Financial pyramids appeared a century and a half ago. During all this time, millions of people have fallen for scammers. The world is changing, but the schemes for “divorce” remain the same. With the growing popularity of digital assets, along with classic financial pyramids, cryptocurrency ones have also emerged. The scammers immediately realized that there was a lot of money in this area, which was an excellent field for their activities.
What is currency?
Currency, by its own definition, is a measure of value and payment . In accordance with this, real currency is: a legal means of payment, a basis for determining the scale of prices and a means of foreign exchange and credit transactions.
Basic requirements for currency: the legality of its use and its payment.
The first questions begin: unlike traditional currencies, cryptocurrencies are legal in a limited number of countries and cannot participate in exchange processes on international exchanges (yet).
Blockchain as a means of an “open society”
In fact, today cryptocurrencies are the prototype of universal “candy wrappers” that are valid due to universal agreement.
Contingent power to settle and support transactions is exchanged for contingent rewards. Almost complete compliance with Marx: labor generates its own generally accepted equivalent.
What does it mean? Society agreed (more precisely, agreed with the developer of a specific cryptocurrency) that the resources expended are worth this number of “candy wrappers.” And each “candy wrapper,” “coin,” or “cue ball,” in turn, is the equivalent of a particular service or product.
The rate of a cryptocurrency without exchange trading is determined only by the participants in its mining (everyone has already heard the story of the first pizza bought with bitcoins - and it’s not about the rate of the currency as such, but about the agreement between the participants in the transaction).
Thus, with the help of blockchain, the principle of an open society is partially realized: a socio-political system in which the most important events occur according to a general agreement.
This is a completely universal means of payment, free from outside influences. But this is how it should be - and the reality is not so rosy.
General portrait
And there are many such projects. To attract participants, their creators promise a percentage of income significantly higher than the market one, win-win investments in securities, cryptocurrency or IT projects, cashback and other benefits.
As stated in the user agreements, the authors of the projects are not responsible for the occurrence of “force majeure” circumstances, and the client does not have the right to make claims against them if suddenly the result of the “investment” does not meet his expectations. Moreover, the client cannot go to court. In some cases, it is stated that members are not entitled to a class action. Finiko went even further and stated in the agreement that “partners” participate in a game that simulates investment activity.
Often, pyramids accept deposits directly in cryptocurrency: bitcoins, ethers or tethers. They are asked to transfer them to a certain crypto-wallet, usually not connected with the company in any way, explains Marat Safiulin. Another scheme for accepting investments is through online payment services: “QIWI Wallet”, “Yandex.Money” and others.
For example, (Finnex INC), which offers investments in cryptocurrency, according to the Fund for the Protection of the Rights of Depositors and Shareholders, in addition to more than 20 types of cryptocurrencies, accepted rubles, hryvnia, and dollars by transfer through the PerfectMoney service and to bank cards.
Deposited funds are usually converted into local currency, in which participants receive income. In fact, these are “candy wrappers” that have no real value.
– In reality, issuing cryptocurrencies is expensive, so only the name is used in the fraudulent scheme. Pyramid builders need regular money,” explains Safiulin.
The domestic currency reassures investors who see growing numbers in their account. Problems begin when investors try to withdraw it: such an operation is usually strictly regulated and sometimes becomes inaccessible for one reason or another. In addition, the organizers usually reserve the right to change the course. They control everything themselves, and it’s hardly possible to win when the rules are invented as the game progresses, Safiulin is sure.
Exchange trading cryptocurrency
In order to combine the calculated piece of the algorithm with the rest and insert it into the common hash, exchanges are used.
They are also necessary for carrying out direct and indirect transactions - unfortunately, the insufficient prevalence of cryptocurrencies does not yet allow working without such a regulator.
Of course, the lack of a legal framework adds problems, because in fact only Bitcoin is recognized as an official means of payment (this increased its rate in April, which provoked a subsequent increase in interest in this currency).
