This is a story that I hope never happens to you. It happened to me and when it did I was tempted to just walk away from Bitcoin and never look back.
Early on I decided to purchase about one tenth of a Bitcoin for somewhere between nine and ten dollars. My Coinbase wallet provider allows me to link my regular bank account so I can make the exchange from fiat to Bitcoin without having to go through the exchanges. The transaction takes a few days to fulfill, but it’s adequate since I’m not looking to make quick currency trades at this point but just trade from one to the other as needed.
While waiting for my one-tenth BTC to land in my wallet, I discovered a number of sites where I could earn small fractions of BTC and within hours had a steady flow of micro deposits flowing into my wallet. Although the amounts were small, it was fun watching my balance grow.
At first I thought I’d improve my holdings by selling my Bitcoin high and then buying it back low. Since I was only working with ten or twenty dollars’ worth at a time that proved to be almost impossible as the modest transaction fees would wipe out any gains from all but the largest fluctuations in the Bitcoin-Dollar exchange rate. But I went back and forth a few times and before I stopped that I had “invested” a net of $20 in my Bitcoin wallet and gained a few thousandths of a Bitcoin from my “trading.” But I’d earned more than that by spending lots of time on BitcoinGet.
That’s when I started to think it would be really great if there was a way to make my Bitcoin balance grow by putting it into some sort of investment. What I wanted was a solid security that paid regular dividends but I hadn’t gotten to the point of putting this into words. I just knew I wasn’t going to be able to go on forever earning 10,000 uBTC a day on BitcoinGet. But… if I could somehow take those 10,000 uBTC and maybe turn them into 12,000 or 15,000 uBTC, and keep doing that with the Bitcoin I had plus the Bitcoin I’d continue earning, then I’d be getting somewhere.
It was this desire that turned out to be my undoing. One day I was just minding my own business, entering Captchas on BitVisitor so I could get paid to view their ads when I saw it. It was a banner ad from a new website called Mining United which made the promise that with them you didn’t have to gamble to win. Considering at the time the vast majority of the websites I was paid to visit were gambling ones, that was definitely some cleverly targeted advertising. I clicked on the banner and landed on the website.
The premise was simple. Send a small amount of Bitcoin to the provided address and that amount would rent you a spot on the mining server for a few days. When your time was up, you’d be sent your “share” back plus thirty percent of whatever that share generated. In this way, 0.25 BTC could “grow” into 0.27 BTC, 0.1 BTC could grow into 0.11 BTC (more or less) and so forth.
I knew very little about Bitcoin mining at the time (still know very little) so had no way to really evaluate if the promised gains were even realistic. Only I didn’t realize how little I understood. There was a part of the website where you could look for your address and find the expected date for your payout, there were testimonials by people claiming to have already made quite a few Bitcoins through this service and the site itself even had a few helpful tips about how to avoid scams as well as urging everyone to be very careful about gambling. Some of those gambling houses “will rob you blind,” the site claimed. It all seemed very legitimate and official.
I sent them 0.25 BTC and waited. I had some questions about whether or not my payment had gotten through as I couldn’t locate my address on the page where all the addresses were listed, so I sent an email to the contact address. I received a reply within hours, and the operator quickly located my address. He or she was very helpful. A few days later I received a payment of 0.27 BTC and was quite happy. I immediately sent back another 0.25 BTC. I also made three separate payments of 0.1 BTC, bringing my total “investment” to 0.55 BTC, which represented all the Bitcoin I had earned and bought to date.
Then I waited. And waited. I checked the status of all four of my payments repeatedly and the expected payout date came and went. I started to worry.
The website abruptly changed from Mining United to BTC Cheap, and at that point I couldn’t locate my payments anymore.
Then one morning I checked the site and it had been completely taken down. All that was left was an announcement that due to increased Federal regulations Mining United was shut down. There was a link to the terms of service with the claim that this was completely within their right to do so. Once I read the terms of service more carefully, yes, the translation from all the legalese basically said that they could (and would) cut and run at any time. How did I not see that before?
There were updates for a few days and promises to refund everyone, then the claim that all the refunds had been paid. I never got one.
At this point I decided I wanted to know more about Mining United. Feeling rather sheepish that I had not done this due diligence prior to emptying my wallet, I hit Google.
My search led me to a thread in the Bitcoin Forum that was talking about whether or not Mining United was a scam. Reading the thread I learned all I needed to know. Mining United was definitely a scam operation. It lasted for an entire month–an unusually long time for a scam–but unfortunately I did not discover it until the very end. Reading the thread I also learned a few important principles both about sound business practices and about mining itself which should save me from making the same mistake again.
