Unlike local fiat currency exchangers in your town or city which are thoroughly regulated by financial authorities and which abide by all K...
Unlike local fiat currency exchangers in your town or city which are thoroughly regulated by financial authorities and which abide by all KYC/AML policies. Currency exchanges are properly audited and the State Bank keep a firm eye on their activities. In short their exists check and balance and they provide full customer protection.
Astonishingly in crypto-world, all you need to create a digital currency exchange (DCE) company is a fancy website, social media and advertising campaign and a dev. team of no more than 2-4 people.
Cryptocurrency exchange is the place where people give their hard earned money for an exchange with worthless computer bits. This is where miners sell computer bits to a greater fool as termed by Bill Gates. Payment is done via credit cards, PayPal or even bank wire transfers.
There are software packages provided by companies such as BTCTrader and Alphapoint that offers a fully branded, customized, and managed white-label service that offers you the ability to start your local bitcoin exchange in less than 20 days.
How much budget does it take to setup your bitcoin trading platform, well read it for yourself what the guys at BTCTrader are asking for:
BTCTrader provides the entire exchange platform and
maintenance services in exchange for a percentage
of the trading fees collected by our partners.
An initial one-time licensing fee is also expected
from the partner.
All you need to pay them is a small one-time license fee and a share of trading fees that you collect from your trading users.
No you don’t need to spend thousands of dollars in security, programming, penetration testing, regulation and insurance. Just setup a trading website with BTCtrader and start selling worthless bits to people willing to buy them!
There are three ways in which a scammer can expect high returns by setting up a crypto-exchange site:
- A miner, can easily sell his branded crypto via the exchange and get people’s hard earned money in exchange for his worthless bits.
- A non-miner, can setup a ponzi scheme or pyramid scheme, promising high returns on BTC deposits.
He can gather as much audience as possible without allowing funds withdrawal for at least four months. Once enough funds are gathered, the scammer can shut down the site after transferring all funds to his BTC addresses.
No authority can catch him thanks to anonymous nature of the cryptocurrency transactions.
Example: Bitconnect, all funds gone!
Ethrade.org, 100 BTC gone!
- OR one can simply offer crypto-trading services and become a large exchange firm. Once enough funds have been deposited, get the exchange hacked and some funds stolen. In the end just play the victim game!
Example: Mt. GOX, $450 million stolen, 850,000 Bitcoins disappeared!
Bitfinex, $72 million stolen, 119,756 Bitcoins disappeared!
To give you an idea of how insecure this cryptocurrency exchanges are, I have compiled the following list.
Complete List of Hacked Cryptocurrency Exchanges (2011-2018):
|Date||Exchange Name||Attack Type||Coins Stolen||Value (USD)|
|KICKICO (ICO)||Security breach||KICK||$8,000,000|
|Security breach||58 BTC||$540,000|
|Security breach||438 BTC||$3,300,000|
|Security breach||17,000,000 NANO||$195,000,000|
|2016 Aug||Bitfinex (Exchange)||User wallets/ |
|2016 May||Gatecoin (Exchange)||hot wallet/ |
|250 BTC + 185,000 ETH||$2,000,000|
|2016 Mar||ShapeShift (Exchange)||inside job||557 BTC||$230,000|
|2016 Mar||Cointrader |
|hot wallet/ |
|2015 Feb||Bter |
|cold wallet/ |
|2015 Feb||Exco.in (Exchange)||cold wallet/ |
|2015 Feb||Kipcoin (Exchange)||cold wallet/ |
|2015 Feb||796 (Exchange)||cold wallet/ |
|2015 Jan||Bitstamp (Exchange)||hot wallet/ |
|2014 Dec||Blockchain.info (Wallet)||user wallets (bug, R values)||267 BTC||$101,000|
|2014 Dec||Mintpal (Exchange)||inside job||3,894 BTC||$3,208,412|
|2014 July||Cryptsy (Exchange)||inside job||13,000 BTC + 300,000 LTC||$9,580,000|
|2014 Mar||CryptoRush (Exchange)||cold wallet/ |
|2014 Feb||Mt.gox (Exchange)||hot & cold wallets/ |
|2013 Nov||PicoStocks (Exchange)||cold wallet/inside job||6,000 BTC||$6,009,397|
|2012 Sep||Bitfloor (Exchange)||hot wallet/ Security breach||24,000 BTC||$250,000|
|2012 May||Bitcoinica (Exchange)||hot wallet/ |
|2011 Oct||Bitcoin7 (Exchange)||inside job||5,000 BTC||$25,000|