“Bitki” are considered money only in China, Japan and South Korea. In other countries of the world they are either banned (in Ecuador, for example), or are planned to be banned, or do not have any legal weight (yet).
Accordingly, if we consider cryptocurrencies as a means of payment, that is, talk about them as money, then we need to understand:
- these are non-convertible currencies that only work in certain countries and communities;
- These are not legally protected means.
Legal problems of cryptocurrencies
What does such a lack of legal framework mean? In Russia, Bitcoin is not legal tender. According to Russian court decisions, there are no guarantees that services that should be paid for with cryptocurrency will be paid for. Since there is no legislative framework, the court cannot operate with cryptocurrency as a means of payment.
How will this work in reality? Let's say you create a website for a customer, specifying in the contract payment for work performed in bitcoins. In the event that the work was accepted, but the bitcoins were not transferred, the court will most likely find that the customer does not owe you anything. And there are already precedents (fortunately, our legislation is not precedent).
In the absence of full-fledged legislation, cryptomoney can be considered, at best, an intermediate means of natural exchange. But quasi-substitutes for money are illegal in many countries. They themselves and transactions with them can be classified as serious violations of the law, in particular:
- counterfeiting;
- illegal currency trafficking;
- fraud to evade taxes;
- illegal stock exchange and exchange activities.
Despite the widespread use of crypto-substitutes, under a certain set of circumstances, nothing prevents a person from being arrested for using them. And it will be almost impossible to prove otherwise.
Myth No. 4. Difficulty buying Bitcoin
Someone else may still think that it is difficult to get into the cryptocurrency market. However, this is not at all true. The current situation allows you to buy any cryptocurrency for almost any amount, and you can pay for it through any payment system:
- Bank cards Visa/MasterCard (Sberbank, Tinkoff, VTB, Alfabank, etc.)
- Yandex money
- Qiwi
- Payeer
- Advcash
- etc.
There are now a lot of cryptocurrency exchangers. Due to their high competition, you can purchase Bitcoin virtually without a markup (at the exchange rate).
- How to make money on cryptocurrency
- How to withdraw cryptocurrency
- How to buy cryptocurrency for rubles
- Bitcoin faucets - a free way to earn Satoshi
How is cryptocurrency supported?
Blockchain allows everyone to receive a certain amount of the corresponding currency for exchange by computing and maintaining a payment system: a server in exchange for a reward. Direct exchange of physical and labor resources for an equivalent that can be exchanged for what is needed.
However, this equivalent is provided only by the resources already expended (personal time, computing power and electricity). At the same time, they no longer have value, so maintaining its solvency directly depends on the existence of people and resources (servers) providing transactions (exchange operations for other world currencies, things or services) at a given specific point in time.
In fact, they are the only collateral for cryptocurrencies, so the more noise there is, the more users there are, the more valuable the currency.
There is and will not be any collateral for them with securities, debts or gold - only the already completed work of calculating the algorithm. It has no value apart from cryptocurrencies, unlike other currencies.
The removal of equipment from computing power and its breakdown should directly reduce the rate. Accordingly, an increase (and spread of currency) in the number and power of servers means an increase in the exchange rate. There is no such direct relationship.
Some people are trying to argue that gold has similar properties and contractual value (rather, even traditional value). Unfortunately, this is not true - without technical precious metals (with a higher value than exchange-traded metals), there will be no electronics, and there will be no cryptocurrencies.
Myth No. 5. Quantum computers will destroy Bitcoin
The Bitcoin network is maintained by miners. They protect it from hacking. Their computing power (Hashrate) has only grown and grown over the years. The initial hashrate merges with the X-axis, since growth is exponential (always).
The emergence of an extremely powerful (quantum computer) carries risks. This could cause problems because, in theory, its power could exceed the network power of all miners.
But at the moment this argument is only a theory. Discussions about the emergence of a quantum computer have been going on for a very long time and it has not yet been implemented. And will it be implemented at all? There have been discussions about creating artificial gold for several centuries, but so far no one has succeeded. So is it worth worrying just yet?
