How to spot a fake cryptocurrency?

There is a growing trend in the cryptocurrency industry with new coins being increasingly offered that promise extraordinary payouts. The greater the variety of cryptocurrencies in the world, the more complex the selection process. Fraudsters take advantage of this feature of the market by offering fake or counterfeit currencies. The number of users who subscribe to these programs daily is growing exponentially.

Note that all fraudulent schemes are designed for those who want to get rich quickly. These include those offered on the market today, fake altcoins or Scamcoins - altcoins with a “guaranteed increase” in value.

Such a “new” coin is positioned as an improved, new bitcoin or a completely new cryptocurrency, the potential of which is very great and its implementation has yet to be realized. Users are invited to become the first owners of the new coin, while it is little known and inexpensive and, by analogy with Bitcoin, wait for the sky-high price of their asset to rise.

Thus, Reuters reported the closure of the QUID PRO QUO association for distributing the counterfeit cryptocurrency E-Coin. Swiss financial regulator FINMA claims to have raised at least $4.2 million from several hundred users in exchange for E-Coin. The currency was officially launched on 01/01/2016. At the same time, the association stored the cryptocurrency on its servers and did not use blockchain technology. Almost $2.1 million of the funds that users gave to the association were blocked. Regulator FINMA warned three more companies about suspicious activity in the cryptocurrency sector. Now FINMA suspects 11 companies of distributing counterfeit cryptocurrencies and is under investigation

Another sad example, the pseudo-cryptocurrency Swisscoin. This is yet another case of a company trying to capitalize on the allure of cryptocurrency, even though the company actually has nothing to do with digital currency. Essentially, affiliates are investing in a fake currency that does not exist outside of the Swisscoin ecosystem, and to make matters worse, the value of that fake currency is an arbitrary number set by the company. Swisscoins are not traded on any crypto exchanges and cannot be used to purchase anything outside of the Swisscoin website. The Prosecutor's Office of Ukraine opened criminal proceedings with the qualification "fraud on an especially large scale." 
By spreading false information about receiving excess profits in the case of investors transferring cash when purchasing “swisscoin”, advertising “swisscoin” as a cryptocurrency, scammers seized funds in excess of $500 thousand... 

Spotting such fraudulent schemes using cryptocurrencies is often difficult for both novice and experienced users. However, certain signs that this is a fake currency certainly exist.

The main signs of a fake cryptocurrency:

1. Centralization of currency. Cryptocurrency is issued or managed by a specific company. The administrator can influence the financial transactions of system participants. The company, as a rule, dictates the terms itself. For example, a company may report a wait time of several months for customers to receive their money

2. Lack of liquidity If the exchange is only offered within its platform, the cryptocurrency has no recognition, you cannot use the currency outside the community or group of people who own it. It is not an official currency, so it cannot be converted into any other cryptocurrency. Most often, you will not find it on exchanges with an accessible API.

3. Closed source, closed blockchain. There are only vague hints about what the cryptocurrency's technology is based on, the location of its servers, or who controls the creation and accounting of the coin. Open source is a must. Blockchain, first of all, is a secure electronic register for storing data on transactions, property rights and other information that is always publicly available. So, if you invested in cryptocurrency, buying tokens, usually for bitcoins, a record of this will be saved in the project’s blockchain, in the future you can receive income from a successful investment and an increase in the value of tokens.

4. Wallets for users, if any, are located on the cryptocurrency website, and are not installed on the wallet holder’s computer. If you notice these factors in a certain cryptocurrency, then most likely it is not genuine and requires more careful collection of information about it.

How to double-check the characteristics of a cryptocurrency and determine its authenticity? In any professional community, there are authoritative sources that will help when choosing an investment item. The crypto community is no exception..

You can check the reality of cryptocurrency and its main features on well-known resources:

Cryptocurrency source code: On public repositories like GitHub.com, you can check the availability of source code for all declared cryptocurrencies.

An indirect sign of the reality of a cryptocurrency is its presence on the Chainz.Cryptoid.Info resource, and the rating and capitalization of cryptocurrencies will confirm its presence on the site CoinMarketCap.com.

Availability of cryptocurrency on the website WorldCoinIndex.com. This platform tracks news and prices of the cryptocurrency market. Information is collected from more than 35 cryptocurrency exchangers. All prices are in BTC and 13 currencies: USD, EUR, CNY, GBP, RUB, CAD, JPY, HKD, BRL, IDR, AUD, KRW and INR.

Also through social networks like twitter and reddit, you can usually get access to up-to-date information about cryptocurrency.

Description of the coin mining algorithm: When creating any cryptocurrency, the number of this cryptocurrency mined over a certain period is specified. This algorithm regulates the speed of coin mining. Exceeding the required number leads to an increase in difficulty to slow down production. If less than the required number of coins were mined during this period, then the reduction in complexity leads to faster mining of the cryptocurrency.

The fundamental principles of cryptocurrency include decentralization, confidentiality, unlimited use and transparency through an open-source public Blockchain. If the cryptocurrency you choose does not meet the requirements given above, it is, with a high degree of probability, a Scamcoins, that is, a fake.

Therefore, be careful and prudent in your choice.