Dubai: Following a May 26 press release that claimed bright prospects for DubaiCoin, attributed to the cryptocurrency's founder, UAE-based blockchain startup Arabian Chain Technology, official government sources on Thursday confirmed the news that was circulated was a scam. Here is how it was perpetuated.
A day ago, DubaiCoin was listed as the ‘most profitable coin’ according to ‘WhatToMine’, a global cryptocurrency trading platform that calculates how profitable it is to mine selected cryptocurrency coins in comparison to much larger rivals like Ethereum or Bitcoin, using crypto-mining software named GPU Mining and EtHash, an Ethereum mining algorithm.
“‘WhatToMine’ had calculated the profitability of DubaiCoin, compared to its larger rivals, much higher that it is now, which caused a lot of people to obviously switch to DubaiCoin quickly,” noted a US-based crypto expert to Your Money of gulfnews.com, who followed the latest developments closely and wishes to remain anonymous.
The analyst, who specifically focusses on addressing new cryptocurrencies in the market, added that the value of the cryptocurrency dropped just as quickly as it rose, following signs and market chatter of it being a scam.
What is DubaiCoin (also known as DBIX)?
DubaiCoin (DBIX) is a cryptocurrency created in 2016 by Arabian Chain Technology to enable trade between Gulf countries and users are able to generate DBIX through the process of mining.
DubaiCoin has a current supply of 4.26 million, according to last given data available on the cryptocurrency exchange crypto.com. DBIX starting trading in the market since April 2017; since then the value of the coin stayed largely at an average price of $0.2 (70fils).
Essentially, crypto mining is the process by which new coins are entered into circulation, but it is also a critical component of the maintenance and development of the blockchain ledger. It is performed using very sophisticated computers that solve extremely complex computational math problems.
What the circulated press release revealed
The press release attributed to UAE-based blockchain startup Arabian Chain Technology stated that “plans for the next several years are firmly focused on DubaiCoin” and the cryptocurrency was available to be currently traded at an “international starting price of $0.17 (62fils) per coin” – which was the price of the cryptocurrency then.
However, Arabian Chain Technology denied making the announcement and the Dubai Electronic Security Centre (DESC), the official government department handling cyber security, issued a scam alert on Twitter that warned that "Dubai Coin cryptocurrency was never approved by any official authority" and that "Dubai does not currently have an official cryptocurrency".
A clear case of ‘pump-and-dump’
The cryptocurrency or DXIB, which was traded on cryptocurrency exchange HitBTC saw the value of the currency rise by about 1,114 per cent to $1.13 (Dh4.15) per coin, from a low price of $0.17 (62fils), after the so-called prospects of DubaiCoin were made public.
“Something happened on HitBTC to drive that price up and it showed signs of a quick pump-and-dump,” explained the US-based crypto analyst. “Don’t get distracted and if you are trying to make a switch (from your prior cryptocurrency investment) to make a profit - don’t do it for DubaiCoin.”
The earlier mentioned calculators at ‘WhatToMine’ currently show that its profitability indicators depict how the earning prospects of DubaiCoin has reduced considerably since Wednesday night.
The circulated news, alongside the above calculations that highlighted the profitability prospects of the coin on how profitable the coin is expected to be, drove publicity and a surge in demand and investments from investors who wanted to buy the so-called new cryptocurrency asset cheaply before its price shot up.
The market value of the cryptocurrency shot up to $4.84 million (Dh17.78 million), with $591,863.24 (Dh2.2 million) of coins traded over the last 24 hours.
So who recognised that the news was a scam?
DESC revealed on Twitter that “Dubai Coin cryptocurrency was never approved by any official authority.”
"The website promoting the coin is an elaborate phishing campaign that is designed to steal personal information from its visitors including names, email addresses, passwords and phone numbers," the cybersecurity government body revealed late on Thursday.
"Always be diligent with your personal information and investments and make sure to verify the authenticity of investment opportunities with official sources."
The currency’s developer Arabian Chain also tweeted earlier that such an announcement was false, while advising investors to be cautious. “Also this website: https://dub-pay.com/en/ (where the information was made public) is fake and a scam,” the company tweeted.
There was earlier skepticism surrounding DubaiCoin as the coin was neither widely used nor widely known among analysts and cryptocurrency investors.
Morever, there were claims in the press release that DubaiCoin will soon be able to buy and sell goods in place of fiat currency (government-issued currency that is not backed by a commodity such as gold).
A website belonging to DubPay International, the site which was taken down, posted on its social media platforms that DubaiCoin was the ‘most exciting cryptocurrency in 2021’ and that the coin was ‘a new worldwide cryptocurrency intended to replace USD as the de-facto global currency.’
The WhatToMine platform and the HitBTC exchange (where the currency was traded) were not immediately available for comment on the above developments.
How to spot such scams in the future
The first ways to spot a possible scam-triggered price surge or decline of any cryptocurrency is to look at whether the trading volumes are low, and whether a price spike as high as five to ten times the price has been indicated within a short span of time, like within a day or two.
“(In the case of DubaiCoin), the pump (in price) was out of nowhere and the volumes were low, and this indicated that it was a suspect (of a scam). Also the website of the company involved does not give details on the currency beyond October 2019,” the US-based analyst added, referring to the company’s website.
So the lack of information available is a key indicator not to invest in it on a whim.
“These are pretty much the signs that it’s a ‘dead coin’ and this looks like an accident on the WhatToMine platform,” the crypto expert added.
The only place DubaiCoin was traded was the exchange HitBTC and the supply of the coins were low. This inflated the price exponentially to levels that were not sustainable, the analyst said, while adding it was likely driven by a scam.
After DESC confirmed that it was a scam, going forward, any such scam can be escalated via its online platform: https://desc.gov.ae/incident-reporting/.
“This self-service (e-crimes) portal allows the public to record complaints regarding cybercrimes,” the website noted. “To file a complaint, please fill out the form and ensure that you have as much information as possible, that way we can help you as efficiently, as possible.”
However, note that this service is specific to e-crimes happened within the geographical scope of Dubai.
Given the significant amount of recent hype and so-called success around cryptocurrencies, research has shown that new investors are often quick to jump at the chance of possibly pocketing major profits by betting on nascent-stage cryptocurrencies, in hopes of it becoming the next top cryptocurrency like Bitcoin or Ethereum.
However, like experts revealed above, if the price rise is unrealistically high or volumes are low, the recommendation is to stay away.