Plus, even if a quantum computer appears, why is there a fear that it will be aimed at hacking Bitcoin? Again, this situation remains only speculation.
What influences the exchange rate and why is it unstable?
The first reason is the lack of a real opportunity to pay with cryptocurrency according to a universal agreement and a strict definition of its value.
The second reason is the lack of general regulation. Each participant, each exchange can set its own rules to one degree or another. There is no punishment or reward for this. Therefore, one of the most sad cases deprived participants of one of the Bitcoin exchanges of 30% of the accumulated “coins” simply by decision of the exchange.
The third reason is high volatility and exposure to external factors. Despite the fact that, by definition, cryptocurrencies should not be influenced from outside, even news materials can bring down the rate.
If tomorrow several large news portals launch negative news about cryptocurrencies, for example about shadow trading using Bitcoin, the rate may drop several times.
Cryptocurrency scams and cryptomillionaires
Another reason for exchange rate instability is currency speculators . Due to the absence of a real free society (since its implementation depends on all members of society) and banal human greed, there are speculators in the market who accumulate significant amounts of money supply and actively play with rates for their own purposes.
They are the ones who increase production capacity for the production of bitcoins or ether, increasing interest in the currency and, accordingly, its exchange rate. Including manipulating it by playing on the stock exchange with large volumes. They also bring an increase in complexity closer, thereby depriving ordinary participants of the blockchain of a significant part of the reward.
The existence of such cryptocurrency millionaires, who accumulate a significant amount of electronic currency in their accounts, discredits the principle of free currency and deprives it of its function of providing a universal and secure means of payment in a free society.
In fact, due to the external influence of stock exchange speculators and information communities playing in the same camp with them, “crypto” from a safe “candy wrapper” for universal exchange turns into a regular fiat currency, backed by a resource with a cost significantly lower - conditional video cards in the absence of a mining rush 3 times cheaper.
The resources spent on calculating the hash are worth nothing at all, and cannot stop the depreciation of the exchange rate - they are no longer there, they are spent. Therefore, the only actual support for such types of currencies is a human agreement, which is expressed in the conduct of exchange transactions “cryptocurrency for a service/good .
Types of dubious projects
Fraudsters use various scams that also affect the crypto market. Today there are three types of such pyramids:
- cloud mining – programs that offer hashing power or equipment rental for the purpose of mining cryptocurrency coins in large quantities;
- highly profitable investment projects - pseudo-traders promise break-even transactions, which, according to legend, bring high profitability and 100% payback;
- scamcoins are new altcoins that guarantee an increase in the value of capital.
Fraudsters daily implement schemes using cryptocurrencies that are difficult to recognize even for experienced ones. Therefore, anyone can become a victim of deception.
Pyramid or the future of the financial system?
Not every modern economist has enough competence to answer this question. There are too many opinions. Most real experts (not in computer technology, which in this case do not determine anything) agree that existing cryptocurrencies are a kind of financial pyramid built on universal faith. At best, it is a fiat fiat currency subject to strong fluctuations.
However, at the same time, they also confirm the need to introduce blockchain technologies to ensure transactions of conventional currencies.
The rate of “ether” and its reaction to a false message about the death of the algorithm developer
Including those based on existing technologies, for example, the ubiquitous Ethereum, better known as “ether”: its algorithm allows not only to generate fictitious coins, but also to carry out other operations using a common hash and a distributed system of servers.
The “pyramid” theory is supported by the story of video cards and the growing bubble of “ether” - an uncontrolled growth of the exchange rate, unbacked by real assets. However, even its own developer criticizes this protocol.
Ethereum
Ethereum takes a big step forward and allows almost any financial transaction or contract to be executed. You can use it for home title verification, movie ticket sales, escrow services, crowdfunding-style project financing, and so on.
Ethereum is a general platform for running smart contracts. Ethereum has its own virtual machine. Running the program will cost ETH/
But how do you calculate how much ETH you need?
There is an on-demand price regulator that prevents nodes from being overloaded. The cost will be expressed in gas, its balance must be maintained and purchased with ether.
