s still there, and its age gives it a lot of clout and distribution. People in support of it call it ‘The People’s Coin’. It was much more accessible than Bitcoin due to its joke-based nature, and it was already public – it wasn’t shady to buy some as a joke.

The founder had a Twitter account before that was taken for granted. Its ownership isn’t perfectly distributed, but it’s much more diversified than any new coin could hope to be. This is important: where new coins are hitting the same value as DogeCoin, they aren’t nearly as stable because ownership is concentrated. Forget the spike, Dogecoin was within a few tenths of a cent of its average price for months beforehand. That’s incredible! DogeCoin was cheap, but it was well-known and decently solid, and word-of-mouth on its subreddit kept it stable until the spike. Smaller coins that don’t build a community around their use have no chance of achieving that.

The New Guys

Computers are better than they ever have been. The kind of computer needed to make a cryptocurrency is within reach for moderately wealthy people. However, now that the tech is available, everyone wants to make a coin. More specifically, they want to make money off of making a coin. The question is: how do they want to do that? Do they actually want to make currency, with what that entails? Could they want to make a safe, secure, and reliable coin that anybody could use, like BitCoin did? Do they want to make the coin as a ‘joke’ and accidentally stumble into wealth, like Dogecoin did? Or do they want to get a lot of money invested in their product very quickly, without much effort on their part, and then dump their own stock and leave with said money?

“Pump’n’Dump” Schemes

Demand = higher prices. The more demand there is for any one kind of coin, the better the price gets. BitCoin’s head start means that a single coin is worth tens of thousands (as of this article, July of 2021), because it’s widely accepted, widely trusted, and well-known, so it’s widely demanded as well.

Other big ones include Etherium and Maker, which are a couple thousand per coin each. These are also reliable, distributed coins that started early. For every success story, though, there are dozens of failures where people didn’t invest. DogeCoin could have been considered a failure a couple of years ago – the guy never got the value very high until recently, even though the concept was well loved.

How does someone make money off of a phenomenon that strikes like lightning? Spikes are completely unpredictable, even to experts. The answer is easy: some crypto makers simply make their own spikes! They pump their coin, and then dump their coin!

Steps to “Get Rich”

Step 1) Make a coin. Name it something catchy and/or stupid, or riff on another coin’s name to create bad-faith confusion. Hold a lot of it.

Step 2) Get people to buy it. Play off the name, pay celebrities, do whatever you can to hype this coin. Meme off it. Get people to buy it, even if it’s just as a joke.

Step 3) Wait until your coins are worth something. Dump them for cash. (This destroys the coin’s value).

Step 4) Disappear with the money while everyone is upset. They either quit and dump their coins themselves, crushing value, or stick around and watch as their coins become worthless.

As soon as the top of the pyramid dumps their coins, it becomes a race to the bottom for everyone else. After all, without the creators advertising it, hyping it, and otherwise managing it themselves, where is any new value going to come from? The users? If they stick around to bring it back up, users are going to bail the second they’ve made more than they put in, because the coin has destroyed their trust in it, and it will flatten out that way. There’s no way back up without top-down support. Everyone who didn’t get out in time loses their money.

Just the Actual Worst

Celebrities are being paid to endorse this. Soulja Boy tweeted out that he was interested in a coin only to realize a few minutes later that he’d also copy/pasted the instructions for tweeting, making it obvious that he’d been solicited to tweet about it. Soulja Boy also famously tried to release his own line of gaming consoles before being issued a cease and desist by Nintendo. Other notable crypto advertisers include various streamers and an adult actress or two, not people you’d expect to give financial advice.

What’s the common thread? These are the people the crypto makers hope they can get because their first picks – actual celebrities, trustworthy streamers, and financial experts – won’t take their deal. In fact, some of these people actively rally against the Neo-Crypto cause. You’d take advice from someone with a PhD in finance, and you might take advice from someone you’ve been watching on Twitch for years, but anyone else? Not unless they’re a big fan.

Youtuber Cody Ko points out that these people are mainly defrauding their own fans if the coin goes belly-up. What’s the plan then? That the fans just won’t hold this streamer/star/influencer accountable? As he says, repeating over and over that “You should buy this! It’s definitely trustworthy and suuuuper stable!” for pages, but only saying “This is not financial advice” every 6th tweet is not sufficient warning.

A fan is not especially stupid or wrong for looking up to their favorite streamer and buying coins based off of their ‘not-advice’ – they’re a fan. Of course a fan is going to listen to a streamer or role model, that’s why companies sponsor entertainers in the first place. These public personalities know that, and they’re either taking advantage of their unearned financial credibility, or deliberately ignoring everyone telling them it’s a bad idea. If these coin-hypers were really intent on their fans’ best interests, they’d clarify the risk, but they don’t. The danger of over-investing in a volatile product is being heavily downplayed to funnel more money into the coin. Everybody but the fan stands to gain from the fan’s ‘investment’, so they’re being incentivized to over-hype.

Digital currency is a powerful tool – it’s just a shame that it’s being treated like an investment instead of what it’s supposed to be, decentralized currency.


Crypto Casey, via Youtube (

Cody Ko, via Youtube (