The meteoric rise in the popularity of Bitcoin can be attributed to it being the safest and the most reliable payment method. With the cryptocurrency getting the acceptance of coveted brands like Microsoft and Dell, in addition to the numerous small and medium-sized businesses, consumers have also shed their inhibitions as they dump the greenback for the unregulated digital currency.
But the massive growth of the Bitcoin industry in 2014 was marred by a spate of Bitcoin exchange scams which have severely dented the investors’ confidence. The Hong Kong Bitcoin exchange MyCoin recently disappeared with roughly $8 million of consumers’ investments, dealing a hefty blow to the Bitcoin community which is already struggling to get the support of national governments.
There are certain measures, which if implemented, can bring invaluable stability in the highly volatile Bitcoin prices as well.
- Know Your Exchange – Investors must be diligent to do a thorough background check on at least the senior members of the exchange and keep a close eye on the exchange’s activities. For example, the abrupt resignation of MyCoin’s sole director, William Dennis, should have raised eyebrows and active intervention of the investors may have averted the scam. The director, interestingly, resigned one month before the scam.
- Look For Credibility – Just like brands such as Microsoft incite confidence in the digital currency, investors should look for credible names and reputed organizations supporting exchanges. For instance, the US-based Bitcoin exchange Coinbase has received investment from the highly revered New York Stock Exchange. This in itself is a major positive for the Bitcoin markets and investors do not have to lose their sleep worrying about losing their hard-earned money to a scam.
- Responsibility Of The Exchange – Exchanges must ensure transparency in their way of functioning and provide the clients with substantial security and not just online accounts. Monthly updates to the clients regarding policy changes, with high emphasis on withdrawals, can significantly bolster the flagging confidence.
These are simple, yet highly effective measures which can be implemented if the digital currency was to be rid of the “ponzi” tag.
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