On the CoIntellect Cloudhashing Scam and the Currency of Reputation

My friend Nathan Wosnack of uBITquity recently got in touch with me to alert the community of a potential scammer. The cloudhashing site CoIntellect was going to hire him to explore a bug in their software that clients were complaining stole Bitcoin and Dogecoin from users who downloaded it. As he was researching, he discovered several sources claiming that CoIntellect was scamming people and concluded that the Estonia based company was indeed stealing coins from people. He quit promptly and alerted many other media outlets, but the scam raises deeper questions about trust around a trustless protocol. I started this post to raise awareness about the scam, but found it had already been covered sufficiently, so instead I opted to opine about other bothersome conditions surfacing in the Bitcoin space.

Justice can come swiftly in crypto-world, but can also be uncertain. With new projects popping up all the time, it can be difficult to discern con artists from idealists. We must be more vigilant in exposing these scams than even better known scams such as those perpetuated by the legacy banking system. Yes, in truly freed markets you may see a propensity for swifter action in regard to scams, but we’re operating within a mixed system that combines purists, idealists, realists, and opportunists all tainted with the remnants of a dying, corrupt, yet entrenched system. The ability to generate a lot of capital is ripe in the space and with new, more vulnerable people entering everyday it is in some ways a con artist’s paradise.

So, how do we deal with the internal problems caused by opportunists? Part of the solution comes down to taking back the narrative by any means necessary. Along with the protocol, we are ushering in a new era of speech and media. If the legacy banking system must go, so must the legacy media system that distorts instead of reports. Bitcoin combined with easily accessible blogging has created opportunities to speak out against threats external and internal and it is imperative that we utilize this speech to its utmost capabilities. We also have to be a better source of information than the corporate media. Our standards must be higher to bolster credibility but already we are seeing the same lazy approach infiltrating Bitcoin media sites. With great ease comes great responsibility despite examples of the contrary.

However, we’re also seeing these standards upheld decentrally by individual bloggers, as the Cointellect scam revealed. You also saw maverick reporters during the MtGox fiasco and other controversies. It has been my experience that people involved in Bitcoin tend to be more skeptical than your average person and this has led to decent quality investigations into scams before; hopefully this trend continues. It takes principled people to expose corruption among Bitcoiners, and these are the people who must be sought out and elevated instead of those with the ability to inject quick and easy money (and influence?) into the space.

We’re well acquainted with lies and misrepresentations from large media sources and to let the same laziness or outright malice infiltrate this very tiny space is unconscionable. Yes, I’m saying we should know better. Bitcoiners need to not only contribute balanced, correct information for their points but also demand it. If we don’t turn the microscope on ourselves and uphold each other to certain journalistic and ethical standards then there’s no reason to not just allow Bitcoin to be absorbed by the current regulatory regime. There won’t be any financial freedom for the people if we’re not careful to weed out the parasites now.

Reputation is a more valuable currency in this emerging paradigm and its tendrils reach to all aspects of the space whether you’re a journalist, trader, start up founder, exchange, venture capitalist, or any other role within the greater Bitcoin milieu. Focusing on quality not quantity of people can also be a safeguard, but Bitcoin’s nature brings all kinds and can reach a wider amount of people than can possibly handle the responsibility. Guard your heart so to speak and be slow to make allies based on a tenuous affiliation. I don’t want more excuses for regulators to enter the space because of perceived (though on a much smaller scale comparably) corruption.

There aren’t enough Bitcoins nor should there be to buy off broken reputations and our accountability power comes in the form of stern disassociation and swift condemnation of corrupt practices. Let’s hope this practice is actually applied because now is the time to do it while things are still relatively new and reputations are a bit more fluid. We can also learn from the overlap of people active in the larger liberty movement whether politically or externally, which I find has failed at applying the principles of disassociation to people with questionable and sometimes provable corrupt reputations. In some ways, it may be too late to mitigate the damage done by shysters who were accepted with open arms because they labelled themselves “libertarian” or “anarchist.”

For now the tools for weeding out corruption are in analog mode compared to the advances promised by blockchain technology, but they work. I also believe that with persistence, we’ll see better technologies emerge to provide indisputable evidence of wrongdoing–indeed we already are. Multisig accounts are able to prevent corruption before it happens in corporate environments, and while we are often a few steps behind when scandal erupts the gap is closing. Transparency is growing, and blockchain technology is leading the way in innovations that can prove even small disputes over something like original authorship which can have larger implications like verifying evidence inconclusively. The onus of course is on people to utilize these functions themselves and while that’s hardly a problem with honest people, those who wish to harm others have no such desire. So, for now the usual methods of sleuthing and due diligence will work until these innovations become more widely used.

To conclude, those who have principles and are willing to sacrifice monetary gain for reputation like Nathan should keep on keeping on, but we have to be bulldogs (or perhaps honey badgers) about the corruption we suspect regardless of who is involved. Internal corruption will give the ammo needed to justify external regulation if we don’t kill our idols early and often.

**UPDATE: CoIntellect has issued an official response to the accusations which can be read here.

Original content by Meghan, copyleft, tips welcome at bit.co.in/mklords

5 thoughts on “On the CoIntellect Cloudhashing Scam and the Currency of Reputation

  1. I Google http://cointellect . ee/ scam in the search engine and landed on your site, why are you giving us a long speech, just say its a scam for such an such reason and give it a rating and who started the program, I didn’t ask for a long speech. just straight meat and potato, with some bulletin and pros and cons

    1. Well the title implies an op-ed, so there’s going to be more opinion in it than a straight news piece which it is not. And there’s that whole other half of the title that reveals what I will talk about before I talk about it. I linked to all the meat and potato articles in this one, but they were also all prominently featured in a simple search. If you want news stories on bitcoin try CoinDesk or some other outlet.

  2. I am fashioning an article on this very subject, and would caution any further claims of corruption on cointellect’s part, as I’ve been in touch with it’s creators, and they are no more con artists than the long winded round about way you claim them to be, or as with many of the articles you elude to in what amounts to a highly volatile market. No more suspicious than from bitcoin’s mysterious pseudonym creator ‘Satoshi Nakamoto’ And I’ve been commissioned to feature them per my own investigation. FREE OF CHARGE. Since I have followed the crypto markets since it’s infancy. While it appeals to me in essence, we will ALL be lucky to see ANY alternative currency standard if the world lasts that long – never mind the www. C+ Stay un-tuna’d
    They’ve released a strong warning to slanderous claims! Will also be highlighted^

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