Threes Ways to Generate Fake Transactions at Bitcoin Exchanges
The year of 2017 has witnessed a rise of 194% in bitcoin price, which has taken the lion’s share of the media. The daily transaction of big bitcoin exchanges could amount up to 30 billion RMB.
Fake transaction is an invisible hand behind this growth. Bitcoin industry insiders revealed that it is an open secret that exchanges would use a written software or a program to make fake transactions to increase their market share.
“I offered a price much higher than the closing price, but I just never got the bitcoin. This is so weird,” complained by a bitcoin investor.
As bitcoin investors, especially bitcoin newbies see transaction volume as the metric for security, exchanges would use the following three means to generate fake transactions.
Release a false number
Big China-based exchanges all release their bitcoin transactions over the past 24 hours. They can simply release a decent number to make themselves look better.
Transactions between shell addresses
Exchanges could just report a lot more trades with many accounts as they could claim to report internal netting trades as volume.
Bitcoin back and forth between two different IP address.
If you worry the first method is too lame, then the third one would be so undercover.
Exchanges could send Bitcoin back and forth through different IP addresses and wallets to make it look like there are lots and lots of transactions happening. Even an old hand can hardly recognize the trick.
Stakeholders of OkCoin and Huobi noted that their incomes are mainly from providing withdrawal services and lending bitcoin for leverage. And transaction volume is the key for them to make a profit.
With no relevant rules and regulations, exchanges have little scruples about falsifying transactions. But if regulators investigate transaction records, it would be practical for them to recognize fake transactions.