As fascinating as the cryptosphere might be, it’s definitely not a place for the faint-hearted. Sure, cryptocurrencies have taken the world by storm with Bitcoin being more popular than ever, and there are thousands of interesting projects that aspire to revolutionize the world and steal its crown. In the midst of all this, there are scams, frauds, attacks, hacks, and other, similarly shady ventures.
To help you get off on the right foot in the cryptosphere, we created a list with some of the most common and most important Bitcoin scams together with practical tips on how to avoid them.
Fake or fraudulent ICOs
With Bitcoin’s incredible popularity as of late, we’re currently seeing more and more blockchain-based companies entering the market. Seduced by the potential of crypto and blockchain projects, various investors venture onto the “wild” of the cryptosphere looking for the next big thing.
Since ICOs represent the easiest way of getting started in the crypto world (ICOs raised a total of $11 billion), there’s no surprise that this has inevitably raised the danger of fraud. There are various reports that concluded that well over 50% of all ICOs in 2017 and 2018 were scams. For every ICO success story, there are five more stories of scams.
One of the most popular ICO scam methods involves creating fake websites that remember ICOs’ and guiding users to deposit coins into a compromised wallet. This usually involves lying about everything like using fake team member names, and similarly misleading information.
To make sure that you never fall victim to a fake ICO, make sure you research the company and the project thoroughly. Pay attention to details such as bad websites, vague information, unrealistic promises and roadmaps, strange whitepapers, the specifics of the token and the tech behind the project.
Cryptocurrency exchange offers anyone a very direct way of getting their hands on Bitcoins and investing in various projects. Since there’s no regulatory body overseeing these exchanges in most countries (even though great progress has been made in 2018 in this particular niche), there aren’t few those who left empty-handedly due to fake exchanges.
The expression worth keeping in mind when dealing with Bitcoin exchanges is as follows: “if it sounds too good to be true, then it probably isn’t.” Having said that, one of the biggest red flags is the unrealistic price. Be wary of exchanges that promise very high discounts on Bitcoin. A very good habit worth having is to always check the website address. It should also include “https,” which means that the traffic between your device and the website is encrypted.
Therefore, make sure to always stick with well-known exchanges. Just like in the case of ICOs, learn as much as possible about the company, the team, and read reliable reviews. Make sure others from the cryptosphere confirm or infirm its legitimacy before proceeding forward.
Hardware wallet theft
This sounds like an impossibility, but there have been various reports of hardware wallet thefts. Even though a hardware wallet is specifically designed to securely store your private keys, it doesn’t mean that these devices can’t be tampered with. On more than one occasion, hackers used a backdoor created with the help of a “pre-configured” seed phrase hidden under a scratch card. This situation can be effortlessly avoided by buying hardware wallets only from 100% trusted sources, or even directly from the device’s official website.
Cloud mining scams
Even though Bitcoin mining is an incredibly resource-intense process, there are still some that believe in its potential to grant amazing rewards. Those who don’t want to have to deal with paying for massive amounts of processing power and electricity can rent server resources for a set rate.
This gave birth to a plethora of cloud mining scams out there. From diminishing the earnings of users through a range of hidden fees to the promise of astronomical but unrealistic returns, these types of scams are incredibly popular.
To make sure that you never fall victim to such a scam, be extremely suspicious of services that “guarantee” profit. Another very good tip is to always research any cloud mining service and read as many reviews online as possible. Furthermore, don’t be afraid to ask for proof when it comes to the mining equipment.
Multi-level marketing scams
MLMs, as they’re popularly known are marketing schemes that promise investors quick returns, and for progressively larger sums of Bitcoin. In truth, these schemes take investors’ money for the promise of even higher profits. Usually, these schemes fall short of the latter part. That said, make sure to avoid services which don’t have strong identities behind them. Ensure that you deal with legitimate brokers when it comes to Bitcoin “get-rich” schemes.
One of the biggest advantages of cryptocurrencies is the fact that their transactions are irreversible. Unfortunately, this aspect has been speculated by many hackers who scammed a great number of people within the crypto community. It’s possible that sometime in the future, we will have clear regulations in regards to how to use cryptocurrencies. Until then, it’s your responsibility alone to educate and protect yourself