Cryptocurrency decrypted ,Is another scam at global level waiting to happen

At the outset, let me clarify that Bitcoin(cryptocurrency) itself is not a scam, but how Bitcoin is being sold is a scam. More about that below.

Bitcoin is the latest buzzword in town and everywhere one goes ,real or virtual world ,one is bombarded with bitcoin prices and other details thus I thought of sharing my 2 cents on this topic . 

Some recent development why a lot of people have jumped on this bandwagon

• Have risen more than 15 times in last 1 year 
• Touted as a boundaryless currency which is not governed by any government 
• Transferring money at a click of button
• Highly secured

To understand crypto currency one has to first understand blockchain which is the basic idea whose offshoot is bitcoin or crypto currency . 

Block chain

A friend posted this beautiful explanation of block chain for dummies 

Let us assume that there are two people Ram and Shyam. Ram borrows some money from Shyam and Shyam writes it on a piece of paper signed by Ram. After some days Ram denies the existence of such document and claims that Shyam has forged that piece of paper. Shyam would now find it difficult to prove that Ram actually owes him Money.

In this example Ram and Shyam are two nodes.

Now assume the same scenario, but among a society. So there are ’k’ pair of people transacting with each other. And the only proof that each pair has, is that piece of paper. Looking at this scenario, one person, Sita comes up with a solution. She suggests maintaining a common notebook of transaction for entire society. She designates town hall to be the place where every exchange takes place. In the common notebook, every pair writes the transaction and then the notebook is kept safely. People rejoice and accept Sita as their leader.

That notebook can be called a database.
But one day, somebody spills wine on the notebook. This makes the notebook illegible. Taking the advantage of this situation, Ram again denies taking money from Shyam.

This is the problem databases face - single point of failure.
Irritated by this problem, Sita comes up with another solution. She suggests maintaining multiple notebooks. She chooses some trustworthy people from the society and gives them a notebook each. Now every time a transaction or exchange takes place between two people, Sita instructs some of those trustworthy people to mention the transaction in their notebooks. So the data is repeated in the notebooks. Now, even if one notebook is destroyed, chances are that all the data regarding transactions are still present in the combination of other notebooks.

This is a distributed database and multiple notebooks are the multiple nodes.
But next day, another problem arises. Sita has a friend named Pappu who owes a lot of money to some people in the society. He asks Sita for help and she agrees to help him. She instructs all the people with the notebooks to remove the entries where Pappu received money. Now Pappu doesn’t owe any money based on the notebooks.

This is the problem with distributed databases - they are centralized. That means one single entity owns all the nodes/resources and can make changes as they deem fit.
When the people from the society come to know of it, they remove Sita from the leadership.

· They decide to keep a notebook each. Every time a transaction is made between any two people , all the people from the town come together and mention it in their respective notebooks. So if there are n people in the society, then there are n notebooks and no one person controls the overall representation of the transactions.This is decentralization.
· They also decide to never remove or delete an already mentioned transaction from the notebook. This is immutability.
· Now when another group of people from the society, let’s call them C, try to change a record in their notebooks, all the other people also need to make the same change(as mentioned in the first point above, all the people write all the transactions in their notebooks). Before writing the transaction proposed by group C, all the other people notice that the transaction is not correct. So they come to realize that C is trying to make a fraudulent transaction. Hence they deny that transaction and not mention it in their notebooks. They also decide to banish the group C from further participating in the group. This is how Consensus is formed and voting is done to decide the validity of a transaction in Blockchain.
· A very enthusiastic kid suggested that the transactions form a chain, so they decided to call the collective set of fully replicated, decentralized, immutable notebooks as Blockchain.

So, well. This is the easiest example I can think of to explain Blockchain. Blockchain is a decentralized, peer to peer, immutable storage network which is censor free and regulator free because of the absence of one single controlling entity. Every transaction that is written is voted upon by a majority of nodes and changing something which was written before in the chain is computationally very difficult 

What is Bitcoin ?

To start out, it is important to understand what Bitcoin really is. It would be easy to bore you with a discussion of the technology, about peer-to-peer servers and sophisticated algorithms, but that is not what you need to know.

What you need to know about Bitcoin is that distilled to its technological essence, each Bitcoin is simply a number. That’s it: A number. It is simply a series of digits, with each number being assigned to each Bitcoin.

To illustrate, I’ll randomly pull a $1 bill from my wallet, which bears No. L88793293J. Assuming some minimal level of competency by the U.S. Treasury, no other bill bears that number.

