As the influx of new people to Bitcoin continues, I am noticing a troubling pattern.
The first experience new people are having is being ripped off. This is often partly their fault for being greedy and/or reckless, but it is not a healthy situation for Bitcoin. In the interest of reducing the rate of muggings being part of the introduction to Bitcoin, I am creating this thread to cover some of the obvious traps, and grind a few axes of my own
. I will occasionally point ads to this thread.
mods give me a few days grace to get this into shape
1. Never buy bitcoin from individuals without trusted escrow. There may be honest sellers for moneypak, etc., but there are enough thieves using the demand for bitcoin to scam that you should assume any transaction with an unknown party will be a scam. Meet face to face in a secure location with online wallets on each side, or use escrow.
2. Butterfly Labs. Billions of bytes have been wasted documenting the massive pile of fail these clowns are. Giving money to them today is a great way to lose it. Nine months of order backlog ahead of you guarantees that even if they ever get their shit together and ship a working product, you will get your fancy gold mine right in time for the difficulty to be 100x higher than it was when they announced their 'product'.
3. Control your keys. Don't store funds on exchanges, trading sites, or anything that pretends to be a bank. You can't know if they are short selling your bitcoin to cover expenses or just take huge profits. Don't use 'convenient' online wallets like instawallet that are completely insecure. Learn how to use paper wallets securely
bitaddress.org.
4. Stay away from
Bitfloor they are insolvent, owing over 25 000 BTC to customers. Eventually one of their customers is going to get tired of the entire facade and file to force them into bankruptcy.
5. Never borrow or lend bitcoin. Bitcoin is unique as a currency that has a finite limit of total currency units available. Over enough time, any amount of interest will exceed the available amount of currency. There are 100 more practical reasons not to borrow or lend but I will leave it at that for now.
16. Don't buy 'perpetual' mining bonds. When the history of Bitcoin is written, the issuers of these instruments will be remembered as the most brazen of rogues. Selling a call on the dividends generated by a set hashrate as if the dividends will continue in perpetuity was stealing candy from babies. On top of that, most of the 'perpetual' bond holders defaulted within 6 months.
7. Don't trust yourself. Bitcoin has enormous potential, and has proven itself to be robust and effective. This is the gold rush phase, and people are getting giddy. If you imagine you're going to get rich quickly and easily, it is easy to deceive yourself into ignoring the obvious warning signs of being ripped off. Entrusting money to a convicted felon is just a less efficient way of throwing it into the wind.
1 I have lent BTC to people I believe are trustworthy. The loans were for bitcoin mining hardware and the terms were 0% interest.
