Unfortunately, scammers never rest. Some scams are pretty obvious while others are really convincing and more subtle. Scammers are evolving their methods all the time. Noone is 100% immune to these scams but you can do your best to avoid them by understanding them. That`s exactly what this post is about. It is the ultimate guide to avoid crypto scams.
The first type of scams that I would like to point out is also one of the oldest. I am talking about the so-called Ponzi-schemes. This scam doesn`t only exist in crypto space, it is actually going back to the 1920s.
The basic premise of a Ponzi-scheme is pretty simple. An operator pays out existing investors with money that is brought in by new investors. It`s like robbing the old one to pay the new one.
The project itself doesn`t generate any legitimate income, it only creates the illusion of it. The Ponzi-Scheme can continue as long as there are new investors jumping on board and bring in new capital. Some of these Ponzi-Schemes are not easy to identify, they can last over years and fool even the most sophisticated investors.
This type of scam has become quite popular amongst scammers in the crypto space. Ponzi-Schemes are easier set up in the crypto space than in the fiat world. There are lots of different examples, however, the most well-known are crypto lending platforms like bitconnect.
Very often a Ponzi-Scheme appears as a cloud mining service that tells you that the money you are investing is earning a steady return by cloud mining cryptocurrencies. One of the most well-known cloud mining scams that uses a Ponzi-Scheme is probably the BitClub Network, a scam that ran over five years and took more than 700 million dollars from investors.
Have you ever seen a Tweet or a YouTube video by Ripple XRP or the Litecoin Foundation stating that they are giving away incredible amounts of crypto? Well, this is one of the oldest scams in the crypto space. It`s the "Send me 1 Bitcoin and I will send you back 2 Bitcoin" scam. It sill is a commonly found crypto scam on Social Media Platforms.
These kinds of scams are promoted nearly every day on social platforms like Twitter or Youtube. Fake accounts with thousands of followers are created so that they look real or even worse, real official accounts from celebrities get hacked as it has happened on Twitter earlier on this year.
Always keep in mind that there is no possible explanation for you needing to send crypto in order to receive more.
Cryptocurrency transactions are permanent, irreversible, and additionally, the recipient of the transferred crypto is anonymous. This means that your crypto is gone forever and it is most unlikely that you will ever receive something back. It`s important that you are able to spot a giveaway scam and report them.
One of the main targets that scammers have is your private keys or recovery phrase. It is the ultimate end-goal of a phishing attempt in crypto space. This is probably the most important fact that you should always be aware of.
Your recovery phrase is a vital piece of information for any non-custodial wallet user. You use it to regain access to your wallet and to all of your crypto assets. Now as you can imagine, it’s a scammer’s wet dream to get a hold of your private keys.
Always write down your private keys on a piece of paper. Keep it offline and private. Never share this with anyone.
So long as you don’t share your recovery phrase, there is no way that scammers will get access to your beloved cryptocurrencies.
Unfortunately, your private keys can be attacked in many different ways. The usual tactic of a cryptocurrency phishing attempt is you make you visit a website that looks legitimate. This website could be a popular exchange, an online wallet, or similar crypto services that require authentication to access.
The scammers will use an internet domain that looks very similar to the official address of the website.
So carefully check the domains of the crypto websites you are using. Sometimes it is nearly impossible to see or can you spot the difference between "ledger.com" and "Iedger.com"? There is a difference, the first address is written with a small "l" and the last one is written with a capital "i".
The hosted websites look nearly identical to the official websites that you think you are visiting. Scammers are even running ads on Google or social networks to promote these fake phishing websites. You think that you simply log into your account but in fact, you are handing over the sensitive data to the scammers. Now the scammers can do whatever they want with your crypto.
An effective way to protect yourself against phishing attacks is to set up a 2-Factor-Authentification with Google authenticator.
The same applies to fake wallets that you can download from the internet or the Google Play Store. Always make 100% sure that you are downloading the original wallet from the official website and don`t fall for these nasty phishing attacks.
Unfortunately, the crypto space is also famous for rug pulls and exit scams. These types of scams have effectively been used by fraudulent ICOs. It is not hard to understand how these scams are working but it`s even harder to spot them.
The scammers want to convince you to think that it is a good deal to buy a new cryptocurrency in an Initial Coin Offering (ICO). Once enough users have been pulled in, they will simply disappear and your investment is gone with them. Most of these fraudulent ICOs happened in the 2017 ICO-mania. Now it seems that these exit scams have moved over to the DeFi space and the scammers will offer their new fraudulent token as a yield farming incentive in order to convince users to invest their capital to the DeFi protocol. After they have reached the critical mass, the scammers (or blame it on the devs) dump the token and disappear with the locked capital.
Even if it is not a scam, there is a high risk that there is a critical bug in the smart contract that leaves the protocol open to a hack as it has happened to Harvest Finance only a few weeks ago.
The only way to avoid these types of scams is simply not to get involved in the first place.
Social Media Scams
The Telegram Messenger is quite popular in the crypto space. Scammers are using Telegram and other social networks to reach out to you directly.
Let me give you one example: Enter a crypto-related group on Telegram like the Atomic Wallet Chat or the Kucoin Chat and write a simple "hello". Very soon you will receive the first direct messages from scammers who pretend to be from the official support team. Their aim is to get your 12-words backup phrase. Your 12-words backup phrase is the key to your wallet. It has essential meaning for keeping your funds safe.
Never ever give your backup phrase to someone else, especially not on Telegram or you are going to lose all your fund in your wallet.
I know that the dialogue in this example is quite funny, but if you ever receive a private message like this from someone who pretends to be from Atomic Wallet support, block and report immediately!
Love Scammers are also quite active on Telegram. Simply block and report everyone on Telegram that is sending you an unexpected private message, that`s how I keep it on Telegram to stay safe. The same applies to spammy comments in social networks, emails, and phone calls.
My Final Conclusion
Scammers are everywhere and unfortunately, they never rest. Now as long as you are aware of how these scams are working, then you are already ahead of the scammers. As you know the methods that scammers are using you can avoid them and keep your crypto safe.
Please keep in mind that the best scammers are those who are constantly improving and evolving their methods. No matter how much they are evolving, they are always either appealing to your greed or to your fear.
However, I hope that now, after reading my post, you are well prepared to spot and avoid crypto scams.
Stay safe and thank you guys as always for reading, liking, following, and tipping 👍
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