The face value of a $1 note is, of course, just $1 dollar. But two people could privately agree that No. L88793293J is actually worth $5,000.

To illustrate Ram wants to buy Shyam’s golf clubs, but Ram doesn’t want his wife to know — at least just yet — that he spent $5,000 for golf clubs. So, Ram and Shyam agree that No. L88793293J is worth $5,000 and Ram gives No. L88793293J to Shyam. Ram then tells his wife that he bought the clubs for the $1 bill. At some later time, when Ram’s wife doesn’t care so much, Ram pays $5,000 to Shyam for No. L88793293J, and gets the $1 bill back.

The only difference between Bitcoin No. ABC123 and $1 Bill No. L88793293J is that at the end of the day, the $1 bill physically exists and has a face value that is worth something, i.e., Ram could take the $1 bill and buy something off the $1 menu at McDonalds.

By contrast, Bitcoin has no intrinsic value — it is just a number. The number may have an agreed value between two parties, but the number itself has no value. Consider a bank account number, such as Bank Account No. 456789. The depositor and Bank essentially agree that the account designated by No. 456789 has the value of what the depositor puts into it, less what the depositor takes out. But the number itself, No. 456789 has no value. The same situation occurs with credit card transactions, whereby the credit card processing company assigns are unique value to each transaction, but the number itself has no value.

Let’s now talk about uniqueness. Bitcoin does have some value because there are only a finite number of Bitcoins available, because the algorithm that is used limits Bitcoin to a particular number of units, of which there should only be somewhere in the neighborhood of 21 million that fit the algorithm.

Uniqueness certainly has value. Because there is only one Hope Diamond, it is estimated to have a value in the neighbourhood of $350 million. Because there are only 100 of that 24¢ stamp with the upside down airplane, they are estimated to be worth about $1 million each. Ditto for rare coins, original Picasso paintings, etc.

But here is where the fundamental flaw in Bitcoin’s value lies: It is simply a number, and numbers are infinite — there will never be a shortage of numbers. Even if you are the world’s greatest mathematician and think that you found the largest number ever, there is always that number plus one, plus two, etc.

So, Bitcoin may be limited to 21 million numbers, but that doesn’t mean that somebody else can’t come up with a similar algorithm and thereby create their own unique set of numbers, i.e., their own cybercurrency.

For example, let’s say that somebody creates a cybercurrency that is based on known prime numbers. There are about 50 million of those, so another 50 million cybercurrency numbers could be created. Indeed, the recent boom in Bitcoin has triggered numerous companies offering their own cybercurrencies, and the amount of such numbers that they can generate is limited only by the ability of their mathematicians to create the necessary algorithms, which of course is similarly infinite.

According to that to me of all knowledge known as Wikipedia, as of December 27, 2017, there were 1,324 cybercurrencies in use. Just multiply each cybercurrency by the number of units they each support, and you get a pretty big number. And that is just the presently existing cyber currencies, recalling that all it really takes is a sharp mathematician to come up for an algorithm for a new one.

And that brings us back to the main point: Cyber currency units are simply numbers, and there is not a finite supply of numbers. Rather, the numbers available are infinite. This further means that the supply of cybercurrency units is likewise infinite. This has profound implications for pricing.

Value Calculation

The true value of any widget is determined by the aggregate street price of the item, i.e., the sum total of what all units could be purchased for today, divided by the number of additional units which are available for sale. This is where uniqueness comes into play. think of it simply in common-sense terms: The more there are of something, the less valuable each one is; if the market is flooded with something, they each have little value. Consumers see this every day at the gas pump, as the price of fuel varies primarily based upon available oil supplies.

Bitcoin Value Calculation

Herein lies the problem with cybercurrency, which is that there are an infinite number of cybercurrency units available. Divide anything by infinity, and you get a number that is almost zero — not quite zero — but as close as you can get to it as possible. This is true even if we assign a current aggregate value of all the existing cybercurrency units at $500 billion. Because it is not quite zero, we can assign it a value of 1¢, not because it is necessarily worth 1¢, but simply because that is the smallest unit by which we can designate value in our currency.

Actually, it is some number larger than zero, and thus 1¢, mainly because the Bitcoin folks have put in a lot of effort to keep each number unique and assignable to a given owner, and there are some merchants who will accept Bitcoin as if it were a government-issued currency. But how much does that really add, and how unique are those features as other cybercurrencies take hold? Suffice it to say that the answer is much closer to 1¢ than $15,000 per unit.

