Dead Coins, also known as the Crypto Graveyard, are becoming quite the phenomenon as the cryptocurrency market ages. They are starting to add up, and the proportion of these that are scams is surprisingly high.
Let’s start with the definition of a dead coin: it usually happens when the developers leave the project, take down their website (usually as a result of the above), or when the trading volume falls below $1000 for three months in a row. There are now over 1,000 coins that meet this definition.
Frequently a coin will “die” for reasonable reasons, for example developers cannot keep up with the rapid changes in the blockchain space, but a large proportion have been found to be simply scams. According to research by Traders of Crypto, scams account for a very high proportion of the failures out there.
Why do coins die?
- Abandoned or no volume – 1596 coins
- Scams (or other problems) – 528 coins
- Failed or simply short-lived ICO: 239 coins
- Joke or no purpose – 33 coins
- Limited volume / limited trades: 2 coins
Scam coins can fit into several categories. The obvious one is the ICO scam where there is no intention to launch a legitimate project. Another preferred route is the pump-and-dump scheme, where a small gang uses their influence to drive the price up, before reaching a peak that they usually determine for themselves.
Crypto traders note that “another form of crypto scam includes the simple theft of digital currency either by hacking investors’ crypto wallets or setting up fake wallets or exchanges to steal people’s money. The classic Ponzi scheme has also made a comeback, taking advantage of the unregulated market and the difficulty of people keeping up with developments in the crypto and blockchain space.”
Which brings us to the biggest scam coins to date. This is a dubious club that is growing in numbers and ambition as we go.
The Biggest Scam Coins in Cryptocurrency History
- OneCoin ($4 billion)
- BitConnect ($2 billion)
- PinCoin and iFan ($870 million)
- Gemcoin ($147 million)
- AC Chain ($80 million)
- PlexCoin ($8.27 million)
- Squid Game ($3.38m)
- PayCoin (unspecified)
- Titanium (unspecified)
Crypto traders can give you a more detailed summary of some of these scams. The OneCoin scam remains the largest to date and likely taught traders many valuable lessons in the process. It was one of the first to move, raising money between 2014 and 2016. OneCoin Exchange, which was the only means of cashing out the coin at the time, closed in 2017. Co-founder Sebastian Greenwood was arrested and is currently serving time in jail in the US, while his partner in crime Ruja Ignatovais still on the run.
The lessons to be learned here are not complicated. First of all, avoid cheat coins. Yes, DogeCoin was one of the most successful coins of last year, but this was an exception to the rule. There is always one. Second, do your research. Ideally, find out who the developers are and what they’ve done before. Where they live? Lack of transparency is always a danger sign. We have been impressed by how little transparency some popular coins actually offer to their investors.
Avoid bounty schemes and so-called guaranteed returns. Make sure to keep your crypto assets safe in a trusted wallet and always use a trustworthy exchange. Let’s be careful out there.