As new cryptocurrencies are developed and become more widespread, the number of scams and scammers also increases within these systems. Any type of monetary system will have scams that attack its users; this is even true of nationally backed currencies, and it only makes sense it would hold true for cryptocurrencies as well.
On the one hand, these scams are necessary since the cryptocurrency systems cannot implement ways to protect users without knowing where there are weaknesses. Bitcoin scams and Ethereum scams can be quite complex, making them hard to identify. Let’s review some of the most common cryptocurrency scams that you’ll need to be aware of to keep your investments safe and secure.
Phishing scams have been plaguing society as a whole for a very long time now, and they are some of the most common scams you’ll see. Luckily, they also tend to be some of the easiest cons to detect and protect yourself from.
When talking about cryptocurrencies, phishing scams are much like the ones from our past: hackers will reach out to their target, usually via email or social media. The scammer would then direct you to click a link to a fraudulent website for them to gather some valuable information about you.
So what is the solution to keeping yourself safe from these scams? Never click on links from unknown sources, and always verify email addresses before trusting the links and information within. These two steps will ensure you don’t get caught accidentally falling victim to these avoidable scams.
Cryptocurrency Wallet Scams
Wallet scams are unique to cryptocurrencies since these online wallets hold all of your cryptocurrency information; all it takes is a hacker to gain access to your account, and you could become a victim. These data breaches can affect many people at once and are much harder to protect yourself from.
The best way to avoid this type of scam is to change your passwords frequently. It would be best to keep an eye out for any news about data breaches for the cryptocurrency exchanges and wallets you rely on.
Ponzi schemes have been around for a while; they usually promise high returns at low risk. This scam lures people into a false sense of security by delivering on this promise in the beginning. Once they have built a positive reputation for being legitimate, more investments will flood in and reveal the scheme’s true nature. At this time, the investors stop receiving the returns they were expecting.
This scam type can also be a type of pyramid scheme where new investors are paying for the previous investors. In cryptocurrencies, this can take the form of shares for mining pools or promises of rewards for recruiting new investors.
A sure sign of a Ponzi Scheme would be anything that promises a guaranteed return on your investment in a short time frame. Since markets are always changing, it is impossible to guarantee a set return. If something sounds too good to be true, it usually is.
Fake Cryptocurrency Scam
There are a huge variety of different cryptocurrencies nowadays, and it can sometimes be challenging to determine which ones are legitimate and which ones aren’t. This created an influx of new scams claiming it’s too late to invest in Bitcoin, Ethereum, or other major cryptocurrencies.
These fake cryptocurrencies offer a solution to unsuspecting victims, and once you invest, the scammers redirect the fund into their pockets. Fake currencies are another great example of why you should always do thorough research to verify the reliability of the information you read online.
Decentralized Finance Rug Pulls
Decentralized Finance’s goal is to get rid of gatekeepers to financial transactions; this does open up other system weaknesses. These DeFi Rug Pull scams are newer and are currently one of the driving factors pushing for security improvements to several different cryptocurrencies, including Ethereum and Bitcoin, to name a few.
This scam usually involves a promise of a return on your investments after a specific time frame. Once the time frame is up, the scammers withdraw the funds from accounts rather than return them to the investor.
No matter what currency you use, it’s always advised to be aware of the possible scams out there and to take any needed steps to protect yourself and your finances. Scams and scammers will always exist, and you can do your part to stay safe by doing your research before clicking on any unknown links or entering your information into any website.
With more cryptocurrencies emerging all the time, more scams will also arise, as is the nature of any financial system. It’s essential to be vigilant and stay on the lookout for anything that looks suspicious. Always question the information you see, and verify with your own research before investing in anything unfamiliar.