Cryptocurrencies and the blockchain technology on which they are based are not that easy to understand, even for geeks. Many unscrupulous characters have taken advantage of the fact that cryptocurrencies are barely understood and unfettered by regulatory frameworks. They have created schemes and scam coins with the intention of fooling and fleecing naive investors.

Many people are attracted to the world of cryptocurrencies because they promise huge returns on investments. But there are too many tokens, coins, and cryptocurrencies in the industry. Those who do not understand the technology are unable to separate the wheat from the chaff. In other words, they find it difficult to distinguish between good coins that are safe to invest in and bad coins that can impoverish them. Since the crypto environment lacks control and regulation, it is full of scammers who are busy devising ways to separate gullible investors from their hard-earned money.

Before investing in any cryptocurrency, investors should learn the art of identifying scam coins.

Major Features of Scam Coins

Before investing in a cryptocurrency, you must study it carefully and check whether it has the following features. If it does, you will save a lot of money by just avoiding it.

#1: Scam coins are too good to be true.

Scam coins are too good to be true. They make tall claims. They promise huge, risk-free returns in the shortest possible time. They feed on people’s greed and their desire to get rich overnight.

The simple truth is that it is not possible to generate fixed profits continuously. A company requires a steady source of revenue to be able to offer fixed returns. If they do not sell services or products to generate revenue, they have to run a Ponzi scheme to get guaranteed high profits. A number of scam cryptocurrencies that one sees are actually Ponzi schemes.

#2: Scam Coins offer cloud mining services.

In order to mine coins and earn rewards, one requires a sophisticated computer to solve complicated cryptographic problems and thus process and confirm transactions. Through cloud mining services, fraudulent companies behind scam coins tell gullible investors that they only have to pay a fee in order to mine coins without purchasing sophisticated computers. The gullible investor will get his/her rewards as long as the scam coin has users. If there are no users, the system collapses and investors will lose their money.

#3: Scam cryptocurrencies include multi-level referral schemes.  

Most scam coins come with multi-level referral schemes. In this way, they can get the required traffic by encouraging investors to share referral links on their social media accounts. Investors are encouraged to take part in the referral program by promising them huge referral rewards. In the hopes of boosting their profits, investors promote the cryptocurrency by posting their referral links in various social networking sites. This gives the scam coin website all the traffic it needs and plenty of new investors.

#4: Scams include bitcoin investment packages.

Bitcoin Investment Packages (BIP) are investment programs that encourage users to invest bitcoins for high returns. Investors are encouraged to purchase a subscription to receive daily or weekly returns. The returns will continue to be high as long as there are new users investing in the program. If the program doesn’t get any new users, it will not be able to pay its existing investors.

How to Avoid a Scam Coin

If you come across a cryptocurrency that exhibits the following characteristics, you should steer clear of it:

  • Very little information on how the coin works
  • Multi-level referral schemes
  • Makes promises of high, risk-free returns
  • Very little or no information on the founder, developer team, or company behind the coin
  • Very difficult to withdraw your investments

Here are some more tips to help you avoid a bad coin and find a really good one to invest in:

Avoid Close Sourced Cryptocurrencies: This does not mean that all close sourced cryptocurrencies are scams. It just means that all the coins that have gotten into lists of scam coins are close sourced. In other words, they do not reveal their source code. The worst scam coins do not even have source codes.

To find a cryptocurrency’s source code, you only have to visit If the cryptocurrency doesn’t allow you to download its source code, you had better avoid it. All highly reputed cryptocurrencies have an open source code. Anybody can download, modify, and re-distribute it. Anybody can have a look at the code and review it. This makes the cryptocurrency transparent. It also allows the community to check out its protocol, fix bugs, and make improvements. The cryptocurrency project grows by allowing the community to improve its source code.

Look for a White Paper: White papers give you all the information you need about a cryptocurrency. If there is no white paper, the cryptocurrency could be a scam.