This now brings us to the economic law of supply and demand, by which value is determined by what a willing seller will let a unit go for, and what a willing buyer will pay for that unit, at a particular moment in time.

All of which means that the value of Bitcoin, and any other cybercurrency, is established by agreement of the willing sellers and willing buyers as to what point they would be willing to let go of or buy up Bitcoins as the case may be.

This means that an investment in Bitcoins is purely speculative — it is utterly no different than investing in gold, social-media stocks etc. So long as the number of buyers outnumbers the sellers, the price will go up, but when the sellers outnumber the buyers the price will go down.

You’d think that one would be able to spot bubbles by now, since we have three in the last 20 years, being the Dot.com (or, maybe more accurately, Dot.con) bubble of the late 1990s, and of course the housing bubble that ended in the crash of 2007, and then the instant Bitcoin bubble. These bubbles illustrate that they occur not because of sophisticated Wall Street traders looking a business fundamentals, but because the less sophisticated investors who start taking money out of their nice, safe insured deposit accounts and money-market, and start trying to shoot-the-moon with investments that they barely understand. Yet, they see other folks making money overnight and want to do so too. Ask about anybody what the key to successful investing is, and they’ll repeat the old mantra “Buy low and sell high”. The problem with people chasing investments which are already hot is that they will end up buying high and selling low.

All of this brings us to the scam element of Bitcoin. Again, as I stated at the start of this article, Bitcoin itself is not a scam. Now let me tell you what is.

The scam in Bitcoin is in talking average man-on-the-street investors into investing in Bitcoin by intentionally obfuscating what it really is, just a number, into some super-sophisticated investment by throwing out the technical verbiage that surrounds cybercurrencies, such as Blockchain technology and peer-to-peer servers. These technologies actually accomplish only one critical thing, which is that they keep particular numbers peculiar to Bitcoin, but they sure sound like Star Trek level stuff. Yet, to those not familiar with these technologies, it makes Bitcoin sounds like it has a lot more worth than it really does.

To push Bitcoin, there are now a lot of internet gurus who claim to have inside knowledge on the ever-imminent rise of the cybercurrency, There are also Bitcoin sellers who spin a load of bull so that they can sell Bitcoins to the unsophisticated investors who can’t seem to bring themselves to confront the question that “if something is anywhere as valuable as they say, then why are they selling it?”

The answer is that those who trade in anything make their money on their commissions for selling. It doesn’t matter what they are selling, so long as they can make a commission on it. The more trading, the more in commissions. Investments that are perceived as “hot” will generate a lot of trading, and so traders will naturally flock to those investments and try to gin up further interest among investors who heretofore had no interest in that investment at all.

Sure enough, getting away from the wealthy folks who have the spare cash to speculate in stuff, we’re now seeing pooled funds set up just so that the average mom-and-pop investors who are simply trying to set some money back for retirement, can throw their bucks in too. What these folks don’t realize is that they might as well just take their money to the nearest casino and drop it all on red for a single spin of the roulette wheel. They’ll either win or lose, just as Bitcoin is either going to go up or down.

And, at least the casino will pay if you win. I get the idea that some of these “Bitcoin funds” actually own no, or very few, Bitcoins, but are simply the next wave of Ponzi schemes.

I think that so many small investors seemed to be falling for Bitcoin. my take is that smaller investors should be in carefully asset-allocated portfolios so as to spread and minimize their risk, and if — and this is a big if — somebody determined to invest in any speculative investment, such as Bitcoin, they should limit their portfolio exposure to no more than 2%. But, better not to invest in purely speculative investments at all.

This takes up back to the fundamental rule of investing, which is simply to buy low and sell high. Bitcoin is already high, and astronomically high compared to its true value. Folks who buy into Bitcoin now are quite likely to be buying high and will end up selling low. There is also an old investment adage to the effect that “the quickest way to lose money is to invest in something which is already hot.” The idea there is that the folks who are going to profit have already made their money investing, and now are just looking for suckers to unload their investment on. Bitcoin is certainly hot; in fact, it’s now the hottest thing going. That by itself should raise a bright red flag for investors.

Will Bitcoin fall?

Maybe not today, tomorrow, or next week, but eventually it will fall as the novelty wears off and folks figure out that they are really just buying a number, and the number of buyers diminish.

Will Bitcoin go away entirely?

Probably not, because Bitcoin still can serve some usefulness as a unit of exchange, to the extent that it can convince merchants to accept it as currency. The caveat here is that when a bubble finally bursts, the object of the bubble usually falls into deep disrepute.

