How cryptocurrency scams work and how to avoid them
Cryptocurrency just keeps on trending around the world. Unfortunately, cryptocurrency scams are becoming more widespread as well. If you’re planning to invest, it’s important to be aware of the various crypto schemes out there.
We’ll start by discussing how bitcoin and other cryptocurrencies work to get all readers up to speed. Then, we’ll go through the different types and examples of crypto scams. More importantly, we’ll explain how you can keep safe from them.
Many people don’t understand cryptocurrencies, so scammers love to take advantage of this. If it’s your first time investing, you might fall for them too. This guide will teach you how cryptos and scams work so that you can invest safely.
How does cryptocurrency work?
As we said, you need to understand how cryptos work. If you don’t, you’re more likely to fall for cryptocurrency scams. So, let’s start with the first-ever crypto: bitcoin (BTC).
Someone named Satoshi Nakamoto launched Bitcoin in 2009. A decentralized network called a blockchain made this digital asset possible.
Computers from around the world make up this network. Regular people own them. In the crypto space, they’re known as miners.
Their job is to confirm BTC transactions, each protected by encryption. The miner’s computers will figure it out by doing thousands of computations every second!
The first to figure out the “winning solution” gets to earn proof-of-work. Then, the blockchain will get a new block. Afterward, the miner will then receive more bitcoins as a block reward.
The whole system was intended as a financial system without a central authority. It’s a group of miners, buyers, and sellers making it all work.
What are the usual kinds of cryptocurrency scams?
This caught on recently as more people are now using cryptos. More countries are letting people hold, buy, and sell these assets. El Salvador even allowed it as legal tender!
Unfortunately, scammers are also starting to use it too. They know that most folks don’t get how cryptos work. As a result, these schemes have become common lately.
The Federal Trade Commission even sees it as a problem now. The FTC said that around 7,000 people reported losing money on these scams since October 2020.
The total amount of funds lost was more than $80 million. That’s a median loss of roughly $1,900! Fortunately, the FTC listed the types of cryptocurrency investment scams:
- Investment/business opportunity – Some people or companies may promise financial freedom through cryptos. Then, they’ll tell you to buy some. Give it to them, and they’ll promise to return it with interest. Once you open the “account,” though, you’ll realize you can’t get your money back unless you pay some more.
- Blackmail emails – Others will send emails saying they have embarrassing pictures of you. They’ll say you need to pay them in cryptos, or they’ll release the pics. The FTC says to report it to the FBI as soon as possible.
- Social media scams – You might get a request to send crypto to your friend. Others may pose as celebrities and ask their followers for crypto. These are probably fake accounts or hacked ones.
- Fake websites – Some people can create fakes of popular websites. Check if the URL is spelled wrong, there’s no small lock icon beside it, or it doesn’t have “HTTPS” in it. If any of these are true, close the site and don’t click anything in it.
- Fake mobile apps – Scammers may tell people to download their app on the Google Play Store or the Apple App Store. Some look like popular apps. If you notice something weird about the app, uninstall it immediately.
What are some examples of cryptocurrency scams?
As we said, there have been lots of crypto investment scams in the past. You need to see actual ones so that you can protect yourself better. Here are some recent crypto scams:
- Teen hacks multiple celebs – A teen from the US took control of several Twitter accounts for a bitcoin scam. These belonged to well-known people such as Bill Gates, Kanye West, and Barack Obama.
- Elon Musk impersonators – The Tesla CEO is a well-known figure in the crypto world. He even called himself the “Dogefather” before his SNL appearance. As a result, lots of scammers pretended to be Musk. The FTC said it drove the recent scam trend.
- BitConnect – It was a company with a crypto-lending scheme. In November 2020, a person who promoted BitConnect now faced prison in Australia.
Investing in cryptocurrencies is similar to other assets. There’s always a risk, and there are no guaranteed returns. If someone promises quick and easy cash, don’t believe them.
How do I avoid cryptocurrency scams?
🚨SCAM ALERT: Fraud remains a plague on the crypto world.
If someone sends you a cold email claiming to offer the #Consensus2021 attendee list for sale, don't fall for it.
Here's what to do: 🧵👇 pic.twitter.com/drT0kgp5rJ
— CoinDesk (@CoinDesk) May 24, 2021
The best way to avoid getting scammed is to inform yourself. Also, you must always read the fine print. Read below for more details:
- Keep calm and avoid FUD – Scammers may take advantage of FUD (Fear, Uncertainty, and Doubt). They’ll tell you to buy certain crypto now, or you’ll miss out on earnings. Just avoid their offer.
- Research by yourself – Study about any asset before investing in it. All investors do this, no matter if it’s stocks, bonds, or cryptos.
- Check where you’ll buy crypto – If a person recommended a crypto coin, look them up online. Remember, you’ll have to provide details such as your credit card info before you can use these services! If you’re buying from a crypto exchange platform, read all about it too.
- Know where to store your coins – Aside from an exchange platform, you may store your cryptos in a digital wallet. Again, check how it works because you’ll put your investments in there. You may also get a hard wallet for more protection.
In response to the crypto trends, central banks worldwide want to make digital currencies. Despite this, cryptos are here to stay. If you truly want to invest, start right.
Begin by learning all you can learn about cryptocurrencies. You may find tons of free resources on the internet. If you need quality crypto articles, you’ll find them here at Inquirer USA.
You’ll see that the articles always weigh the good and the bad. What’s more, you’ll always see reminders to read other sources. We want readers to plan their investments carefully.
Learn more about cryptocurrency scams
What are some crypto scams?
The most common crypto schemes involve hacked celebrity social media accounts. Others include fake websites, fake apps, and blackmail messages.
Is it safe to invest in cryptocurrency?
All investments have risks, including cryptos. You can lose money in stocks, bonds, real estate, and other assets. Your financial safety rests on your decisions.
Will cryptocurrency make me rich?
Some people became millionaires from investing in cryptos. Some were just lucky. Most investors had to plan their investments wisely.