A few thoughts on "Bag Bias" and other problematic stuff
I wanted to write a blog post about this matter since quite some time, actually since shortly after I entered crypto. Correction, since shitcoins became a thing. Why? Because soon after I entered crypto, I realized that there are lots of crooks and frauds who tell you anything to make a profit. After all, this is about money, and where money can be made, you will also find human waste which tries to separate you from yours.
This article should serve as a guideline for noobs who don't have years of experience with scams and how to spot them. So, let's dive right into it!
What does DYOR mean and why is it important when dealing with cryptocurrencies?
DYOR means Do Your Own Research, and it means (or should be understood as, in the realms of cryptocurrencies) trust noone. Nobody here has any reason to recommend you anything you can turn into a profit. To be fair, there are certain players who promote cryptocurrencies they believe in, but for the sake of your own (financial) safety, just assume that everybody is after your money.
Luckily, I implemented this attitude quite early, which helped me a lot to get around most scams. Implementing such an attitude generally helps you to stay safe in Cryptoland. Apply it to what you read (new coins being promoted / touted by "influencers") and also to your security: treat any aspect of crypto like everybody is here to steal your money. While crypto is – like everything in life – not actually that binary, it's a good starting point to assume it was, at least until you have enough own experience to distinguish between the nuances.
"Reasons" to not Do Your Own Research
There are two answers to that, both going in opposite directions. The short answer is: none. There are no reasons to be negligent with your research and just listen to what someone else tells you. Remember (and I will probably state this a few more times throughout the article): there is no free lunch. Nobody has any reason whatsoever to help you make a profit. If there was a profit to be made, they'd take it themselves. This is especially true for:
random people shilling coins on Twitter, bitcointalk.org, YouTube or whatever platform you're on
paid group leaders (if their trading was actually top notch, they'd trade on their own and collect the insane profits they promise you for a fee… most of the times, their trading is actually bad, which is why they have to resort to "teaching others" to make back their losses from tra... from gambling on the crypto exchanges)
"crypto influencers"… as I mentioned, not all are bad guys, but it's better to assume so until you learned to differentiate
coin announcements on bitcointalk.org
I will cover these points one by one, explain where to be careful, how to debunk the bad actors and how to prevent getting scammed.
Now you know that there are no reasons to research your stuff. But there are "reasons", namely laziness and greed. In markets like the cryptocurrencies, greed is a major, omnipresent factor. Wherever you look, if you look closely, you will find greed. And if you're honest with yourself and / or have a good self conception, you will realize (e.g. while trading) that certain situations like an emerging bull run will trigger greed in you, too. This is only natural, and this is exactly how these markets work, so there is basically nothing wrong with that. It's just important to understand and to acknowledge it. If you're able to do this, you already have a good toolset to help you get along.
The other "reason", laziness, is a human property like greed, too. How distinctly these properties are developed differs from person to person. But like a slide control they define your success in cryptoland. The good thing with sliders is, you can (learn to) use them to control whatever they regulate. I will cover that later in the article.
What happens if you're negligent?
The answer is simple: you will lose your money, one way or another. If there's one thing for certain: scammers in cryptoland are clever. And creative. I've seen some of the most sophisticated scams taking place in cryptoland. Always keep in mind: there are always people who are more intelligent than you, and they might use that to separate you from your money. People got their identity stolen for a few thousand US Dollars. So, don't assume you're not a "worthy" target.
I will give you a few examples of successful scams, some being very successful, some not so much. But all share one thing in common: it's preventable to fall prey to them if you use your brain and do some research.
1. BitConnect: ~2.5 billion USD scammed
BitConnect was a HYIP (high yield investment program). They had their own cryptocurrency (which was only traded at their own exchange with no way out for any paper profits, ensuring they will keep all of the money). Some people allege that it wasn't even an actual cryptocurrency, but mere database tokens (money which only existed in their database with no real cryptocurrency network behind it).
On YouTube, many many so called influencers touted that project, and the insane amounts of money, they allegedly made. This derailed pretty quickly, and people like Trevon James, CryptoNick, Craig Grant and Ryan Hildreth promoted the project heavily on YouTube, leveraging their influence / subscribers to fool even more to sign up on that scam.
