A Bitcoiner fails his last attempt at entering his seed phrase; a coin network gets hacked and everyone’s coins disappear; a 51% attack brings down a cypto’s network and send prices to hell fast. Decentralization is the single largest benefit of blockchain technology- but this same concept can cause headaches and heartaches for all. But with each and every scam and attack, the networks of blockchain are becoming more secure and bulletproof.
A Horror Story
One of my friends- we’ll call him Andrew, recently lost a significant portion of his portfolio to a crypto scammer. He held (and I hold) a good amount of Theta tokens in his online hot wallet provided by the Theta Network. For those of you who don’t know, Theta Network is a video network based on blockchain technology where users can stream videos for each other- think YouTube but decentralized. Some of its biggest planned use cases include gaming and Esports videos- something I’m incredibly bullish on since Esports is actually more popular among Gen Z than baseball and soccer (football) worldwide. The founders include a couple of YouTube execs and the project has some solid support in Silicon Valley.
The Theta Network lets users set up Edge Nodes and Guardian Nodes, which are ways to become nodes on the network and earn TFuel, the network’s gas fees. Andrew and I both wanted to set up these nodes on our computers- but doing so required days of downloading time. Weeks went by and neither Andrew or I were able to set up nodes successfully on the network so we could start earning TFuel.
Andrew was pissed about this, and attempted to reach out to the creators of Theta Network via the ‘contact’ on their website, but didn’t get a response. Often these projects have very little in the way of support because there may be less than fifty people working on the project and it can have millions of users. Earlier in the year Andrew had received help from having a botched transaction on Theta- the team was able to solve the issue and his money that was temporarily in the crypto twilight zone had been recovered.
Andrew took to Twitter and tagged @thetanetwork asking about why his Theta Edge Node was not running properly. Someone responded. This person claimed to be an admin at Theta, just like the person who had helped Andrew earlier in the year with his botched transaction. The admin gave Andrew clear steps for setting up the node, and Andrew followed. At one point the admin asked for Andrew’s login credentials so he could finalize setting up the node. Then Andrews’s Theta tokens were gone forever.
Andrew agonized over this for days. He isn’t a stupid person at all- he’s got degrees and certifications out the wazoo and works with patients in the healthcare industry with his own successful private practice. Thankfully he’s in a position where he can quickly recover the losses he experienced. He was able to move past it. Since this event, Andrew has had some heavy doubts against cryptocurrencies in general, and sees scammers and crooks as a huge impediment to the global adoption of the technology. I tend to agree.
The problem is that in the moment everything had felt so believable and real, and I think the fact that Andrew had recently had contact with Theta’s actual support team made matters much worse. It’s said over and over again, but it cannot be said enough- never give your crypto private keys to anyone, ever. I’m even skeptical of online hot wallets, and will be aiming to get all currencies including my shitcoins onto my hardware wallet as apps become available for doing so- and even then, I need to double and triple check URLs when transacting online with my hardware wallet and staking. Be ultra careful on social media- this is where scammers look for their victims. I’m on several Facebook groups and it still amazes me just how much shit gets past the admins.
There will always be scammers, crooks, and shitbags. Elderly citizens and others are preyed upon everyday- there’s a prince in Nigeria that needs your help! Cons, theft, and lies are as old as humanity itself, and these people deserve to answer for their crimes (preferably with blood:)). Since blockchain is a smaller asset class and a younger technology, a larger portion of the people investing and using crypto are these mother f***ers. It’s slowing adoption and generating doubt among everyone. The problem with decentralized is that there is no central authority, FDIC insurance, or legal structure to protect against bad actors. A bank can reimburse you if your credit card is stolen. The purpose of blockchain tech is to have all of that protection built in- but most of this pertains to hacks to the network, like 51% attacks. The human element of someone needing help and another pretending to be someone they’re not cannot be protected against with technology- only know-how and laws. This goes back to my thesis that crypto regulation will actually boost investment in the asset class– and send prices soaring. Only a small percentage of transactions have to do with this type of fraud- but they have an outsize impact on the asset class and can be devastating. As Bitcoiners we must never forget Mt. Gox and The Silk Road- the first being an instance where hundreds of millions Bitcoin were lost or stolen and the second being a highway for vice (prostitution, human trafficking, drugs). When new technologies come online, it usually invites a lot of illegal activity. 30% of Google’s search volume is still for pornography- and the AI that was used to build Google Images was originally built to screen out nude images from appearing.
Maybe someday crypto will be safe like Oslo, Norway. But for now we need to assume it’s New York in the 1970s (not safe). There are some safe neighborhoods like SoHo and The Upper West Side (Coinbase, Kraken), but let’s assume the rest is a jungle (including Robinhood.) The asset class has and will continue to deliver outsize returns relative to the stock market, but with it comes the volatility and scammers.