The 5 Most Common Cryptocurrency Scams and How to Avoid them

The rise of cryptocurrencies and blockchain tokens has gotten the attention of investors from all over the world. There are many honest projects and products in the cryptocurrency space but there are also some dishonest ones. There are people out there who want to scam you and steal your money.

Currently the crypto space is largely unregulated. Compared to the traditional financial world, in the crypto world It’s easier for scammers to defraud people and get away with it. The following are 5 of the most some common scams in the crypto space.

Shady exchanges scam

Hundreds of cryptocurrency exchanges exist online. Anyone with the right technical background can set up an exchange fairly quickly. Traditional financial exchanges are heavily regulated. Most cryptocurrency exchanges are not regulated.

There have been cases in the past where an exchange has simply disappeared with all of its user’s funds. There have also been cases where the exchange gets hacked and user’s funds vanish, leaving users with no options to recover the stolen funds.

How to avoid this scam
To protect yourself from these questionable exchanges, just don’t use them. Do your research before using an exchange, and only use reputable exchanges. It’s also good practice not to leave your funds on an exchange. Once you buy your cryptocurrency or token, withdraw those funds to a secure wallet.

Phishing for your private key scam

Phishing involves tricking you into exposing the private key of your cryptocurrency wallet. Once a scammer has your private key they have access to move your funds out of your wallet. Wallet phishing is perhaps the easiest and most common scam to fall pray to.

Many cryptocurrency phishing scams involve presenting you with a legitimate and secure looking cryptocurrency wallet. The scammer’s hope is that you’ll move funds into this wallet or open it up. Doing so will expose your private key to the scammer and allow the scammer to steal your funds.

How to avoid this scam
Don’t use wallets that are solicited to you via online ads (See below for the search engine ads scam) or email. Download wallet software from official sources or wallets that are recommended by the official team behind the cryptocurrency or token. Don’t use 3rd party wallets unless it has established itself as a reputable wallet amongst the community.

Don’t access your wallet over unsecured public wifi networks or internet connections. You never know who’s watching. Only access your wallet through a secure internet connection or offline.

Scam ICOs

Initial Coin Offerings (ICOs) have opened up the world of startup seed financing to the average investor. Currently there’s little to no regulation surrounding ICOs. With little oversight, some scammers are using ICOs to defraud people. Most ICOs have honest intentions, however some don’t. Scam ICOs have every intention to steal the money raised once the crowd funding phase has ended.

How to avoid this scam
To avoid falling pray to scam ICOs there’s only one thing you can do and that’s doing due diligence. Before investing in any ICO make sure you do your homework. ICO due diligence is a topic for a whole other article. But in general if the ICO lacks transparency and community support there could be something fishy going on.

Search Engine ads scam

People who are new to cryptocurrencies often start their research on search engines like Google. Search engines are a great tool to find relevant information that you’re looking. Search engines also allow advertisers to place their own products and services at the top of your search results page. Often these search engine ads are formatted to look very similar to organic search results. Scammers can place search engine ads for shady or fake crypto related products and services. People often click these search engine ads thinking that it’s just part of their organic search results. At best these products and services over promise and under deliver. At worst they are out right phishing attempts to steal your private keys and/or passwords.

How tot avoid this scam
While many legitimate crypto related products and services are marketed through search engine ads, you need to be careful of the illegitimate ones. For starters never use a wallet or exchange that you come across though an ad. Only use wallets and exchanges that are reputable amongst the community. And secondly if a product or service promises a certain ROI on your investment or sounds too good to be true it often is. Use your common sense and judgment.

Fake ICO contract address scam

During high profile ICOs there’s often a mad rush by investors to get in on the ICO before the ICO ends. This in turn puts high traffic demands on the ICO project’s website. Investors scramble to try and find the ICO contract address on the website but aren’t able to because the website is too slow.

A common scam used during some ICOs is that scammers will publish a fake ICO contract address online. They’ll post the scam address on apps like Slack or Reddit. The scammer’s hope is that someone who desperately wants in on the ICO and can’t access the contract address on the official site will send their ICO funds to the scammer’s fake address.

How to avoid this scam
To avoid this scam always send ICO funds to an address that is officially posted on the ICO’s official website. If you see someone post online claiming that they have the ICO contract address, don’t trust it. Only trust official communication from the official team.

Always be cautious 

These are just some of the main ways scammers try and get your money. As the blockchain space evolves, so too will the scammers. Always be vigilant when handling your cryptocurrencies and tokens. In the cypto space, you are your own bank. So take the same level of seriousness that a bank would when handling your funds.

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