It is true that cryptocurrency scams are everywhere nowadays, and have caused shocking amounts of money to be stolen, or have brought down entire exchanges. This has left a vast amount of people distressed and distrusting cryptocurrency investment for the foreseeable future. Of course, every revolution is never without those that want to ruin everything.
Most people will be very attracted to investing in crypto assets today, so much so that the security aspect of it will go over most people’s heads. The problem is, everything that is digital can be compromised sooner or later, which means crypto-assets can be hacked, stolen, or compromised as well. How does this happen, though?
In effect, there are several ways this can happen including via direct hacks to a crypto exchange where there is not much a user can do, as well as scams users fall for which are attributed to user human error. This is why we need to look at and understand cryptocurrency scams, particularly which known cryptocurrency scams to look out for.
What is a Cryptocurrency?
A cryptocurrency is a form of digital currency that was popularized when Satoshi Nakamoto (the pseudonym yet to materialize as a real person) supposedly created Bitcoin around 2010 and revealed Blockchain technology, both of which are set to revolutionize finance, business, and much more.
With the Bitcoin being worth a paltry few dollars back then, back when nobody believed it would be worth anything, and worth almost $40,000 today, those that have purchased several BTC (short form of Bitcoin) back in the day have amassed an unexpected fortune. Many people have bought entire houses or sports cars with crypto money. Some have transferred it to the stock market, etc.
Since then, several other coins such as ETH, Ethereum (second in line to the mighty BTC), and a bunch of other “alt-coins” can now be purchased on the market by digital asset enthusiasts. Most people will buy crypto via crypto exchanges, while there are many more ways to do this such as via PayPal and new ways to deal with crypto are appearing every day. There are even crypto ATMs out there. However, the commission one needs to pay varies a great deal.
Cryptocurrency can be one of the most lucrative investments out there, some say even better than investing in the stock market because the crypto market is so volatile. Hence, the volatility, the dips, and the peaks allow people to make a lot of money. Of course, transferring that money to FIAT (paper money like the EURO and Dollar) currencies is still not that simple and includes large commission fees. In some countries, though, it is possible to pay for things with crypto.
Since this is the first digital currency revolution ever, naturally cybercriminals (a.k.a hackers and scammers) have found a new, fertile playground to orchestrate their dark schemes. This is why we see so many crypto exchanges getting hacked recently with hundreds of millions worth of BTC stolen. This is also why cryptocurrency-related scams are at an all-time high. Remember, digital assets are the fastest and most anonymous way to transfer funds, so that works well for criminals.
Let’s look into that and how you should protect yourself from things like this.
What is a Cryptocurrency Scam?
A cryptocurrency scam is the equivalent of any digital scam such as phishing, but only in that, it applies strictly to cryptocurrency-related platforms, apps, and the social engineering required to trick victims and make monetary gains. After all, scams are the simplest and sneakiest ways for scammers and cybercriminals to conduct everything from impersonation to theft.
In a nutshell, cryptocurrency scams involve a number of schemes, such as;
- Phishing emails
- Spoofed and imposter websites
- Tech support and security impersonation scams
- Crypto giveaway scams
- Employment scams
- Extortion
- Man-in-the-Middle cyberattacks
- Investment frauds and pyramid schemes
Scammers will do anything to prey on unsuspecting cryptocurrency enthusiasts and will try to doop them into unknowingly giving over their credentials, most commonly via phishing (email scam) emails that naive victims usually tend to respond to, and go along with.
Scammers or hackers will try to enter a victim’s Bitcoin or cryptocurrency account in some fashion, which can also mean intercepting a victim’s WiFi router with a MiTM attack, doing fake giveaways, asking for some sort of “verification”, even ridiculous things like extortion and sextortion scams via email. It is no surprise that pyramid schemes are involved in this process, as are business opportunity scams or even celebrity endorsement investment scams.
There is no end to the creativity of scammers when they smell an easy profit on the other side. This is especially true because it is difficult for authorities to pinpoint the culprit of a crypto scam, particularly because everything is encrypted and anonymized in the blockchain, unlike how real-world money and bank transactions always have a trail.
How to Protect Yourself From Crypto Scams
Most importantly, you need to know how to build a defense wall against crypto scams. You need to;
- Protect your Bitcoin or digital wallet, ideally, get yourself a cold USB wallet to store your crypto
- Use strong, random passwords that hackers will not be able to crack that simply
- Keep your crypto software up to date
- Keep your devices and computer updated to the latest version
- Never give anyone your cryptocurrency private keys!
- Never let anyone know your passwords or MFA keys!
- Do not use unverified browser extensions to hold your crypto or any unverified digital wallets for that matter
- When doing crypto exchange transactions, use a VPN or Virtual Private Network to shield your internet connection from transmission sniffing
Remember, most horror stories related to crypto come from lost or damaged wallets, much less so from a hacked exchange – but this does happen too. Although, most legitimate crypto exchanges like Binance, Coinbase, and others that have huge user bases guarantee the return of funds in the case of a hack. However, funds should always be kept on what is called a “cold” wallet.