A complete guide to gas on the Ethereum network
Which begs the next question, who exactly pays the ether to run the program?
Contracts operate for a short period of time in response to events. This is essentially an API with a set of supported operations.
Ethereum offers transparency and decentralization. The network creates demand for Ether. Thus, the internal currency becomes necessary for society and acquires value. The more people use these applications, the more Ether is needed.
What's wrong with video cards, or the story of one hysteria
The hype around video cards is completely unhealthy. I will share my observations:
- “Ether” took off after a number of posts in major news publications, reminiscent of paid advertising;
- large miners have nothing to do with this - they do not buy in stores;
- large retailers do not sell cards in small quantities as directed by manufacturers;
- There are no cards, and there are no chips to produce them right now either.
It’s interesting that in China (TaoBao, AliExpress and even Gearbest, not to mention direct retailers), ComputerUniverce and eBay, our compatriots swept away the cards. Where are they? On Avito for 3 prices. That's who benefits! And this despite the fact that analysts do not hide the fact that Ethereum has grown from scratch.
Earnings
Is it possible to earn money from this and how much (and at least just to recoup the initial investment) is a separate question, and no one will give the only correct answer to it. In some ways, this is reminiscent of weather forecasts - too many factors influence the cryptocurrency rate. These include technical capabilities, market laws, the popularity of a particular platform, and the attitude of government regulators to this.
Moreover, the problem of the state seems to be the main one. And the authorities have plenty of reasons to worry. Firstly, cryptocurrencies are used by organized crime - this includes arms trafficking, drug trafficking, and withdrawal of funds. How this can be avoided in the current state of affairs is not yet clear. Secondly, the circulation of a parallel currency carries many risks. Among them are the impossibility of devaluation against the backdrop of the economic crisis and the vulnerability of the population from volatility. The Greeks, who were quietly accepted into the EU, can talk about the first problem, and foreign currency mortgage holders in Russia can talk about the second. The solution could be, say, state mining, but how much the main advantages of cryptocurrencies will be preserved in this case is unknown.
So, as the vast majority of experts correctly note, investments in cryptocurrencies cannot currently be called reliable - this is more than a risky asset, and no one will give any guarantee. However, the same experts believed back in the spring that, in the best case, by the end of the year the cost of Bitcoin would reach $1 thousand.
Maxim Konnov
To mine or not?
Be that as it may, until August 1st , and maybe even necessary. After this, ordinary players risk leaving the game, giving way to certified partners (another point that discredits the technology as free and sustainable). It’s too late to mine Bitcoin, Chinese players already have everything.
What about other currencies? Today everyone is promising. After all, the main thing in their course is the spread of algorithms, a large number of active participants and human desire (or, more precisely, the thirst for profit).
Tired of reading? Let’s try to briefly answer the main questions (I’ll tell you how and what to actually mine at the end of the week).
Crypto investors
The scale of the spread of crypto-pyramids in Russia is difficult to assess. Some of them are identified by the Central Bank, but this is not a complete list.
One of the last to cease operations was the “investment” company LTD Lion. In Russia it was registered as Lyon LLC and had a representative office in the UK. She did not have permission for financial activities either in the Russian Federation or in the United Kingdom. According to the company itself, its starting capital is $1 million, the number of investors is 35 thousand people. The organization accepted money from investors and promised to increase it through operations on the financial market, as well as the purchase and sale of cryptocurrency, Kommersant wrote.
At the end of last year, a Chita court blocked a group on the VKontakte social network that advertised the financial pyramid Antares Limited. Managers from another fraudulent cryptocurrency project, Cashbury, worked in the company.
– The company built its work through social networks and “consultation centers.” It was proposed to invest citizens’ funds in the group’s activities exclusively in cryptocurrencies. The payment of profitability was ensured solely by attracting new clients, the Central Bank told Octagon.
Another major project is the Roy Club, the dubious activities of which were announced by investigators of the Republic of Mari El at the beginning of last year.