Search for Details of the Founder or Developer Team: If the founder and developing team choose to remain anonymous, you should be cautious. Scam coins are not eager to provide information about their founders as they do not want to be found when the scam finally comes to light. If you cannot find any information about the coin’s founder or its developers, you should not trust the coin.

Find out the Purpose of the Coin: Every founder has a purpose to create a coin. For example, the founder of Bitcoin wanted to solve the problems of government manipulation, inflation, and value erosion found in traditional currencies. The founder of Ethereum wanted to create a blockchain platform to run smart contracts. The founder of Monero wanted to provide complete privacy in transactions. If a cryptocurrency is vague about the purpose of its creation, it has to be avoided.

Check out the Activity: Cryptocurrencies you can trust have active Github pages. If a coin’s Github page is silent and shows no signs of activity, you should beware of it.

Follow Discussions on Social Media: Find out what others in the community are saying about the coin on social networking sites such as Twitter, Reddit, YouTube, and Facebook. If the cryptocurrency has not succeeded in getting the trust and goodwill of the cryptocurrency community, you must steer clear of it.

Study Details of the ICO: The amount that a digital currency startup wants to raise through its initial coin offering (ICO) also speaks volumes about how credible it is. Beware of companies that want to raise an incredibly huge amount in an ICO.

Check for Pre-mined and Instamined Coins: You can identify a scam coin by studying the way it distributes coins among its stakeholders. Coins are said to be instamined if a large percentage of the total number of coins to be created are mined during the first few hours of its launch. These coins are distributed among a few people who can then manipulate the coin’s value as they desire. Coins are said to be pre-mined if a significant percentage of them are mined even before the coin is launched. Once the coin is traded at an exchange and increases in value, the founders of the coin sell their pre-mined coins and disappear from the scene.

Do a Lot of Research: Visit sites such as and Bitcoin Talk to get a better insight into the cryptocurrency. Do a simple Google search for the coin. Some scam coins are difficult to spot, but thorough research can unearth most of them. Visit their website and explore it thoroughly. A website that uses language with plenty of grammatical and spelling errors is really not worthy of your time and effort. Don’t trust websites that do not provide important information about the coin or its founders.

Read Reviews: Reading reviews of the cryptocurrencies you are interested in will give you a very good idea of what to expect. Don’t forget to check out the reader comments at the bottom of each review as they are sometimes more enlightening and informative than the review itself. While reading reviews remember that even good coins sometimes get negative reviews, which is why you should not rely on the reviews alone, but should always supplement your reading with more Google research.

Research Promoters of the Coin: Many times, it pays to research the people who promote the coin. Ask whether the scam company is paying these people to promote their coin. You will find most of these promoters on YouTube. These are actually “pump videos” created by the company in a desperate bid to get more investors for their coin.

Watch Out for Sell Walls at Cryptocurrency Exchanges: Before purchasing an inexpensive cryptocurrency in the hopes that its price may soon rise, check out for sell walls. It happens at exchanges that have non-functional wallets. You will buy the coins but will not be able to trade them. You can neither withdraw them nor sell them at the same price you purchased them for. AllSafe is one of the biggest examples of a scam coin with sell walls. If you visit an exchange called Yobit and buy AllSafe coins, you will be stuck with them.

How to Avoid Scam ICOs

Crowdfunding enjoys a great deal of popularity in the world of cryptocurrencies. Usually, these crowdfunding campaigns take the form of initial coin offering (ICO). During an ICO, the company behind the new cryptocurency convinces investors to part with bitcoins, altcoins, or fiat currencies in exchange for their cryptocurrency tokens. Almost every week, an ICO is being held in the world of cryptocurrencies. Many investors have used these ICOs to become rich, but most of the time, ICOs end up impoverishing gullible investors.

If you are interested in taking part in an ICO, watch out the following:

Tall Claims: Scam ICOs are not honest about their projects. They promise too much, and naive investors end up believing all their promises. If you end up at an ICO that claims to have a coin that will replace bitcoin in the next time, you can be sure that the company is a scam.

