Cryptocurrencies, sometimes known as virtual currencies or tokens, are not the same as traditional currencies, dollars or euros.
Cryptocurrencies are digital assets secured by cryptography that may be used as a means of trade, rather than being created and guaranteed by a government or central bank. They run on a blockchain, a system with an open, distributed ledger for recording transactions.
While several types of cryptocurrencies have existed for years, they became a bombshell in 2017 when the price of Bitcoin, the most well-known crypto, rose to about $20,000, signifying a year-over-year rise of over 2000%. Even after the “Great Crypto Crash” occurred in 2018, cryptocurrency remains popular, with Bitcoin being joined by Etherium, Ripple’s XRP, Tether, and a slew of other notable cryptocurrencies.
Furthermore, cryptocurrency exchanges have grown in popularity, offering venues for clients to trade cryptocurrencies for other assets such as cash and other digital currencies.
However, like with any financial instrument, there is the potential for unscrupulous actors to deceive investors, particularly one that is highly volatile and has sparked widespread public attention. Cryptocurrency fraud has become a hot issue among government enforcement attorneys, with a slew of notable conference panels and agency advisories addressing its varied forms.
So, How to recognize crypto and Bitcoin scams?
Cryptocurrency scams share a lot of the same characteristics, so if you know what to look for, you’ll be able to recognize them. here are some tips and situations:
· Promised returns are extremely high or assured
It’s critical to examine the offer and determine whether it’s reasonable. Making a 1,000 percent return on your investment in 18 months would be fantastic, but is it possible with this brand-new offer?
Making up false promises of profits is one of the ways scammers attract money to their schemes. Steer clear if you don’t have a strategy or supporting facts for why this initial coin offering (ICO) /the phrase for when a new cryptocurrency is formed and people are given the opportunity to acquire it at an early price/ would rise so rapidly.
· Offers are heavily promoted and marketed
Another method bitcoin scammers recruit victims is by spending a lot of money on advertising. Full-page newspaper advertisements, massive banner ads on websites, and a slew of sponsored bloggers are all geared to reach as many people as possible in the shortest period of time in order to collect money quickly.
Because it will develop and grow naturally, a more legitimate digital coin offering will not need to promote or expand as rapidly.
· Team members that are unnamed, ambiguous, or perhaps non-existent
You should be able to readily find out who is operating a cryptocurrency, including each member of the team, just like you would with any other business or investment.
It means you may look into their past, peek at their social media sites to discover how old they are, who follows them, how many followers they have, and so on.
It may seem like a lot of work, but if a couple of the team’s engineers aren’t online and you don’t hear back after contacting the organization, skip it.
· Check out the whitepaper
One of the most crucial aspects of a cryptocurrency ICO is the whitepaper. It will explain how the currency project was created, how it will develop, how it will generate revenue, and how the offering will function.
If you’re studying a whitepaper and wondering to yourself, “this doesn’t make any sense,” it’s possible that the founders are attempting to perplex their investors by presenting a false product. It’s also not worth investing in if there’s no whitepaper.
· Unusual investment packages
You may be given the option of subscribing, investing a particular amount, and receiving a daily or weekly return. This type of return is frequently unsustainable, and it will most likely slow or cease.
There are many such gimmicks and offers, and it’s critical that you read the paperwork and learn how they operate.
. No published code
Don’t let this one deter you. Only a few people will be competent to read a cryptocurrency’s codebase. The code is what enables cryptocurrencies to work, and the majority of reputable cryptocurrency teams will release their code ‘open-source.’ This implies that it is available for anybody to read, change, and verify that it is what the founders claim it to be.
After all, just because you can’t actually read the code doesn’t imply that you shouldn’t be able to view it. If a cryptocurrency team keeps its code hidden, this should raise red flags. What are they attempting to conceal?
Although not every legal and genuine cryptocurrency has its code publicly sourced, almost all illegitimate and fraudulent ones hide theirs.
How to protect yourself from cryptocurrency scams?
Protect Your Wallet
You’ll need a wallet with private keys to invest in cryptocurrency. If a company asks you to share your keys in exchange for an investment opportunity, it’s almost always a hoax. Maintain the secrecy of your wallet keys.
Keep an Eye on Your Wallet App
Send a little amount the first time you transfer money to verify the validity of a crypto wallet software. If you notice strange behavior while updating your wallet app, stop the update and delete the program.
Only Invest in Things You Understand
If you’re not sure how a cryptocurrency works, it’s better to take a break and do some more study before deciding whether to invest or not.
Take your Time
Scammers frequently employ high-pressure tactics to persuade you to commit money right away, such as promising bonuses or discounts if you engage right away. Before you invest any cash, take your time and do your homework.
Be Wary of Social Media Adverts
Scammers that operate in the cryptocurrency space frequently utilize social media to publicize their deceptive schemes. To generate a sense of credibility, they may use unauthorized photographs of celebrities or high-profile entrepreneurs, or they may promise prizes or free money. When you see crypto prospects offered on social media, maintain a healthy skepticism and conduct your due research.
Only Download Apps From Official Platforms
Although phoney programs can get up in the Google Play Store or the Apple App Store, downloading apps from these platforms is safer than downloading apps from other sources.
Do Your Research
The most popular cryptocurrencies are not scams. But if you haven’t heard of a particular cryptocurrency, research it – see if there is a whitepaper you can read, find out who runs it and how it operates, and look for genuine reviews and testimonials. Look for an up-to-date and credible fake cryptocurrency list to check for scams.
You may purchase and sell currencies using a cryptocurrency account on trading platform. However, do your research and read platform reviews. Some will advertise fantastic bargains, implying that they can beat exchange rate changes and that they employ automated technology to ensure you receive the greatest value.
Scammers will likely target the crypto ecosystem as it grows in size and complexity. You can recognize a crypto-related scam early on and avoid it if you understand how scammers obtain your information.