Tips on How to Avoid Cryptocurrency Scams
While the cryptocurrency industry has evolved substantially since the invention of Bitcoin in 2008, it is still susceptible to hacks and thefts. While the underlying structure of blockchain-enabled virtual currencies is mostly secure, hackers have found sophisticated techniques to scam users of cryptocurrencies.
However, a trader can avoid being victim to cryptocurrency scams by exerting precautionary measures. In this article, we identify the common cryptocurrency scams, and tips on how to avoid them.
1. Phishing Scams
Phishing is one of the most common scams in any sector, and the crypto industry is not an exception. In phishing, a scammer impersonates the identity of a cryptocurrency exchange or wallet service and tricks you into giving details about your passwords or seed word.
In the phishing scam, an attacker fishes for your private data through sources like email, telephone, fake websites, or social media platforms. You receive emails or messages asking you to click on the link.
The link takes you to an external website where you are prompted to fill in the private details of your crypto assets. Since the link is duplicated, the attacker steals your credentials and therefore has the access to your crypto fund.
Tips to avoid phishing scams
Never give your credentials like your password, seed words, API key, and secrets to any entity even if they claim to be from your exchange website.
Watch out for minimal and vague information on the website or in the email in which you received the link.
Remember that platforms always contact you through official channels. Whenever a person or an entity offers a deal too good to be true, always think twice.
Check the logo URL and interface of the website. Check for any ‘red flags’.
Use anti-phishing softwares that block suspicious or malicious websites.
2. Ponzi Schemes
In a Ponzi scheme, investors are generally promised a huge return on their investments. The Ponzi scheme neither has any product nor an underlying structure.
Instead, it is a scam to extract money from investors by promising them with ‘get rich schemes’ and/ or abnormally high rate of returns.
In a Ponzi scheme, old investors are paid their rate of return from the new investor entrants. The scheme continues and eventually, the scammers runoff by taking funds from investors.
A number of ICO scams were Ponzi schemes in the crypto industry. Through marketing techniques, funds are raised in an ICO with the promise of huge returns on their investments. However, they were exit scams and in the end, founders left with the investors’ cryptocurrency funds.
Tips to avoid Ponzi schemes
Do not trust websites promising ‘get rich fast’ schemes.
Before investing in an ICO or blockchain project, check and verify various details including the project, its whitepaper, the founders, tokenomics, etc.
Do not trust websites advertising with enormous and instant returns.
Do not send crypto to a random address. If an ICO is promising 3x returns by sending 1 ETH to a ‘special address’, it is more likely to be a Ponzi scheme.
3. Social Media Cryptocurrency Scams
Cryptocurrency scams via social media channels have now become common. Some of these scams are in the form of giveaways on social media networks.
For instance, an influencer promises to give away 5x times for sending 1 BTC or ETH on their wallet address. These messages on Twitter or Instagram are nothing but scams to retrieve cryptocurrencies.
The recent cryptocurrency scam on Twitter drew massive attention. Due to a flaw in Twitter, accounts of influential personalities and organizations were hacked. Attackers promised that by sending BTC to their wallet address, the users would return double the amount in their wallet. However, it was a cryptocurrency social media attack meant to scam users.
Telegram is another social media channel where hackers have found different ways to scam users.
Telegram crypto attacks involve fake accounts of popular cryptocurrency services and scamming users by prompting them to reveal their private credentials. Apart from this, hackers deliver malware files through the Telegram messaging app, which can reveal your sensitive data.
Tips to avoid social media scams
Do not trust accounts promising you to double or triple your investments by sending cryptocurrencies.
Check if the Telegram channel or Facebook account is official.
Do not reveal your passwords, private credentials, or seed words to anyone under any circumstances. The official channels will never ask a user for their passwords.
Beware of any promotional or giveaway offers that sound too good to be true.
4. Fake Wallets, Mobile Apps and Cryptocurrency Exchanges
Fake wallet applications mimic the wallet interface, but are actually malicious apps designed to scam users. These apps usually present a promotional offer or bonus incentive to lure users into depositing their Bitcoin or Ethereum to a specific wallet address. Once you have sent your funds, there is no way to retrieve them back.
These fakes apps are very commonly found on the Google Play Store and Apple App Store. Once downloaded, these applications can get access to your most sensitive and private data.
Fake exchanges lure users to trade on their platforms by charging very low transaction fees. Fake cryptocurrency exchanges also make it difficult to withdraw your cryptocurrency funds once they have been deposited into their exchange. In some cases, exchanges earn their commissions by including fraudulent ICO tokens on their platform.
Tips to avoid fake apps
Download the application from the official website of the cryptocurrency exchange or wallet.
Check for any red flags like promotional offers or bonus incentives.
Check the credentials of the application if you are downloading from the app store.
Research the testimonials from external sources before selecting a platform for cryptocurrency exchange.
Tips To Avoid Cryptocurrency Scams
A trader or investor should always perform due diligence before investing their crypto funds. Here are some tips on how to avoid being a victim of cryptocurrency scams:
Do your own research before investing in a project, exchange, ICO, wallet, etc.
Enable additional security measures like 2-Factor Authentication and multi-sig.
Do not indulge in offers that sound too good to be true.
Keep your anti-virus software up to date.
Check for red flags. If a URL, logo, or interface seem different, it might be that you are dealing with a clone website.
Do not share your private credentials with anyone. An official support team member would never ask you to give your passwords.
Conduct thorough research on ICO project. Do not fall prey to over-the-top marketing techniques. Research the idea and team behind the project.
Concluding Remarks
Hackers have always found new ways for malicious attacks. A trader needs to be always aware of the information presented in front of them.
Use official websites and sources to perform any activity pertaining to cryptocurrencies. Most importantly, remember: if it sounds too good to be true, then it probably is.