2. Telegram scams in different variations
No way near as evil as BitConnect, but still annoying. The scammers go for much smaller amounts, and they're rarely successful. But you still don't want them to succeed with their scam, especially not with you being the victim. Regarding the lack of success: I know that because I got like 2-3 of them to talk to me about why they do this, where they come from and how much they make with these kinds of scams. For the most part, they're poor, desperate people from developing countries, and while this is all sad (once I sent one of them 50 bucks because I somewhat felt sorry for him – as a thank you, he tried to get me to install a malicious Chrome extension ^^), you still don't want to lose money on them.
The scams work like that:
Support admin scam: this requires that you're in a support chat from an exchange, a project or anything people could use some sort of help with. Try it: go to the Bitfinex Telegram room and ask for help because a deposit of yours is stuck. Just give it a try, it's fun. After some time, you'll get pm'ed by someone with an identical name to an actual support person from that service (in this case, Bitfinex). He will tell you that he can solve your problem and guide you through a series of bullshit instructions you'll have to follow closely. They'll create pressure ("do it fast, my time is limited" and the likes) and eventually lead you to make a deposit to a Bitcoin address they control.
Security deposit scam: Someone who has no common Telegram rooms with you (strong indication that they have your Telegram handle from a former scam ICO you took part in... shame on you!) will contact you out of nowhere, asking you for help. He will pretend to be from a country which has banned crypto, and now his coins are stuck. You will receive a link to a more or less genuinely looking crypto exchange website they control, and he will offer you to help him doing an internal transfer of funds from his account to an account you newly created for that you can keep a portion of his BTC as a thank you. You, greedy as you are, will think that's easy money, agree and sign up. You will give him your account ID and he will initiate an internal "transfer" (actually, he just enters numbers into a database, so a random balance shows up in your account). Now, it's your job to initiate a withdrawal to a BTC address you control, keep ~20% of his funds and send the rest to a BTC address he controls. But it won't even get that far, because as soon as you initiate a withdrawal, you will be notified that you will have to make a small security depost of 0.01 BTC (amount varies) to ensure "your account is legit". How that proves legitimacy is really beyond me, but that's how this scam works. Now you might think, considering you're going to get 0.2 BTC soon anyway, 0.01 isn't that much and you send the BTC. Okay, you think, now let's withdraw. But as soon as you try again, the fake exchange website will tell you that this is too large of a withdrawal, and they need another "security deposit" of 0.05 BTC to prove even moar legitimacy. What a bullshit, right? But I know people who have fallen for that. Once you deposit the second time, you'll never hear from them again. Or who knows, if you appear dumb enough, they might try to milk you even more.
Casino ripoff scam: Scammer pretends to be an admin at an online casino, and that he can manipulate rolls. He will offer you to make you winner and you share profits with him in return. He will then manipulate a few rolls for you so you see "it really works", and when you try to cash out, the rest works like the "Security deposit scam": you'll have to deposit a comparatively small amount of Bitcoin to be able to withdraw funds. But of course, you will never be able to withdraw anything from that website; once you've sent that "security deposit", the scammer's mission is completed.
Solution: learn to do proper research!
It's hard to stay alive in Cryptoland, I think nobody who has been around here long enough denies that. But there are a few ways to prevent getting scammed and… well, survive.
1. Get your greed under control
Don't be a greedy fucko. While there's probably little you can do against the feelings of greed to come up, you can very well notice when those feelings arise and act accordingly. This is of great help and you can litterally counter trade yourself: when greed reaches its climax and you desperately want to increase your position size, even if that means to max out the leverage: reduce your position size some. Just try it. You will notice that you start making more profits. If you're a psycho-/sociopath and don't experience such feelings, just get an idea when others' greed / FOMO reaches its top. ;)
2. Don't be lazy, do your own research
If someone on Twitter (be it shills, "OGs", influencers, whatever) tells you what to buy, ignore it. They don't do research because they hope you'll make a quick buck. Most likely scenario is that they own a shitbag themselves which they don't get rid of and that they need someone to dump on. If you follow their recommendations and buy, chances are good you just bought something you never should have bought, and if you're bad enough of a person, you'll turn into a shill yourself because you're desperate about your shitty investment and now search for a greater fool to dump on.
General appearance of the project: does the ANN thread look professional or is it full of typos, offers little information about the project itself, stays vague about how its future plan and implementation of technology?
