By Obi Nwosu, CEO and Co-Founder, Coinfloor UK
Cryptocurrencies have always been shrouded in an aura of magic and mystery, so it was only a matter of time before JK Rowling showed an interest. On May 15, the Harry Potter author tweeted: “I don’t understand bitcoin. Please explain it to me.”
Three hours and 1,500 replies later, she seemed even more in the dark than before, tweeting “I don’t trust this.”
The cryptocurrency industry is often its worst enemy, not least in its promotion of supposedly “magic” coins, most of which won’t survive the year, or deliver any long-term value.
The proliferation of these “shitcoins” (and the marketplaces that sell them) provide a perfect illustration of why many people, like Rowling, struggle to get to grips with crypto. Instead of placing the customer first and helping them navigate the complexities of cryptocurrencies, some exchanges seem happier to put customers under their spell so they can shill for the latest “magic” coin on the market. And it’s this mindset that we need to conquer if crypto is ever to fulfill its promise.
Luckily, the power to “Expelliarmus” these crypto Voldermorts is already well within your grasp. Let us lead you into crypto’s Chamber of Secrets, and teach you some magic of your own.
Casting a spell on crypto customers
Crypto was never meant to be like this. Bitcoin and its many imitators were supposed to deliver a revolution in money, putting people in complete control of their cash, enabling them to bypass the middlemen and be their own bank. But somewhere along the line this pursuit got perverted: instead of making us masters of our own money, some crypto vendors and trading platforms prefer us to stay subservient and spellbound, utterly reliant on their misguidance and m-advice.
This situation suits the unscrupulous players in the market just fine. If you’re selling substandard coins on commission, you obviously want to keep consumers mystified as much as possible. Why reveal the shortcomings of a particular cryptocurrency and dissuade some sucker from parting with their money?
And this attitude isn’t just limited to the promotion of worthless “magic” coins, but to a slew of other unscrupulous practices ranging from biased investment “advice” to misusing – and risking losing – customers’ funds by trading their coins on other exchanges.
Such cavalier approaches can have devastating consequences for customers. The short history of crypto is already littered with exchanges and trading platforms that lost their customers’ coins after suffering a major hack or insolvency.
In any other industry, such blatant contempt for the customer would be commercial suicide – so why are these attitudes allowed to survive (and even thrive) in the world of cryptocurrencies?
Your magic wand
In the face of this perceived complexity, people are apt to place implicit trust in whatever an exchange or trading platform tells them to do. But this is a major mistake, because absolutely anyone can break the spell and take control of their own crypto destiny.
Knowledge is your magic wand: the more you know about crypto, the less likely you are to fall for scams, tricks and dodgy dealers. But how do you identify a good exchange and dispel the bad?
The first thing you should do is look at the coins that a prospective crypto partner is offering. If it sells a large range of “magic” coins with no indication or education about the merits or demerits of each individual currency, that should ring alarm bells. While there are many alternative cryptocurrencies to the big one – Bitcoin – most if not all lack the technical maturity, value, community support, and regulatory status to be successful long term. If an exchange promotes each coin as equally worthwhile, that’s a sign it’s best avoided.
Just as importantly – people need to know whether their investment is safe. Exchanges should be able to prove that they are solvent and hold 100% custody of customers’ coins through independently-verified coin audits. If you are technically inclined, you can do this yourself, but it doesn’t take a lot of desk research to identify whether verification is truly independent.
So, in fact, you’re more powerful than you might imagine. If more people ask the right questions, and shout “Silencio!” to the charlatans, they will shatter the illusion of power that holds customers in thrall. As customers discover their power, crypto exchanges will be forced to remember who is the master and who is the muggle – and that success is founded on serving the best interests of their users.
The key to becoming a crypto magician is getting some honest education. And to do this, one need simply discover the ancient – at least in crypto terms – magic spells of crypto:
Remembering these runes will allow you to tell the charlatans from the chivalrous and to become a wizard of the wonder that is Bitcoin.