How to Avoid Common Crypto Scams
Basically, a scam is an act of deceiving someone after winning their trust or maliciously accessing their personal information. Scams are unethical and unacceptable in no means.
Whether you are confused tat cryptocurrencies are reliable or not, there one thing we all agree on that is a coin frenzy like crypto can attract corrupted individuals willing to target on monetary greed. We understand some of the scams and believe traders should take caution and be safe when trading cryptocurrencies.
According to the stats, scams are constantly affecting the crypto industry. One reason may be that crypto market receives many unwary new investors every day. A recent report by Crypto aware disclosed that scammers and hackers scammed more than $2.3 billion in the past eight years. Therefore we ask the question:
Why there are so many crypto scams?
The main motive behind any scam is to gain financial returns. However, fraud or scams can be in any field or business, but for various reasons, online crypto trading is on the topmost of the list of most expensive scam cases. Know why:
- Crypto industry is decentralized
As we all know, the blockchain and crypto industry is still in its processing period. Even many countries didn’t yet legalize the use of cryptocurrency. Also, blockchain technology is not controlled by any authorized organization so there is no scope of higher authority to protect. What is actually encouraging scammers to seize the lapse in the distribution of blocks to cheat the less informed traders?
- Lack of proper advancement in the technology
As I already mentioned, the crypto industry or blockchain is still in their drafting mode, so there is a lot of scope of new technological advancement. So many often scammers find a loophole to scam or hack, as there no sign of tracking and retrieving lost assets.
In regular institutions like a bank, banks work as a middle man and secure funds but in the blockchain industry there is no sign of middleman, yet scammer is free to make their way to the catch.
However, many crypto platforms have or trying their best to make the encrypted technology more secure and keep crooked people away. But unfortunately, the majority of scam happens to naïve people who are not yet settled on a particular platform.
Let us look at the top 3 crypto scams of all time.
- Ponzi Schemes
Ponzi schemes work like pyramid schemes. These scammers mostly make their way to the blockchain by paying existing members the dividends brought in by the new membership sign-ups. Hence these groups can easily defraud as long as the membership ratio is balanced.
Why do we consider it a scam?
In a standard Ponzi scheme, no products are sold, the members rely on the investment made by their new members. The system crash when the number of new members is higher than the old members.
In the crypto industry, the Ponzi scheme will scam new people to sign up and witness their investment multiply more than ten times and then the members will advise investing heavily to earn quick rewards.
One of the most infamous Ponzi scheme names is Bitconnet. The scheme affected thousands of people who invested everything in it. Eventually, the numbers grew very soon and ultimately the ship sank as the US government banned it. As it breakdown the prices of Bitconnent also ran-down.
Ponzi schemes use online campaigns, online scams and computer programs to get a hand on desperate people who do not suspect. The government of the United States has clearly legislated to ban pyramid schemes at all levels.
- ICO Frauds
Before we dig into the details, ICOs are legit and secured investments when the company takes care and sets rules and regulations.
So what are ICOs?
Many of you might know or don’t know that ICO is Initial Coin Offering. By means, it is a type of token offered in the form of a coin by the cryptocurrency platforms are yet to be developed. Many investors buy these token in advance to make their hold on the platform beforehand it is launched.
The fraud schemes start when companies offer fake ICOs. When a company requests potential buyers to buy their tokens in advance, but in reality, there will be no platform to be launched. An ICO is a serious offense in the crypto market, but criminals still practice it.
Because of the fake ICO practice, many governments including China has completely banned ICOs altogether. In the US, the company as to launch ICO with strict regulations tat effect in marketing and overall cost of coin development.
A popular example is the Centra Tech, which was associated with DJ Khaled, who invested $32 billion on their platform. Luckily, in 2018 the company was cared for and shut down for fraudulent activities.
- Phone Porting:
In our earlier scam examples, we only mentioned the scams that have to affect naïve or beginner people. But phone porting is far more advanced and targets established crypto personalities. The technique is quite an old school rather; it involves taking control of someone’s cell phone line using another phone.
How is it work?
Well, the hacker takes control of your phone remotely and take out all the valuable information stored in the mobile such as contacts, names, passwords, etc. then they personate themselves as you and hack your account with accessing passwords.
Another method includes the scammer calls and hacks the line so they can hear your calls to know the information.
How to avoid phone porting?
We can be assured that there are several remedies for this malpractice
- Change your passwords often
- Always transfer your phone line to a new line
- Contact your service provider for any suspicious activities
How to avoid scams?
Every problem has a solution. However, a problem so dynamic such as online scams one solution is not enough. It is even more difficult wit blockchain; which is not a multinational business. So here are our few suggestions to avoid being duped.
- To avoid scams you need to be more cautious, keep all private information safely such as your gains and escapades in the market should always be kept to you. Scammers can reach your social media, email and even phone calls. Keeping it a secret is the best way.
- Always secure your documents and information with strong passwords. Avoid having the same password in all accounts. And secure your accounts with two-step verification.
- Ask your service provider to secure your phone line with a private PIN for you; this will prevent access by any third-party scammers.
- Avoid having business with illegitimate companies. Check the company verification on their portfolio before having a business. Always check for the registration under the responsive regulator in its respective country.
- Lastly, do not entertain spammy emails. In case you get any fraud emails always delete it without clicking on the provided links.
In the end, always stop and think if the opportunity sounds reliable to you or not. Don’t forget to do your research before committing anything. Always ask a question and verify the information before having any trade. And finally take your time to make a decision, stay cautious while trading online.