By then the scammers who prey on the little investors will have moved on to the next “big thing”. It is all a never ending cycle, limited only by the number of available suckers.

And that is a big, big number 

Issues with crypto currencies 

1. Extreme volatility
Investing in cryptocurrencies involves very high risk, as prices have been extremely volatile. Many experts are sceptical about bitcoin as an investment primarily because there is nothing for them to analyse. Since these cryptocurrency prices are not regulated, as more people enter the market lured by the high prices, the prices climb ever higher. This might lead to formation of a bubble that will eventually burst and cause widespread losses.

2. Neither commodity, nor currency
The lack of clarity about its origin is another big issue related to bitcoin. In olden days, highly priced metals like gold, silver, etc. were used as currencies. Then came currencies printed by governments (or central banks) and these are called ‘fiat currencies’. Though its proponents claim that cryptocurrency is ‘mined’ using complex mathematical formulae, they are reluctant to call it a commodity. They also claim that it is not controlled by any government and so, it is ‘democratic’. Therefore, cryptocurrencies don’t fall into the ‘currency’ category either. “It can be very risky for businesses, industry and people to trade or invest in bitcoins as it is just a formula, not backed by any tangible asset, but by sheer demand

3. Don’t invest if you don’t understand
Some global bankers and experts have warned investors against investing in cryptocurrencies, because they are of the opinion that it is nothing but a bubble that is just about ready to burst. Jamie Dimon, CEO, JP Morgan, for instance, has recently expressed his doubts about the value of bitcoins, saying “It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.” However, owners and operators of bitcoin exchanges are of an entirely different opinion.
The problem is apparent: If global bankers don’t understand the phenomenon, retail investors might not have much of a chance either. So what should you do? Follow the simple yet profound wisdom of Warren Buffett—if you don’t understand it, don’t invest in it.  

4. An unregulated space
Unlike other investment avenues, cryptocurrencies are not regulated by government entities or banks. “There is no authority like Sebi that you can approach for grievance redressal, “If we buy something with a credit card and get ripped off, we can call the bank and ask to be compensated. But if we get ripped off in a bitcoin transaction, it is impossible to get the money back. therein lies the pain of investing through unregulated schemes. 

5. The issue of legality
One major hurdle in the path of Indian investors who are interested in investing in cryptocurrency, is the confusion about its legal status. While they haven’t been declared illegal, cryptocurrencies are not recognised by the Reserve Bank of India (RBI) or any other authority in India, as a ‘currency’. In December 2017, the RBI issued a press release cautioning users, holders and traders of virtual currencies, including bitcoins, about the potential financial, operational, legal, customer protection and security related risks. In its latest press release dated 1 February, 2017, the regulator has further stated that it has not issued licences to companies for trading in any virtual or digital currencies. RBI also added, that the user, holder, investor, trader, etc. dealing with virtual or digital currencies will be doing so at their own risk.

However, bitcoin exchanges want to draw investors’ attention to the fact that the RBI has not banned them.

6. Ponzi schemes abound
Aside from the operational issues of trading in cryptocurrencies, there is also a high risk of fraud. There is still a good deal of misinformation and lack of clarity regarding bitcoin trading, and fraudsters have taken advantage of this to launch Ponzi schemes, which promise ‘guaranteed high returns’. Some companies claim to double the initial investment within a very short period of time. “The growing use of virtual currencies in the global marketplace makes it easy for miscreants to lure investors into Ponzi schemes. Investors should be careful to steer clear of such unrealistic promises Keep in mind that bitcoins are highly volatile, so it’s just not possible to offer guaranteed returns.

Also a lot of fly by night operator have come up who are offering alternate currencies and are being lapped up by gullible investor .Random cases of these operators winding up the shop have already been reported and the worst part is that there is no trace of money transactions .

7. Prone to illegal activity
Due to the lack of government control, terrorists and extortionists are also utilising the cryptocurrency space to their advantage. “Bitcoins users on either end of a transaction can remain relatively anonymous and cybercriminals have found ways to mask their addresses, so it can be difficult for government authorities and companies to trace such illegal activities, One gullible user fell victim to such hacking in September 2016. Jeswani’s computer was remotely accessed and locked by hackers, who demanded a payment of three bitcoins. However, although this person  met their demands, they did not unlock his computer and he ended up losing his data anyway.

