Bitcoin is a revolutionary new currency. Bitcoin is perhaps the first currency in modern history, or even all of history, that is not backed by a national government or central clearinghouse. Instead, Bitcoin is backed by the combined power of the global online community. Bitcoin has value because only its members believe it has value, but you shouldn’t underestimate the power of this faith. Production, exchanges, transactions, and conversions are all conducted by and monitored by the global online community. And a public ledger allows everyone, everywhere to monitor Bitcoin mining and transactions. Still, that doesn’t mean that Bitcoin is impervious to scams.
While the Bitcoin community and Bitcoin Foundation work hard to ensure that the currency is safe and secure, the simple fact is that there are always scrupulous people looking to make a buck by stealing from others. If you’re not careful, someone could end up stealing your hard earned Bitcoins. And perhaps worse of all, since Bitcoin is a largely anonymous system without any central authority, it is often next to impossible to recover any stolen funds.
Bruce Wagner: Important Bitcoin Promoting or Sleazy Thief?
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One of the most controversial names in the Bitcoin community is Bruce Wagner. A few years ago Mr. Wagner was known as one of Bitcoin’s strongest supporters. He appeared on talk shows, launched a Youtube campaign, and did numerous other things to promote Bitcoin.
At the same time, Wagner has been accused of being part of an epic Bitcoin heist. Accusers maintain that he launched a Bitcoin wallet called MyBitcoin.com. This wallet became reasonably popular before suddenly disappearing off the internet. Then the site quickly reappeared and its managers explained that the site had been hacked and they would be able to refund users only half of their funds. Many people have claimed foul play and argue that Wagner stole the money, not hackers. So far, Wagner remains innocent until proven guilty but the fact remains that many people lost a lot of money from MyBitcoin.com.
Bitcoin Beware: Other Bitcoin Scams
There are other odd scams out there too. One popular scam is to steal computing power instead of Bitcoins themselves. You see, Bitcoins need to be “mined” by computers. In essence, computers are used to solve complex equations, and when the equation is solved, a new Bitcoin is created. Many scammers have now been inserting malware into unsuspecting computers and then taking over their hardware to do Bitcoin mining.
Just a few months ago in May (2013) a major scandal broke out on an online gaming site, ESEA sports. ESEA had been toying with the idea of running Bitcoin mining software through its online gaming client but ultimately dropped the idea. Upper management figured that it was too much trouble for too little reward. Unfortunately, a company employee disagreed and decided to secretly run the program. Online gamers began to notice that their machines were rapidly slowing down for unexplainable reasons. Eventually people figured out that the ESEA client was hijacking their computer to mine Bitcoins. As soon as the company found out, it disabled the maleware, donated the Bitcoins created, and offered to fix anyone’s computer that was damaged. While this scam ultimately had a pretty good ending, it should raise a flag to all us PC users.
Is Bitcoin Itself a Scam?
Some even argue that Bitcoin itself is a scam. Most of the time these arguments center around the fact that Bitcoin is not endorsed or supported by a central government, is not accepted by a wide number of stores, and its value is not tied to a commodity. While these criticisms are relevant, they are not necessarily damning.
Many commodities, such as Gold, have little actual use value, but are still valuable. Why? Simply because people value them. And after so many governments have gone bankrupt or completely disbanded their currency, why should we believe that national currencies have some special privilege? It is true that only a limited number of stores accept Bitcoin, however the list is growing.
At the end of the day Bitcoin is a high risk investment. Still, many people have made money off of Bitcoin, and many more will likely make even more money in the years to come. While there is a chance that Bitcoin could completely collapse, at the moment this seems to be quite remote, unless a government or some other organization decides to launch an attack on the currency. So far enough people have faith in Bitcoin to suggest that it is here to stay.