There were high hopes for Bitcoin in 2014 after it began the year with its value rocketing over $1,000, but things quickly went pear-shaped. Bitcoin had to weather a storm of negative publicity, what with the Mt.Gox kerfuffle (which authorities now believe may have been an inside job) and the shut down of Butterfly Labs, which failed to deliver its customers their promised Bitcoin mining rigs.

Scams are frowned upon, but Austrian economist Jeffrey Tucker sees them as a positive thing for the cryptocurrency. Tucker explains that scam artists tend to flock something when they can see its potential, which means Bitcoin may not be just a trend.

“[L]et’s ask a deeper question: why are scam artists so attracted to Bitcoin?” asked Tucker. “The answer is actually flattering. Scam artists are the evil cousins of genuine entrepreneurs. They are alert to new opportunities. They are attracted to ventures that are popular among the smart set. They are profoundly aware of what people imagine to be the next big thing. Their interest in Bitcoin, then, is actually a bullish sign. I would be more worried about this market if scam artists were not interested in it.”

Though Bitcoin scams may be flattering to some degree, you wouldn’t be thinking this if you’ve fallen victim to any one of numerous Bitcoin scams. The new year ushers in new opportunities but we shouldn’t just jump on board on every Bitcoin opportunity presented to us. Below are some tips on how we can enjoy engaging in cryptocurrency without getting duped by scam artists.

1. Trust your instincts

The rule of thumb is, if it’s too good to be true then it probably isn’t. If a company promises high investment returns, cheap but powerful mining rigs, or a guaranteed return of investment in just a few months, turn your back and forget you ever came across that company.

2. Do your homework

There are things you need to know about a company before entrusting your whole life savings with it, such as:

• Who are the people running it?
• Does it have a physical office which you can visit if you want to?
• And has it been publicly audited?

It also wouldn’t hurt to visit forums and ask around if a company you have in mind can be trusted, or if anyone suspects it of fraud.

Transparency

Since money is at play here, companies should be able to provide information if they have been publicly audited. This proves that the company is financially capable of delivering on its promises to its customers and investors. Simply put, if all hell breaks lose, will it be able to return people’s money? Also, service providers should make it clear as to what they do with a person’s information, why they need it, and how they are protecting the minimal data they have acquired so as to ensure their clients don’t fall victim to phishing scams.

“Assume that every new business model in the bitcoin space is a scam unless proven otherwise,” said Cornell University researcher Emin Gün Sirer. “Assume that every well-intentioned implementation is broken at its core, unless it has been publicly audited. Do not trust your keys and private information to anyone.”

photo credit: btckeychain via photopin cc