Incidents like this make it abundantly clear that it’s much more difficult to track illegal activities in the cryptocurrency space. “Since there is a lack of information about the trading parties, such a peer-topeer non-regulated system may expose the investors to unforeseen risks including breaches of anti-money laundering and financing of terrorism laws,”. This risk also lowers the chances of cryptocurrencies becoming mainstream in India, leaving the future of the market mired in uncertainty.

How Indian bitcoin exchanges are scamming people- “Bitcoin Cash Scam (BCH)”!

Well, what was claimed to be an Independence day for Bitcoin turned out to be a candy treat for bitcoin holders with most (Yes, not all !) of them receiving their shares of new Bitcoin cash(BCH) coins. In short it means:

“ that if you hold Bitcoins, after the split/fork, you will have both BTC and Bitcoin cash balances; in other words, your coin holdings will double. Hoowa ! Double !

There were speculations that this new kid in the market would find it hard to find a reasonable price. But that’s not true! Bitcoin cash is getting enough support from users, miners, and developers. And in reality, to start with, you only need support from these key players.

But the condition isn’t same for everyone!

While the world is busy in collecting their shares of Bitcoin Cash, the Indian exchanges are busy in looting their customers! Zebpay, coinsecure and Unocoin are the major cryptocurrency exchanges in India catering almost 80% of the cryptocurrency trade in country. But they’ve stated clearly that they would not support the new currency meaning the customers having bitcoin would not receive any Bitcoin cash unlike other exchanges throughout the world.

I’m just a simple Indian who has few bitcoins on unocoin and was expecting BCH treat for myself. I just want the world to understand the true “centralized ” nature of these exchanges in countries like India.

This is the response of these major exchanges towards the event:

“If you are interested in having access to Bitcoin Cash, you will need to remove Bitcoin from your Coinsecure wallet to an external wallet by July 31st at 9pm IST,” Coinsecure said in a post.

“We won’t be supporting Bitcoin Cash and I don’t see any exchanges in India supporting it. We will be suspending operations at the end of day today (Monday), because it is unclear what is going to happen. So, we will wait for another two-three days, and once everything settles, we will be back online,” Sathvik Vishwanath, CEO and cofounder of Bitcoin exchange Unocoin, told FactorDaily

Bitcoin exchange Zebpay said in its blog post that it will not support BCC, and asked users to move their Bitcoins to their private wallets if they wished to use BCC. “Zebpay will NOT support Bitcoin Cash or its trading. If you want access to Bitcoin Cash, please remove your bitcoins from your Zebpay wallet to a wallet in which you control the private keys on or before 31st July,” the post read.

Is it a scam like none other in Crypto market with whole idea of decentralization at stake?

Apart from this unexpected nature of these Indian exchanges there are few other points that raise questions on this deceitful decision made by these exchanges:

1.   Have they already sold their customers Bitcoin Cash?

These exchanges reported that they would not be supporting Bitcoin Cash, but they are not clarifying the point that what will they do with the equivalent bitcoin cash that they would get against customers bitcoins which is obvious after the fork. Will they will utilize them for their own benefit?

some exchanges worldwide have said that they would immediately sell the equivalent bitcoin cash coins and distribute them along the bitcoin owners proportionately. Their stand of not going with bitcoin cash is OK but the decision of these exchanges not passing on the benefit of bitcoin cash is worrying.

2. Why go against the worldwide community?

As the official website of Bitcoin Cash states:

“All current Bitcoin holders will automatically own Bitcoin Cash. The existing ledger at the time of the split is preserved, thus users retain any balances they had before the split”

Various Hacks, Scams in 2017

Hard forks? Soft forks? ICOs?

Bombarded by no shortage of unfamiliar technical terms in 2017, consumers in the blockchain sector once again proved a ripe target for hackers and criminals. But, not all hacks and scams were created equal. Some rose above the froth – either due to their size or impact – as well as what they said about the state of blockchain technology and the industry itself.

Still, the impacts of these incidents were far from academic. Whether it was a simple wallet hack, fraudulent ICO or a bug in a piece of software code, investors lost millions, with nearly $490 million taken in the incidents below.

So far, none of the perpetrators of these crimes has been caught or even identified, and it's questionable whether most of these funds can be found or returned.

1. CoinDash ICO Hack

Payment and shipment startup CoinDash launched an initial coin offering (ICO) campaign early this summer, but it quickly had to pump the brakes after its ethereum address was compromised.

The startup raised $7.3 million before a hacker changed the address, causing donations to go to an unknown party. The company shut down the ICO, but promised to send its native token award, CDT, to those who attempted to donate.

