Bitcoin Pyramid Schemes Wreak Havoc on Brazil's 'New Egypt'

Discussion: Bitcoin Pyramid Schemes Wreak Havoc on Brazil’s ‘New Egypt’

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Discussion

Traders and major corporations have disseminated a message requesting people to refer a friend to a given website or rather a platform so that they can earn some money from every successful referral. Bitcoin is a risky business, as any other business, and those online traders may know today. Bitcoin pyramid schemes are full of fraudulent activities that schemers use to get money from people by offering incentives to recruiters who bring in new members into the scheme. For example, Bitcoin investors are at risk of losing their money in the blockchain environment (Boylan and Hull, 2022). The advancements in technology have enhanced trade and transactions as well as investment in the form of cryptocurrency. Dealing with cryptocurrency has its benefits and challenges just as dealing with any other business. A lot of people are venturing into cryptocurrency as it seems convenient, not knowing that they are creating weak links for attackers to penetrate and fraud them from their unsecured funds (BBC News, 2022). Law enforcement is doing all it can to minimize fraud in the business of cryptocurrency. The law protects those who are potential victims of theft in fraud in cryptocurrency. Therefore, organizations need to understand the problems of bitcoins so that they protect the finances of the clients who invest in cryptocurrency.

Mitigation

The increasing investment by people in the line of cryptocurrencies, such as bitcoin, has resulted in numerous risks of losses. For example, Zhang et al., (2021) conducted research on a traditional investment scam known as the Ponzi scheme. Clients are unaware that investing in numerous Ponzi Schemes put their money at high risk of loss. The research proposed system of detecting Ponzi Schemes has been put into use today by several professionals. This system uses a smart contract Ponzi scheme identification method that is based on the lightGBM algorithm. The experiments that were conducted by Zhang et al., (2021) gave datasets that show that this system has an improved level of accuracy in terms of the AUC index and F-score index. Smart contract deploys a specified function that cannot be terminated manually but can terminate itself automatically, if the conditions are not met, hence a better way of detecting Ponzi Schemes. As such, organizations need to realize that the funds of investors are at risk of theft, and mitigating policies should be in place.

Recommendations

Cloud Accounting Information Systems (CAIS) are an important way of reducing fraudulent activities on data. The concept also enhances the management of information in the cloud accounting information systems, which gives the users the confidentiality of security and privacy of their data. CAIS has also helped eradicate fraud activities in the field of accounting in both private and public sectors (Al-Nsour et al., 2021). Organizations operating in bitcoin and cryptocurrency need to implement CAIS so that the finances of the investors stay secure. This CAIS system is the same as the traditional one and a lot of organizations are already including it in their work programs. The difference between the traditional one and CAIS is only that the latter is hosted on remote servers in the cloud. Hosting the information of investors on the cloud system brings the risk of theft of the funds. Technological advancement has created loopholes that online fraudsters may use to track the transaction of funds. Through such drawbacks, the thieves may direct the funds to other accounts where investors lose their money. Investors and organizations need to collaborate so that they can deal with fraudsters and their risks in the bitcoin trade. When organizations implement CAIS correctly, then the potential of securing investor funds increases. When more investors are certain that their funds are secure, then more investments are generated.

References

Al-Nsour, E., Weshah, S., & Dahiyat, A. (2021). Cloud accounting information systems: Threats and advantages. Accounting, 7(4), 875-882. https://doi.org/10.5267/j.ac.2021.1.021

BBC News. (2022, March 9). Will the US crack down on cryptocurrency? Accessed on 12 November, 2022, Retrieved from https://www.bbc.com/news/business-60680786

Boylan, D. H., & Hull, J. E. (2022). Have Accounting Information Systems significantly helped in detecting fraudulent activities in accounting? The Journal of Applied Business and Economics, 24(3), 45-56. https://doi.org/10.33423/jabe.v24i3.5191

Zhang, Y., Yu, W., Li, Z., Raza, S., & Cao, H. (2021). Detecting Ethereum Ponzi schemes based on improved LightGBM algorithm. IEEE Transactions on Computational Social Systems, 9(2), 624–637. https://doi.org/10.1109/tcss.2021.3088145