When will cryptocurrency holders realize that cryptocurrency is a scam?

in cryptocurrency •  last year

Ans ware :
I am the co-founder of a company called Samsa (www.samsa.ai). Samsa connects cryptocurrency investors with world-class cryptocurrency traders.

I was considering not answering this particular question but felt compelled to do so as it seems to be the mainstream rhetoric. Cryptocurrency is not a scam. It is simply an emerging technology that has yet to become mass market adopted. The three main arguments as to why cryptocurrency is a scam are as follows;

It is not backed by any intrinsic value and is created out of thin air
It is used by hackers to scam people or for illegal purposes
It is not issued by a government so it is not real money

These are three common reasons the government and mass media continue to push in order to discredit cryptocurrency and the proponents who are operating in the sector. A scam, by definition, is a dishonest scheme, fraud or swindle. All three of these definitions are not applicable to most cryptocurrencies. Though a few may be used in that manner, painting all cryptocurrency with a broad brush is like saying all police officers in America are racists and shoot black people. Or, all Trump supporters are neo-nazi KKK members. If you judge the majority by the small percentage of bad apples, you could say the same thing about every bank or publicly traded company.

Now, let's look at the above list and see if cryptocurrency fits the scam definition based on those common arguments. The fact that it is not backed by any intrinsic value and is created out of thin air is false. The intrinsic value of a Bitcoin, for example, is based on its limited supply, transferability and social value consensus. It is not created out of thin air as it is mined using an input of electricity, computing power and time. A single bitcoin currently costs $1400 to mine and though it’s market value is much higher, it is similar to gold that is mined for pennies on the dollar it is sold for at market.

A US dollar, on the other hand, is created by printing on a piece of paper and making a promise that it will be honoured. The cost of a photocopy is around .01 cents in terms of production. Does that mean a US dollar is a scam? No, because there is a general consensus that a US dollar can purchase X amount of goods.

Now, let's look at it in terms of a security. For those that say at least with a stock you own a piece of a company, Facebook and Google are two companies worth more than the collective cryptocurrency market. The asset that backs their stock is a software program and if the internet was to go down tomorrow would render those shares worthless. So, are these two huge companies scams? The answer is no, they are digital assets similar to Bitcoin and other cryptocurrencies. They are based on an idea and because that idea can generate profit they are valuable. Cryptocurrencies, like Ethereum, are in that case more valuable simply by the plethora of products that can be built on their network or software.

The second argument, that cryptocurrency is hacker cash used to scam people or that it is used for illicit payments is not a valid argument either. Drug dealers still prefer US dollars and arms dealers have been known to only accept diamonds. Because a small population of the user base of crypto do these types of activities make crypto no more a scam than a diamond or a dollar.

The final argument that bitcoin is a scam, because it is not issued by a government, is like saying that Gold would be valueless without a stamp from Credit Sweiss or oil was a scam if it was not pumped by Exxon. These are commodities and their value is based on social consensus. You pay for oil or gold based on the going market rate. If tomorrow an ounce of gold was selling for $1, would you still pay $1400? Bitcoin similarly is based on the going market rate. No one is scamming and saying this is worth X amount. The buyer pays what they are willing to pay, and the seller sells for whatever they want. No one gets swindled and no one gets tricked. Both the buyer and the seller know exactly what they are trading and are happy to make that trade. If you bartered apples for oranges, would that be a scam because the orange was more orange than the apple?

As a final note let’s talk about ICOs. If Facebook or Amazon had created a coin that you could use on their system to pay for advertising, make phone calls, or send friend requests, wouldn’t those coins be worth something? ICOs are coins generated to give you access to a platform that will have some type of real world usage when launched. It is like a store selling a gift card to potential shoppers in order to raise funds to stock the store. If the store is stocked and the buyer of the gift card gets to trade it for some goods, would that be a scam? No, it wouldn’t and neither are most ICOs. ICOs are used to raise funds to create a product that the coin holder will be able to use in the future. They are getting that coin for a discount and will save rather than buying the coins after the network is completed.

I think the main issue is that most people who attempt to enter the sector do so without understanding it. Most assume that since so many people are making money, they can too. Unfortunately, the majority of investors and so called pundits in the space are ill-informed and don’t fully comprehend the technology or underlying ideas they are buying into. What makes it worse is that the mass media, owned by the people who stand to lose the most due to cryptocurrency (banks & the financial elite), are now actively campaigning against it. They are scared and help to propagate these types of ideas. Cryptocurrency is in no way a scam and is actually less scam-like than the average fiat currency, stock, bond or credit swap.

For those that are interested in investing in the emerging sector, know that early adopters will be rewarded the most. Imagine if you had bought some Apple or Google shares while they were still operating out of garages. That is the place cryptocurrency is now and investing early poses the biggest rewards, but also the biggest risks. For those that don’t understand the technology and want to still invest, Samsa is a great tool that allows investors to mimic the portfolio choices of professional traders. What that means is while you may not properly diversify your position, due to lack of knowledge, copying a trader that understands the risks and is well diversified can still be a great option to get you in early. Give it a shot at Samsa

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