Bitcoin and Other Digital Products Are Essentially an Investment, Not Something Many of Us Would Use to Buy Groceries or Gas

By Dennis Heun About 11 years ago, when reporting on payments networks and data security for American Banker, I attended a bitcoin conference in Chicago that was essentially touting cryptocurrency and answering the questions of curious onlookers.

About 11 years ago, I attended a bitcoin conference in Chicago while reporting on payments networks and data security for American Banker. The event essentially touted cryptocurrency and answered questions from curious onlookers.

One question and its answer come to mind again today because wealthy folks who have been pushing bitcoin and other digital products for a long time view the current president and his administration as avid supporters.

The question at that conference was “Who runs bitcoin?” The answer was “No one! This is one of the beauties!”

Well, OK. Not an answer that would excite me, but to get more specific, it meant bitcoin is an open-source software that anyone can use and build on. That is, essentially, what it was then and is now. Years ago, of course, that brought frowns from traditional bankers and payments execs, but high-fives from folks building applications and services as part of this new ecosystem.

My point here is to provide insights gained from more than a decade of writing about digital coins and talking to coin company CEOs and fraud experts.

Rather than taking a deep dive into the process of the bitcoin “mining” hardware that monitors creation of a bitcoin, confirms transactions and helps keep them secure, it makes more sense for this column to just warn folks about scams that use crypto as a lure.

Overall, the digital coin process has some good security points, but not enough to thwart the most troubling aspects of any cryptocurrency — that its value essentially rises on knee-jerk impulses of buyers with not a whole lot at its foundation to help it bounce back after a deep downturn, and that criminals love digital currency as not only something to steal but also to hide behind to cover up crimes.

It’s not as easy to trace their activities (remember the part about no one is in charge of bitcoin?), and they can dump the value when their deeds are done or, worse, take your money through a fake crypto app.

I checked in with Julie Conroy, a fraud and security expert whom I leaned on often when writing about these things. In her role as Chief Insights Officer for Boston- and London-based Datos Insights, she has seen it all.

“Scams are on the rise across all payment methods,” Conroy said. “Scammers prefer to receive funds via payment mechanisms that are non-refutable. That’s why gift cards, real-time payment rails, and cryptocurrency are among their preferred ways of receiving funds.”

Conroy has always contended a significant danger is that “most people think that scams are somebody else’s problem and it would never happen to them.”

Her company’s research tells a different story, noting that one in three Americans were victimized by some sort of scam in the past couple of years.

“One of the more prevalent and devastating forms of scams combines a romance scam with cryptocurrency, often resulting in five- or six-figure losses for the victims,” she said.

A YouTube video from software engineer and “scambaiter” Jim Browning, who is dedicated to bringing down organized crime behind crypto and other scams, explains how a dating app scam essentially uses gorgeous ladies to lure gullible folks into a relationship.

Part of that relationship includes the lady convincing her new partner that they can make a lot money together through a crypto exchange.

The fake site looks legitimate, showing users how to buy and sell digital coins “without risk.”

That’s a red flag, Browning notes, asking the question, “What investment ever made has not carried some risk?”

Still, many make the plunge and lose a fortune. They buy coins for their new “love” and that is the last they see of the money or the lady.

There are hundreds of other scams, of course, many that start right in our email inbox or via a text message.

If we have to be careful about this sort of thing, there are many asking that President Donald Trump and his followers do the same on a larger scale, even as bitcoin value soars and the president has had his own “meme coin” created and placed in the market. It’s a development that has some of his crypto supporters wary of what is next, especially because the Trump coin’s value will rise and fall with this popularity.

Bitcoin and products like it are essentially an investment, not something many of us would use, nor enough merchants would accept, to buy groceries or gas.

The value rises and falls on the whims of the crowd and raw human emotion, not on a company’s earnings call, inflation or unemployment stats.

Sure, the stock markets fluctuate, but safeguards are in place and companies generally have plans to get back on track. Long-term, the stock market does just fine for itself. Digital coins lack that foundation.

Some in the industry suggest our enemies could be licking their chops at the prospect of buying up a lot of digital coins to drive up their value and thus suck many Americans to follow that trend, then pull out their investment and crash the value. Or simply rob