While the company stated that donations sent after it had released its statement would not be honored, some investors continued to show support by donating to the hacked address, inadvertently raising the amount of stolen funds from $7 million to $10 million at the time.

All in all, the incident showcases the growing pains experienced by ICOs, which despite raising massive amounts of funds, still had to navigate the complexities of an early-stage technology.


2. Parity Wallet Breach

It was a tough year for cryptocurrency wallet provider Parity, which has the rare distinction of being cited twice on our year-end list.

Issues began in July when the U.K.-based startup discovered a vulnerability in version 1.5 of its wallet software, resulting in at least 150,000 ethers being stolen from user accounts.

The bug was found in its multi-signature wallets, compromising several companies’ ICO fundraisers. At the time, the ethers were worth roughly $30 million, but they're worth closer to $105 million as of mid-December.

The issue was deemed "critical," with the company's CTO, Gavin Wood, announcing at least three compromised addresses and saying efforts were being made to prevent further loss of funds.

It was later found that more than 70,000 ethers were already cashed out or otherwise redeemed in some way, ensuring that their loss was permanent.

3. Enigma Project Scam

Back in ICO-land, issues weren't limited to compromised addresses.

Blockchain startup Enigma saw its website, mailing lists and an administrator account on its Slack channel compromised when fraudsters launched a fake token pre-sale in August, defrauding potential investors of more than 1,500 ethers.

The hijacked accounts promised a large return on investment, and masquerading as the genuine operators of the project, those behind the effort were able to convince unsuspecting consumers to donate to the compromised website.

While the team behind Enigma was able to recover control of the company’s accounts, the ether wallet used by the hacker was emptied, and the funds were not recovered.

4. Parity Wallet Freeze

Perhaps the year's biggest security incident, this entry on the list is also distinguished by being one the few to take place without the apparent aid of a malicious party.

Occurring suddenly this November, a Parity user accidentally found a bug in the software code, freezing more than $275 million in ether in the wallet’s second major incident of 2017.

One of two widely used clients for ethereum, the miscue effectively called into question what was and is a central infrastructure component of the network, prompting some to doubt the company's offerings and renewing criticisms of ethereum itself.

In subsequent updates, developers have pushed to restore the funds, though it's now believed that doing so would require all ethereum users to upgrade their software.


5. Tether Token Hack

In another incident notable for its unresolved controversies, more than $30 million was stolen from the U.S. dollar-pegged cryptocurrency Tether in late November.

At the time, Tether claimed that roughly $31 million’ worth of tokens were taken from their virtual treasury and sent to an unknown bitcoin address.

Not a significant number in the cryptocurrency economy, the hack was more relevant as it effectively renewed long-standing criticisms of Tether the company, prompting scrutiny in the form of blog posts and mainstream news exposes.

The company later moved to blacklist the tokens stolen through an update to the Omni protocol, the blockchain on which it is based. Still, Tether continues to be dogged by allegations the incident played no small part in stirring up.

6. Bitcoin Gold Scam



Think forks were confusing? So did scammers, and those seeking to cash out new tokens awarded in blockchain splits often proved all too easy to target.

Shortly after the launch of a bitcoin fork called bitcoin gold, for example, some bitcoin users had their cryptocurrency wallets drained after using a service seemingly endorsed by the project's development team.

Marketed as a way to authenticate whether a user was eligible for bitcoin gold funds (effectively free money for bitcoin owners), the website’s operators instead stole more than $3 million in bitcoin, bitcoin gold, ethereum and litecoin.

Bitcoin gold’s development team claimed no formal relationship with the website’s developer, arguing he reached out offering to build a wallet checking service and offering to make his code open-source. The site’s developer initially claimed the site was hacked, but later wiped his GitHub and ceased responding to users on the fork’s Slack channel.

Overall, though, it was another case of consumers falling into traps over promises of free funds.

7. NiceHash Market Breach
That's not to say that long-standing companies were spared by the year's attacks.

This was the case when cryptocurrency mining marketplace NiceHash, a well-known marketplace for mining power, reported being hacked early in December, later confirming that about 4,700 in bitcoin was stolen. At the time, that was worth approximately $78 million.

It was later revealed an employee’s computer was compromised, allowing the perpetrator to gain access to the marketplace’s systems and remove bitcoin from the company’s accounts.

NiceHash CEO Marko Kobal later announced that his team was trying to determine how the hack occurred, but that it would take time to establish what happened.