Defending Against Cryptocurrency Scams

With the cryptocurrency industry growing every day, new methods of scamming and theft are appearing more frequently. Since the birth of Bitcoin nearly a decade ago, malicious entities or individuals have taken the opportunity to gain from those who are interested in investing in coins but aren’t experts in that area. Unfortunately, these scammers can be associated with Bitcoin or other altcoins by mistake, causing some countries to go so far as outlawing cryptocurrencies altogether.

The most powerful tool against cryptocurrency scams one can possess is knowledge. Ignorance regarding digital currency and the scams out there leaves users vulnerable to attack. Never hesitate to ask questions and do thorough research. With that in mind, let’s take a look at some of the most common scams to which users have fallen prey.

Fake ICOs

Small stack of silver and gold medallions with bitcoin logo
Take a close look at the sections offered in your white paper to ensure the ICO you choose is the right one for you.

Initial coin offerings, often called ICOs, refer to the fundraising tactic in which a company sells their coins for bitcoin or ether. This can be compared to an initial public offering, during which investors purchase shares of a company. Recently, ICOs have seen incredible results, with companies earning millions in a matter of minutes.

Spotting a fake ICO can be difficult, as many of these scams are very convincing. Looking for endorsements from reliable sources as well as verifying that the project has a legitimate team can help set apart the real opportunities from those that are, in fact, too good to be true. Taking a look at the Whitepaper will also lead you in the right direction, as long as you know what you’re looking for.

For more information on identifying these instances, take a look at this article: https://hackernoon.com/what-to-look-for-in-an-ico-white-paper-successful-token-54eba3787139).

Cryptocurrency Wallet Scams

Everyone who is dealing with any type of digital coin has some form of cryptowallet, and most of them use an online wallet. While there are many reputable wallets out there to choose from, there are many scams designed to attack your cryptocurrency. The most important thing here is to be sure and use a wallet that is well-known, reputable and secure. Finding wallets that don’t store your private key is a great way to stay secure.

Want to learn more about cryptocurrency wallets? Take a look at our recent article. Choosing and securing a good crypto wallet helps when defending against cryptocurrency scams.

Email Scams

Example mobile phone email screen imageSince blasting out emails takes no time or real effort, the blockchain community sees a lot of these spammy emails. They may claim that to protect your currency, they require you to follow a link and sign into your accounts on well-known sites.  In reality, these links lead to a fake version of this site, where users input their personal information. They are often disguised as wallet providers. Closely check email addresses, as you’ll often find these come from an address very similar to a legitimate source, only slightly misspelled or different. If someone is asking for your private key, especially via email, that’s usually a good sign that something isn’t right.

Be sure to check out the thread on common cryptocurrency scams in the forums. Scams forums thread.

Fake Exchanges

Like wallets, it’s important to use a reliable exchange. Although there are secure exchanges that may be smaller, going with larger, more populated exchanges can be a safer method. Using a more saturated exchange can avoid price fluctuation and manipulation.

Fake exchanges should be fairly easy to identify, but for the beginner, it’s always better to err on the side of caution in this regard.

Do Your Research

Be it an ICO scam, fraudulent wallets, a spam email or fake exchange, avoiding these scams starts with doing proper research before diving in. If your instincts are telling you something is off, it’s always worth looking into further. Always ensure that you’re using reputable sources with endorsements from trusted sources and a team of actual people when dealing ICOs. When in doubt, be confident in the more well known wallets and exchanges and never give out your private key.

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Sources:

https://mybroadband.co.za/news/security/234618-beware-of-these-common-cryptocurrency-scams.html

https://hackernoon.com/what-to-look-for-in-an-ico-white-paper-successful-token-54eba3787139

http://www.nasdaq.com/article/what-is-an-ico-cm830484