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Every new industry has its ups and downs, and they all have failures, especially in the beginning.
Every new industry has its ups and downs, and they all have failures, especially in the beginning. Unfortunately, this is not the first time a cryptocurrency exchange has folded and all of depositors’ money has disappeared. The Sharecoin spinoff Sharexcoin seems to have gone under completely closing its doors as the exchange (Bitcointalk ID: ziplibrary) has been silent since 3 June, 2014.
Sharecoin is a new PoS cryptocurrency that was presented as a gift to all Bitcointalk forum members. Now, it appears that Sharexcoin was a Trojan horse and the complete details of the loss are still not clear. It is unknown whether the owner was hacked or that the entire thing was an elaborate sting set up by criminals.
In either case, this will probably not be determined until the owner surfaces. Updates to the post can be found at the ANN thread of Sharecoin. The community, as is usually the case when this happens, is still trying to sort out the effects that this might have.
Sharecoin promoted itself as being super-stable because, according to its marketing slogan, it was “the only alternate coin backed by a business.” The fact that the business was the Sharexcoin exchange was lost to no one, however. The exchange was set up to be Proof of Stake (PoS) with a yearly stake of 30% with bonuses of up to 60% if shareholders locked up their Sharecoin for 30 days, effectively doubling their profit, which sounds suspiciously like a virtual Ponzi scheme. The exchange dealt mostly with new altcoins such as Energycoin and Qora and had demonstrated a very large trading volume for the latter just before it went dark.
The amount of money lost in this crash will probably not have a great deal of effect on stability but the psychological effect can become fodder for Bitcoin critics, who view crypotcurrencies as enablers of everything malicious from pyramid schemes to buying illicit drugs online.
Just a few months ago one of the largest exchanges in the world, Mt Gox, lost millions of dollars in several different security breaches, eventually forcing the exchange to shutter its doors. These losses are bound to have an effect, especially in the trading markets, but it is still far too early to gauge the amount of backlash from the community.
Scam exchanges like this are exactly what could give governments reason to regulate Bitcoin and other cryptocurrencies. The losses at Mt. Gox were certainly severe enough for hearings to be held in the United States Senate. But it will be interesting to see whether news of another exchange failure will affect public confidence in cryptocurrencies and whether it will open the door for authorities to clamp down on crypto-exchanges amidst fraud allegations in the future.
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