Avoiding Common Crypto Scams


 

Scams are as old as time, and they are extremely prevalent in crypto. In a report conducted by the blockchain data analytics company, Chainanalytics, $14 billion was stolen by crypto scammers in 2021 alone while $7.8B was stolen in 2020. With this in mind, what are some common crypto scams and how can you prevent them?


Phishing Scams

A phishing scam is when someone sends you a malicious link to gain sensitive information. In crypto, scammers target private keys which give access to a user's wallet. A private key is a string of numbers and letters that acts as the master password of a crypto wallet, granting full access to the funds. Scammers will often send emails or links to fake websites designed to trick users into entering private information. Most recently, the popular blockchain game Axie Infinity was exploited due to a fake link sent to a staff member.

 

Malicious Smart Contracts

Smart contracts are simply computer code that is programmed to perform a certain function, so they can have malicious intent. When you approve a contract, this allows the smart contract to perform a function, and this function can be used to steal assets from your wallet. This is especially common with "free mint" NFTs since they can lure in victims with a free NFT and then steal everything from their wallets once they approve the website's contract. It is important to air on the side of caution if you have a bad feeling about a contract.

 

Rug Pulls

“Rug Pull” has become a very common term in crypto and it refers to when a project's team abandons the project and runs off with the funds. For NFT projects, this usually means that they never delivered on their promises/roadmap despite selling out. For tokens, a common practice is removing liquidity from the liquidity pool and selling, which immediately crashes the price and makes the token extremely illiquid. This is especially common in the microcap “shitcoin” space where new "Inu" coins pop up every day and pull the rug shortly after launching.

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Best Practices for Protecting Your Crypto Assets

Although the crypto space is rife with scams, there are certain practices that you can implement to further protect yourself. In general, if something seems fishy, it is probably not worth the risk.

First and foremost, NEVER GIVE OUT YOUR SEED PHRASE under any circumstance. This is the main target for most scammers since they have full access to your wallet and funds once they have your seed phrase. Many phishing websites will ask for this phrase, and this should be a major red flag. NO ONE should ever ask for this information and if they do, they are surely trying to scam you.

When you are loading different crypto sites keep in mind that many fake websites pop up that look identical to the original website. Always double check that you are using the official website. You can find links from the official Twitter page or through CoinGecko to verify.

Social media is one of the main sources of scammers in the space. Many of these scammers will try to contact you through DMs, so be wary of anyone sending DMs and avoid clicking any random links. As Twitter has become a hub for crypto, it has also become a breeding ground for scammers. Twitter bots are running rampant acting as fake customer support accounts and commenting under related tweets with malicious links. Many fake accounts will pose as official accounts, so always make sure to verify that the account is legitimate. There have also been instances of major accounts on various social media platforms (such as BAYC on Instagram) being hacked and sending out phishing links. Once again, if something seems fishy, avoid it and seek out advice from the community.

To avoid rug pulls, research the team and project extensively before investing. If the team is anonymous and has no background given, this can be a red flag. Although some successful projects are run by anonymous teams, most rug pulls don't tie their actual names to the project. Additionally, projects that promise huge returns or guarantee free money are often too good to be true are just that - too good to be true.

 

FAQs

What is a hard wallet?

A hard wallet is a physical device that gives access to crypto assets and can greatly help protect you from scams. Hard wallets don’t store your private keys on the internet, which reduces the risks of online attacks. With a hard wallet, signing and confirming transactions on the blockchain requires the actual physical device. This means that you need the device and private keys (often stored on a physical piece of paper) to access the wallet's funds.

What does phishing mean?

A phishing scam is when someone sends you a malicious link to gain sensitive information. In crypto, scammers target private keys or your secret phrase which give access to a user's wallet.

What is a private key?

A private key is a string of numbers and letters that acts as the master password of a crypto wallet, granting full access to the funds.

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Emperor Zombietine
Emperor Zombietine

Irreverent, Christian and Boundlessly optimistic. www.RugZombie.io


RugZombie Official
RugZombie Official

Bringing your rugged tokens back from the dead. Welcome to RugZombie, the first resurrected-value focused crypto on the Binance Smart Chain. While RugZombie cannot prevent or predict the exposure of the public to “rug pulled” or “scammed” tokens, it is our mission to provide a value for the victims of rug pulled projects in a cathartic way, while offering actual utility on the Binance Smart Chain.

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