Exchanges: A New Frontier for Scams
The fall of Mt. Gox, the Tokyo Bitcoin exchange, is legendary. But with new markets showing up all the time, exchanges may be the next frontier from scams and coin losses. A lot of user still keep their assets in exchange wallets of varying quality.
In addition, the series of hard forks of Bitcoin, especially the ones that are not very famous and of dubious qualities, often crop up together with new exchanges and are the only places the coin is traded. Sending balances to those exchanges may be risky.
But even for good exchanges, sending coins may lead to losses or slowdowns. In the case of Bitcoin Gold, a still young and slow network expands the time needed for up to seven confirmations, and some users report funds lost in the transfer.
China's ban catalyzed the process of opening new exchanges in neighboring countries, and a lot of minor markets have appeared, raising red flags for scams.
In any case, it is not a good idea to send funds to those exchanges, even as they trade coins not seen elsewhere. A recently added exchange, Koinbi, has been flagged for a scam. Even in a fair exchange, a smaller market would be easier to manipulate with even a small amount of Bitcoin, thus containing more risk.
With Koinbi, users immediately faced withdrawal problems:
“Why the withdraws no work??? I need my Btc! — CM-CryptoEnthusiast (@carlitosmcp_) November 27, 2017”
Others have warned of an outright scam:
“SCAM ALERT! @Koinbi_Exchange is a scam Do not deposit any funds into it! RT! pic.twitter.com/Bhe2ppzsnV — Cryptogrande (@Cryptogrande) November 26, 2017”
When it comes to exchanges, a good track record is a must, as new entities can get away with users' funds. Even larger cases like BTC-E have proven untrustworthy overnight, so the newly created small exchanges are a clear-cut risk.
Other small exchange services offer purchase through PayPal, a rarity in the world of cryptocurrencies. PayPal is rarely used, since refunds are not usually given in Bitcoin transactions, and there can be no proof of the purchase falling through. Usually, sites that include a PayPal payment option have some amount of cryprocurrencies available and cap the daily sales.
While in the future new exchanges can prove themselves, like Binance did in the past few months, it is best to avoid them for now, especially for larger amounts of crypto coins.
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