Cryptocurrency’s decentralised, pro-privacy nature has introduced a new way of transaction.
Removing third parties and regulators, however, also paves the way for new forms of criminal activity. Since crypto crimes are had to track down, it’s easy to see why cryptocurrency is associated with illicit activities.
With this in mind, it’s important to be in-the-know of common crypto scams. Since cryptocurrency is gradually moving into the mainstream, knowing how to avoid these schemes should be your priority if you’re just getting started. Here are a few common scams and some tips on how to avoid them:
Phishing is one of the most common crypto crimes. Scammers try to attain users’ sensitive information like their usernames, passwords, and bank card details. With these personal information, scammers can hack your cryptocurrency wallets and access your private keys, which could mean stealing your crypto coins in the process. Usually, phishing scams are done through fake websites which are designed to look like trading platforms. Those who are duped often sign up, giving away their information.
Many downloadable “programs” claim to hep you mine bitcoin easily are scams. Mining takes up a lot of computer power and cannot be done just by downloading a program with one click. Besides downloadable programs, Malware can also be contracted through clicking on links to supposed cryptocurrency exchanges.
3. Shady exchanges
There are lots of unregulated exchanges online which use fake promotions to bait investors. After investors have deposited money onto these platforms, these exchanges charge hefty fees or make it extremely difficult for investors to withdraw their funds. Sometimes, scammers might also run off with your money, leaving you empty handed.
4. Fake wallets
Many wallets have mobile apps as they are designed to be mobile and user friendly. That being said, not all wallet apps are legitimate. On the Android play store, you will find many fake wallet apps which exist to steal your private keys, user names and passwords. It’s important to stay vigilant and only use credible, popular wallets.
5. Pump and dump
The speculative nature of investing in cryptocurrency makes it more susceptible to pump and dump schemes compared to investments in traditional assets. It can be difficult to tell when a coin is under the attack of pump and dump schemes, causing ignorant investors to lose out. Pump and dump groups often operate on large telegram chat groups where a core group gives orders to members, causing prices of a targeted coin to surge. When other investors buy in, the dumping begins.
6. Initial Coin Offerings
IPOs of cryptocurrency, Initial Coin Offerings (ICOs) are created by cryptocurrency startups to raise funds for their venture. However, some of these “startups” aren’t serious about creating a new token or a breakthrough system. Many “startups” disappear with funds. A cybersecurity company, Carbon Black, reported that in the first half of 2018, roughly $1.1 billion worth of cryptocurrency had fallen to theft through ICOs.
How to avoid these scams
1. Use only credible platforms
One of the best ways to avoid falling prey to fake wallets, malware and shady exchanges is through using legitimate, credible platforms. Other less known platforms may claim to have better rates and attractive promotions but joining less credible platform is a big risk. Some credible exchange platforms include Coinbase, Coinmama, and Kraken.
2. Read forums
Forums on reddit and channels in discord are filled with lively discussions on all topics related to cryptocurrency. Being part of these online communities keeps you in-the-know of latest updates and information. Furthermore, you can also join in the discussion by asking questions on platforms you’ve come in contact with so you don’t fall prey to scammers easily.
3. Research on unfamiliar terminologies
One of the reasons why beginners are easy targets is because there are many unfamiliar terminologies in the cryptocurrency world. If you’re new to cryptocurrency, it’s important to read up on concepts and terminologies you’re unfamiliar with. Understanding what you’re investing in helps you make good decisions and avoid ponzi schemes.
While investing in cryptocurrency might seem risky, it doesn’t mean that you should ignore it completely. In just a decade, cryptocurrency has made lots of breakthroughs and made many milestone achievements. As cryptocurrency moves into the mainstream, it’s even more important for you to be informed and to be vigilant.
More from New to Crypto?
New to the crypto community? You’ve probably seen Bitcoin and other tokens make headlines in the news and you want …
Middlemen, banks, government regulations are some of the entities that Bitcoin set out to evade from the very beginning. However, …
Unlike most markets, the cryptocurrency market is more volatile and sees frequent upswings and downswings. For beginners, these frequent fluctuations …