Finding the Bitcoin Forum has turned out to be a wonderful outcome. I have definitely learned a lot and have started to make some friends there. It was through a different thread in the Forum that I decided to take the plunge and begin writing for the Devtome. As I write this I am about six blocks away from receiving my first payout for my contributions of the previous round! If I were to trade all my Devtome earnings for Bitcoin I would easily have several times the amount I lost from the Mining United scam. Not only that, but I have started to learn more about what Bitcoin mining is (as well as what it isn’t) through some very knowledgeable people I have connected with through writing for the Devtome. One of these knowledgeable miners told me about the ASIC MINER company and its securities, referring me to the thread which chronicles the company’s startup, initial public offering and what follows. I have only made it through the first fifty pages of that nearly 500 page thread, but I learned enough to purchase my first hundreth share of ASIC MINER through the BTCT virtual exchange, and I plan to buy more holdings in that company with both my Bitcoin and Devcoin earnings.
By way of disclaimer, I am not recommending ASIC MINER as an investment at this point. I still have more homework to do, and I do not want anyone making an investment decision based solely on what I have written here. I do hope you will decide to learn more about ASIC MINER and do your own homework as a result of reading this, though.
I will say that from what I can tell so far, ASIC MINER is exactly the sort of thing I was looking for when I got suckered by the Mining United scam. Perhaps the main reason I got suckered so easily was that I simply did not know the real thing might actually exist. I’m willing to put up some Bitcoin and Devcoin towards my current belief and hope that not only does it exist, I may have just found it.
But regardless of whether or not I’ve truly found a way to grow my Bitcoin balance, I have learned some valuable lessons through my unfortunate experience of getting scammed out of a half Bitcoin.
The first thing I came to terms with was that the Bitcoin world, and really, the entire universe of cryptocurrencies, is a lot like the Wild West. The good news about Bitcoin is that it’s largely unregulated and operating outside of centralized government control. That’s also the bad news. The government regulates industries ostensibly to prevent people from getting hurt by scammers, or at the very least, to catch and punish the scammers. Many times people are protected by the various regulations, and scammers do regularly get caught and put in jail while many other would be scammers are deterred. When a number of gullible Bitcoin newbies such as myself got taken advantage of by Mining United (and a fellow victim estimated through his own research that Mining United stole at least 600 BTC), we had no recourse. Sure, we could try to contact Mining United and demand our promised refunds, but there was no law enforcement of any kind to back us up. He or she got away with it, plain and simple. And considering the numerous payments made out to the gambling site Satoshi Dice from the addresses we used to rent our space on the nonexistent mining setup, it’s a good bet (pun absolutely intended) that those Bitcoins are no longer in his or her possession.
Personally, I prefer the decentralized, unregulated state of the Cryptocoin universe. I also know that it means it is imperative that I take responsibility for my own well being because there is no Big Brother government to go crying to if I get hurt. Practically that means I need to take the time to learn about potential ways to invest my Bitcoin and not be in too much of a rush to take the plunge. Something that’s solid will still be around a week later when I have completed my due diligence.
A very easy way to perform due diligence is to search for the opportunity on the Bitcoin Forum. The scams get noticed and talked about pretty much immediately, and Forum members in the know are happy to wax eloquent about the specific reasons Opportunity X is really a scam. I’ve read through several scam alert threads and have learned a lot.
Another lesson I’ve learned is that even an honest opportunity might turn out to not be a good investment. That goes without saying, but sometimes we can mistake good will and virtue for sound financial practices. While I have certainly not learned everything there is to know about mining Bitcoin, my considered opinion from what I have learned is that honest or not, any kind of entity selling mining contracts is unlikely to be a good investment. One of the characteristics about Bitcoin mining is that the difficulty level tends to go up as better technology gets put towards mining. A contract which based on how mining is done today would yield well could turn out to yield nothing within a few months. The same would go with purchasing mining hardware. It could be profitable, but you have to really know what you’re doing. If you don’t want to learn all the technical details about mining and mining technology, then cultivate a relationship with someone who does if you hope to in some way profit from it.
This leads me to another bit of investment wisdom which is to invest in what you know about. I don’t think you have to know absolutely everything about a given security or opportunity in order to put some money into it (after all, risk is a built-in part of any investment), but you do have to be willing to educate yourself as much as possible. Probably most important is knowing what you don’t know. Sometimes we can be so ignorant about a matter that we don’t even realize we are ignorant, and that’s where we can be really vulnerable to getting scammed.
Despite the discouragement of having so quickly and completely lost the Bitcoin which took me weeks to earn and purchase, I do believe I have come out ahead. I’ve gotten more efficient about earning my Bitcoin so replacing them will be easier. I’ve found the Bitcoin Forum, started writing for the Devtome (just got my first payment for that!), learned some important lessons, met some cool people and got exposed to ideas and information I had no idea were even out there.
Overall I’ve come out ahead, and all things considered it could have been much worse. I have heard of people losing hundreds and thousands of dollars (event their entire life savings) in scams. I only lost what I might have spent on a date night with my husband. Actually rather cheap tuition for all I learned as a result. But I sincerely hope that you can just skip the part where you get scammed and go straight to the part where you learn all the cool and quirky things about cryptocurrencies that I am learning, and meet the cool people who are into them. And maybe you too will find some real potentially life changing gems buried deep in the various esotheric threads on the Bitcoin Forum.
Read Scammed! on the Devtome!