Ethereum tokens were “scams that have robbed people of billions”, says Paxful CEO

The CEO of a P2P marketplace, Paxful, recently sent a letter to millions of subscribers, announcing the removal of Ether from their market.

Ray Youssef, the CEO, gave three reasons to remove Ether from Paxful:

    • It was no longer using PoW, which makes Bitcoin the only honest cryptocurrency. With a PoS mechanism, Ether is now just a digital form of fiat.
  • ETH is not decentralized, and controlled by a small group.
  • While Ether had some utility in credit and lending space, the tokens issued on the blockchain were “scams that have robbed people of billions”.

Stable coins too are issued on Ethereum, and Paxful may retain them.

What Ray is referring to are the many projects with a whitepaper, team and Telegram channel that issued ICOs and IPOs a few years back. From utility coins to pay bills to prophet inspired tokens, there was a deluge of cryptocurrencies or tokens post the December 2017 surge in Bitcoin price.

There were miners minting money, and new projects and whitepapers flooding the internet and social media with new applications, schemes, plans and projects. Telegram channels also became a favourite platform to build a group and promote these schemes.

Most of such tokens were issued on Ethereum, which was then a PoW operated blockchain. Ethereum itself is a major blockchain that makes smart contracts possible, and a new world of Metaverse and NFTs. The schemes were cooked up by businessmen. While the investors kept messaging “when moon”, “when lambo”, the real lambos were probably being bought elsewhere.

It’s not known how many of these tokens and schemes have survived. A common strategy is to switch to another project or modify the existing one into a new scheme and thus get more investors in. So the scams continue to operate with a different name and mission, giving the impression that they are genuine. For example, a project may begin with the aim to create a review platform for coins, then turn into a KYC offering service, and then turn into a DeFi finance service. It may eventually become an NFT platform, and when money has been made, or not made, be turned into a Metaverse website. The tokens issued will also be accordingly converted to ever new tokens, keeping the original investors locked in, and attracting a new crowd as well.

This is a strategy that the gullible ground investors have no clue about. They can’t foresee such developments happening into a business they have bought tokens from, but these are the things that any scammer or even a genuine business can do. There is no easy way to tell.

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