As blockchain technology and cryptocurrency surge in popularity, the online transaction of digital currencies is becoming easier and faster. But as people continue to welcome this kind of decentralized banking and timely transactions, many hackers, fraudsters, and scammers have realized the loopholes in the whole system, and have come up with an elaborate plan to fool cryptocurrency handlers.
Don’t let these people fool you. Here are common cryptocurrency scams and some of the precautions you can take to avoid them.
- Initial Coin Offering (ICO) scams
Initial Coin Offerings (ICO) fraud is a common cryptocurrency scam you should avoid. Of course, there are several legit ICOs offered by trusted companies, but nothing stops scammers from spoofing existing ICOs or creating fake ones.
These fake ICOs are harder to spot nowadays, even if they have ICO white paper writing. But there are specific criteria you can use to unearth and avoid them. For instance, an established, reputable cryptocurrency startup is less likely to scam you. Another measure is the absence of a strong presence online of the company’s senior management members.
A quick example of a legit ICO branding firm is Kryptoia. The company has on board a senior management team with a diverse range of expert skills and vast experience in mechanical engineering, gaming technology, information technology, commerce, artificial intelligence, internet marketing and blockchain development.
- Cloned Websites
These are fake websites that look exactly like popular and trusted websites. Often, the web address, design and user interface look similar to the trusted sites. The scammers usually use Google ads to lead users to these cloned websites.
To avoid such websites, make sure you always double check the web address you want to visit before you enter your personal information. It is even better to bookmark the correct site and always use the bookmarked link to access the site.
- Fake Digital Wallets
Storing your cryptocurrency online requires you to own a digital wallet. You have to be careful when looking for a digital wallet because many Internet scammers have their digital wallets with the name or URL that almost resembles the popular ones. These fake wallets disappear once you deposit funds into them. For instance, MyEtherWallet digital wallet app whose name almost resembles MyEtherWallet was created by scammers to steal from cryptocurrency enthusiasts.
There are some precautions you can take to avoid fake crypto wallets. For instance, always use a reputable digital wallet to store your digital currency. It is also advisable to always double check the site’s official names and URL before you proceed.
- Fake Crypto Exchanges
A fake exchange is also one of the common cryptocurrency scams you need to avoid. Most of these fake digital currency exchanges pop up for days or weeks and later disappears into thin air once they are exposed. For instance, Ukraine’s Cyberpolice officers exposed a group of scammers who created several fake exchangers offering conversion of digital currencies.
To avoid becoming a victim of fake exchanges, make sure any exchange site you visit is HTTPS secured. Fake exchanges that claim to offer selling of cryptocurrency for PayPal money is another red flag to look out for.
- Social Media Scams
Scammers are now taking their conning arts to social media. For instance, they hack the social media accounts of crypto lead developers and use the official account to post fake promotions that are meant to correct the users’ passwords and usernames. By holding to the hacked account, they subsequently exploit the company’s customer support service.
To avoid getting scammed on social media, you need to be cautious about promotions, offers or anything that sounds too good to be true. Otherwise, don’t send any amount of digital currencies to anybody over the internet unless you are paying for the stuff you have bought online or you are donating for something.
- Cryptocurrency Mining Scams
Cryptocurrency mining requires technical expertise and expensive hardware. Scammers are aware of this hassle, and they quickly create fake cryptocurrency mining setups looking to steal from unsuspecting miners. Some of them ask their target victims to pay them small amounts of digital currencies or real currencies upfront to connect them to a mining setup.
To avoid mining scams, always don’t trust anybody who solicits payment for mining through emails or private messages. You also need to wary of unknown individuals who promise steady investment return through mining.
- Ponzi Schemes and MLM Schemes
Ponzi schemes and MLM schemes also fall under this list of common cryptocurrency scams you should avoid. These schemes promise exaggerated investment returns for those who pay small initial investments. The recent examples of these schemes include Bitconnect and OneCoin.
These two types of crypto investment scams can be identified very quickly and easily. You can avoid them by saying no to any investment scheme that promises quick and guaranteed returns.