Author of the Roy Club project Alexey Muratov. Photo: YouTube channel of Sergei Mavrodi
However, the project is still in effect, states Marat Safiulin. According to the Fund for the Protection of the Rights of Depositors and Shareholders, the official author of the project is the former deputy of the Kurchatov City Duma (Kursk region), ex-chairman of the central committee of the MMM party and an active participant in subsequent MMM projects Alexey Muratov
.
The project offers investing in its own cryptocurrencies – PRIZM and UMI. Their main difference from the classic ones is that new coins appear through paramining: after purchasing several coins, they will multiply on the account by themselves. The speed of paramining depends on the capital: one coin will increase daily by 0.12 percent, 500 - by 0.33 percent.
You can only get rid of coins on the exchange, therefore, in order to return funds in real currency (rubles, dollars, bitcoins), the demand for PRIZM must grow at the same speed as their quantity, otherwise the coins will depreciate. According to Safiulin, the cost of PRIZM has already fallen by about 70 times. However, users are promised income in exactly the same cryptocurrency units.
Answers to frequently asked questions
Is it true that no one can steal my bitcoins? No it is not true. There are known cases of mass theft involving exchange owners and as a result of a hacker attack. Is it true that no one can take away bitcoins? No, there are precedents in which owners were deprived of their accumulated wealth by decision of the exchange. Will the exchange rate continue to rise? It all depends on current conditions. Exchange fraud, actions of users and countries can either raise or bring down the exchange rate. What will happen if official cryptocurrencies appear? Exactly the same thing, but their appearance will draw money away from other, traditional cryptocurrencies. How does the emergence and spread of new cryptocurrencies affect others? On the one hand, increased interest increases the rate. On the other hand, this rate is inflated because it is not backed by the necessary “real” funds - a mass of fiat funds and transactions. Cash flows flow into new versions, capitalization (value) decreases. This should also reduce the exchange rate. Draw your own conclusions. Mining is not dangerous, will I always remain in the black? Unfortunately, in a bad situation, a lot of the same video cards will hit the market, which miners hope to profitably resell later. Therefore, if you start mining late and do not have time to recoup the cost of the equipment before the difficulty increases, there is a chance of ending up in the red. How long will the hype around video cards last? No less than until the beginning of August. Then a) new mining video cards will hit the shelves en masse, b) the methods of working with “ether” will change, as a result of which the exchange rate will decrease, c) a large supply of cards is planned to traditional stores. Prices will drop by the beginning of autumn, but will return to their previous values no earlier than by the end of winter. If the place of ether is not taken (taken) by other currencies. How long will the cryptocurrency boom last? Exactly until international financial institutions get down to business. Then they will receive global recognition, a legislative framework and will lose one or another part of their freedom.
Myth No. 3. Too small emission of 21 million
Users who are already more familiar with cryptocurrencies know that the issue of Bitcoin is limited to 21 million coins. And opinions are expressed that this is too little for all residents. But they forget that it can be crushed to one hundred parts per million.
The minimum share of Bitcoin is 0.00000001 BTC and it is called 1 Satoshi (after the founder). You can make transfers in such small amounts.
However, it is worth noting that the number of coins in circulation will most likely disappear over time due to the fact that some lose access to their wallets. Thus, about 3 million coins have already been lost and taken out of circulation irrevocably. We should expect there to be some more losses in the future.
At the moment there is no talk of removing the limit of 21 million coins. I am sure that no one will do this, because then the meaning of preserving the value of Bitcoin is lost.
Instead of results
Despite all of the above, blockchain and cryptocurrencies are incredibly important for the development of a modern technogenic society and the development of a single world space.
But do not forget that behind this currency there are quite tangible, freely convertible green dollars, which are received by the owners of the algorithm, video card manufacturers, their resellers and exchange owners.
Whatever happens next, they will be the winners. If they want, they will close this or that algorithm, if they want, they will withdraw some of the funds, change the method of calculating rewards or the rules of the game.
Or they may even deprive users of part of their accumulated wealth (for example, for their own benefit).
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