Since bitcoin’s origin in 2009, there have been various tricks. At first, the lawbreakers behind these activities looked to profit by an absence of comprehension of the fundamental standards of advanced monetary forms, just as monetary items, to cheat individuals.
Be that as it may, as the cryptocurrency money market developed and digital currency education progressed, the sorts of tricks expanded in both recurrence and complexity. In this guide, you will be able to learn about the five most common scams in the world of cryptocurrencies that you should be aware of.
1. Ponzi Schemes
Ponzi schemes were among the first forms of cryptocurrency scams witnessed in the cryptocurrency world. Characterized by the promise of high returns in a short period of time, Ponzi schemes operate by paying their older “investors” with money paid to the program by their newer “investors.” With this modality, the schemes can remain in operation for a long time, which in turn convinces their users that they are a legitimate company or organization.
High Yield Investment Programs (HYIPs) are a type of Ponzi scheme in which people are encouraged to join a program with the promise of high returns and guaranteed percentages. These investment returns, normally “guaranteed”, are usually much higher than the market average. The company or organization offering the investment opportunity will claim to be employing sophisticated investment methods to trade or multiply the cryptocurrency deposited by the investor, which can be said to be the reason for the high returns. In reality, these platforms are using the registration fees paid by new users to placate older participants.
The Bitcoin HYIPs will also have an attractive referral package to motivate users that attract new users to the program. This is done to ensure that new money is coming into the platform to further spread the hoax. Also, users will find it quite difficult to withdraw their bitcoin holdings from the platform as there are usually some impediments. Once the platform has generated enough funds and profits, it will disappear and take the cryptocurrency of the investors.
Another form of Ponzi scheme type is the Bitcoin MLM schemes. Defined as MLM (multi-level marketing) is actually considered by regulators as a legitimate marketing tool, Bitcoin MLM scams differ because they do not offer a real product or service. Rather, they work by offering a portion of the registration fee to anyone who can convince a new user to join the platform. As this is a tool that most Ponzi schemes use in addition to other tricks, it can work on its own to defraud users who are new to bitcoin and do not fully understand how digital currencies work.
Finally, another Ponzi scheme that scammers use to get rid of your bitcoin is through fake cloud mining sites. Cloud mining refers to the process by which a person purchases a cryptocurrency mining contract from a mining company, which will then provide part of their mining profits with the cloud mining contract holder. In this way, the individual does not have to manage the physical part of running a mining operation, but can still benefit financially from cryptocurrency mining.
There are many legitimate cloud mining platforms out there, but it is important to do in-depth research before purchasing a cloud mining contract with a provider to avoid being scammed.
Email phishing scams refer to the process by which a scammer sends what appears to be legitimate email containing important information. Therefore, this message may contain malicious software that has been created to infiltrate the recipient’s system and extract important private information or lead users to fake sites in order to capture the data and credentials of its victims. This information is then used to scam its victims.
These phishing scams are prevalent on the Internet, but even more so within the world of cryptocurrencies. This is because in most cryptocurrencies, once transactions are made, they cannot be refunded or returned, taking into account the anonymous system of most digital currencies, which makes it easy for scammers to get away with yours.
Scammers will always send emails from addresses that closely resemble legitimate addresses for bitcoin exchanges or wallets, usually changing just one letter in the address. This email will inform users of suspected malicious login attempts and will prompt recipients to use the links it contains to change their account information on those platforms.
After the user unconsciously enters their login information through the compromised link, the scammers gain access to the users’ account on the wallets or exchanges. They can then steal the cryptocurrency found on that platform.
3. Fake Bitcoin Sites
Phishing scams also exist in the form of fake Bitcoin websites. Scammers design websites similar to legitimate cryptocurrency exchanges or wallets in order to use user login information. To make sure they are visible to potential victims, scammers often buy Google ads. In this way, the fake page is the first result that appears when a person searches for your wallet or exchange.
To avoid this, you should always double-check the web address of the page you are on or intend to log in, keeping in mind that you need to make sure you have the correct URL. It is also advisable to follow companies on social media channels to get real-time updates on any relevant events.
4. Fake Apps
Fake Android or IOS mobile apps are another method that scammers will use in an attempt to acquire cryptocurrencies. Cybercriminals develop an application that, at first glance, appears to be the legitimate mobile version of a very famous cryptocurrency wallet or exchange. Well, taking into account that the application is in the Google Play store or in the Apple application store, users believe that it is the original version. This is because, in general, it is believed that Google and Apple scrutinize applications thoroughly before letting them be published in their stores.
However, there have been too many fake cryptocurrency apps that have scammed users. These apps run with wallet logos and provide very realistic proofs, leading users to deposit funds at the wallet address. After this, the scammers replace the address the wallets use with their own, causing unsuspecting users to unconsciously send their cryptocurrency funds to the wrong address and lose their coins.
So that you can avoid being a victim of this type of scam, make sure to download the official versions of the wallet by accessing from the link provided on the website of the wallets or exchanges. It is also very important to stay informed about current events within the world of cryptocurrencies and new trends in cryptocurrency scams.
5. ICO Scams
Initial Coin Offerings (ICOs), also known as token sales, are an innovative new way for startups to raise capital to fund their so-called projects by issuing a new digital token to early backers. Due to the fact that ICOs are known to raise substantial amounts of money combined with flexible regulation within the ICO space, it has become an attractive market for scammers.
Scammers will create very legitimate and tempting offers to attract funds from investors who believe in the future growth of the fictitious company. After sufficient amounts have been raised, the ICO will pull out what is called an “exit scam”, disappearing with the cryptocurrency funds and leaving little to no trace of their existence.
In order for you to avoid becoming a victim of an ICO scam, be sure to do in-depth research on the ICO before investing. Familiarize yourself with the product/service, verify the legitimacy of the company behind the ICO, and research the background of the project’s founders before considering investing money in an ICO. Platforms like Reddit and the BitcoinTalk Forum are great to start with if you want to find out the legitimacy of a project, as other community members have most likely already done some research, which is often shared on these platforms.