Empty Words: Scam companies are in the habit of using impressive sounding words that mean nothing. They just look and sound impressive, but when you really listen to them or read them in the hope of making sense out of them, you will find that they make very little sense.

White Paper: If the company’s white paper has the same impressive sounding words that mean nothing, you can be sure you are looking at a scam right in the face. Genuine white papers are highly technical in nature as they are trying to explain the technology behind the product.

No Code: If you cannot find a code to download at Sourceforge or Github, the ICO project is not worth bothering about.

How Investors Continue to Get Fooled

People continue to get fooled by scam coins even when it is quite obvious that the cryptocurrency is a scam. They refuse to learn from painful previous experiences and fail to listen to the warning words of experts. Some investors are just too trusting and gullible and fail to do the tough homework that has to be done before investing in any cryptocurrency.

Bob Wood, the chief executive officer and founder of Nexxus Partners, says that scams usually take advantage of people’s greed and ignorance. Scammers also take advantage of the fact that people do not easily understand new technologies.

According to Wood, there are two major varieties of cryptocurrency scams:

Opportunities Disguised as Cryptocurreny: Wood says that the major features of all cryptocurrencies are decentralization, unlimited use, privacy, controlled supply, transparency, public blockchain ledger, and open source code. Any cryptocurrency that only pretends to have these features cannot be a trustworthy coin. Giving the example of Onecoin, Wood says that Onecoin is a Ponzi scheme that promises huge returns on investments. These returns can come only from one place—money invested by new investors.

Cryptocurrencies without Value: These are cryptocurrencies that have all the features that cryptocurrencies ought to have, but have simply failed to be of any value to users. According to Wood, anybody can build a cryptocurrency software platform. It costs just one bitcoin and can be done in a few days. The bigger challenge is to create a market for the new coin.

Biggest Scams in the Cryptocurrency Industry

Over 600 cryptocurrencies are listed at and many of them are scam coins that have to be avoided. There are several websites that provide lists of scam coins and dead coins. Some of these scam coins are Phenixcoin (PXC), Bitbar (BTB), Mincoin (MNC), LuckyCoin (LKY), Americancoin (AMC), Richcoin (RCH), Nucoin (NUC), and Bitconnect, among others.

Here are some of the biggest scams in the cryptocurrency industry:

Onecoin: Almost everybody in the cryptocurrency community has heard of Onecoin, a Ponzi scheme disguised as a cryptocurrency project. A company called Onecoin Limited, based in Gibraltar, is behind this project. They are believed to have made over $50 million in just one year.

LCF Coins: These coins are popular among Chinese investors, but a financial advisory company called Rothschild & Co. has warned that LCF could be a Ponzi scheme. The company does not have any social networking sites or websites, but promotes itself through Google forms.

Visa Coin:  Cryptocurrencies that use the names of well-known brands in the banking industry are just asking for trouble and those who trust such a coin will definitely lose their money. The unknown team behind Visa Coin disappeared after fleecing 135 bitcoins from gullible investors.

Eros Vision: This company claimed to create an adult platform based on female escorts. They ran an ICO and distributed 9,500,000 Eros coins. Even after it became obvious that they were a scam, investors continued to get fooled, letting the company collect $10 million in investments before completely disappearing from the scene.

Speed Coin: This coin was launched on April 13, 2014. It claimed to have all the advantages of Bitcoin along with added features such as faster transaction speed. They used the SHA256 algorithm and limited the supply of speed coins to 21 million. They successfully touched a market cap of around $28 million before beginning to fall. Trading on the coin stopped on May 22, 2014 and many people consider it to be a scam coin.


The above guide should help you steer clear of the scam coins and identify the trustworthy ones. If you want to become an expert at identifying scam coins, you can check out the information on the following websites:

Bad Bitcoin

Bitcoin Talk Bitcoin Scams

Steemit ShitCoin List

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