Plagiarism: check the whitepaper, copy a section of text, toss it at Google and see what happens. If you get similar looking results, take notes on where / what project they come from and check even more sections for plagiarism. Many scam projects copy together their whitepapers from different projects, hoping nobody will notice until they ran with the money. With your hard earned money!
Check the team itself: an honest project is transparent about its team. Scammers know that, and they have adapted to make your life harder. We'll get to that in a minute. What's generally important to do:
Check their names. Google them and see where they show up. If you get results which point toward something shady, don't invest. If you don't get any results at all, don't invest, because it's likely they just made up the names.
Use Google Image Search to search for their pictures. Some scammers mock their victims by using photos of convicted criminals as their team members, or in the "satisfied customers" section. This really happened: a scam ICO used the image of a convicted rapist on their website to make fun of "investors" (read: "they're so stupid, they won't even notice that).
AI / neural network generated images: in the past month, it has become a thing among scammers to evade detection through woke internet detectives by not using stolen pictures from random nobodies, but instead using neural networks to generate team member images for them, instead. Benefit of this method is that a Google image search will lead you nowhere, but the drawback is that anyone with half a brain can detect such images. At least when you look closely. Example: the most recent Satoshi scammer has used AI to generate an image for him. Check the image: if you zoom in enough, you'll notice that his glasses don't look natural. Follow the lines of the frame, it leads nowhere / kind of "melts" into his skin. This is a pretty common issue with AI face image generation, as neural networks don't really generate images like we humans understand them. So, make sure to inspect the images closely and whenever you find hints on AI image generation, stay away from that project. An honest team doesn't do this. Being anonymous as a developer team can make sense (after all, Satoshi is still anonymous), but if an honest team of developers wishes to stay anonymous, they wouldn't publish team pictures at all.
Investigate their social network profiles: Twitter, Facebook. LinkedIn and whatever they linked on their website / ANN thread. Are the profiles new, is it likely they were created for the sole purpose of being linked under that project? If so, stay away. Their Twitter accounts are something you want to put a very close eye on, by the way. As you might or might not know, you can buy lots of followers for relatively little money. Check pages like Twitter Audit to get an idea on how many of their followers are genuine and how many are fake. Social Blade is a good tool (if they're in their database… a Twitter user is only added to their database once someone searched for that particular account) to check for irregularities. If the graphs illustrating the development of their follower count show weird spikes which don't match the rest (example: most days, that account gets an additional x followers, but every couple of weeks, there are days where they got x*100 followers for no obvious reason), stay away.
Telegram: a new kind of "scam" has popped up, recently: OKCasino, formerly known as OKCoin has opened Telegram chatrooms for several countries. These rooms were full of bots talking nonsense / doing scripted dialogs (I wonder who is writing them) all day long, to make it appear that their chatrooms are actually active. So, if you notice Google Translate German (or whatever your language is) or general talk which looks like it comes from bots, stay away. A honest venture does not have to put up with such kind of manipulation.
Stay away from ICOs! While this is nothing research based, it's still an important factor to consider when conducting research. Trust me, in 99% of all cases, you don't want their crappy shittoken. Here's why: you're paying them upfront for nothing in return. Remember, it's not your job to pull their sorry asses out of poverty (I think @22loops once used that wording on Twitter but I can't seem to find it)! As soon as they have your money (for development purposes, yea sure), they have no reason at all to deliver anything of value to you, the "investor" (or, prey, as I prefer). They already got the money, why the hell should they develop anything? They already got paid. And because of that, they have no reason at all to take care about their shittoken to reach a profitable price. Why risk the funds they already have? It makes no sense. Plus, as soon as they have a market they can trade on, they have another way of scamming you: they dump on you. Congratulations, you just got scammed twice by the same project.
It's pretty simple if you're willing to follow those few rules. Don't mindlessly jump into things you get recommended by people you don't know, don't blindly trust developers and their promises (especially if they want your money before they have anything to show), don't buy things based on hype and stay away from things you know little about / haven't researched properly.
Keep in mind that while "playing crypto" might feel like you're playing with gambling tokens, but it's still your money you're giving away blindlessly. Imagine a stranger approaches you on the streets, asking you to give you a big chunk of your net worth, because he has a great idea (they all have "great" ideas!) and he promises he will deliver. Would you do it?
If you know the answer, think about it the next time you're thinking about buying into a project you know nothing about!