The cryptocurrency market often get a bad name for the very thing that is so great about them: decentralization. People liken the lack of a supervising institution, to a lack of security, when in fact the blockchain allows for much more secure and seamless transaction records. Once a transaction has been made, it is stored on the blockchain (a digital public ledger) and cannot be altered or tampered with.
Despite this, there are still several things to watch out for in the cryptocurrency-ecosystem, such as scams. We’ve mapped the most important ones out for you below, with some helpful tips on how to avoid them.
Initial Coin Offerings (ICOs) are a form of crowdfunding for startups in the cryptoworld. Typically, a team will present a white paper stating their intention, laying out their business plan and introducing you to the team behind it. They sell a token, you buy an “investment”. It’s a great way for the start up to fund capital, and potentially a great way for you to make money.
With an ever-increasing number of new buyers with limited understanding, this became the perfect breeding ground for scammers. Creating hype around a project only to disappear with the money post ICO, resulted in many people losing their money, a reported $1 billion in total.
Exchanges are where you buy your cryptocurrency and wallets are where you store them. As you can imagine, this is also opportune territory for fraudsters. There are a number of fake exchanges out there, enticing customers with large-deposit-bonuses and too-good-to-be-true deals, sometimes taking your money, or charging excessive fees to withdrawal. There are also several fake wallets – some of which have even been listed on Google Apps. These may take your money all together, or take your personal information from which they can do anything (and usually take your money).
We’ve put together several trusted wallets for you.
Pump and Dumps are large groups of buyers that target a specific altcoin with a low market cap. These groups collectively buy large quantities of the coin to drive up the price, and then swiftly sell to take advantage of the significant price rise. This can take place in a matter of minutes. Essentially it is a tool to manipulate the prices of altcoins, and is illegal in traditional security markets.
Several tools are now available to monitor the volume increase in a particular cryptocurrency, helping to identify such schemes.
Phishing is a familiar concept, particularly in the world of traditional banking. In the cryptoworld, exchanges or wallets may send you an unsolicited email with a link to a site that almost identically replicates the one you usually use. Once you enter your account details, the scammers have full access to your cryptocurrency.
As with anything pertaining to money, it’s always important to be vigilant and do your research. Thankfully with Google at our fingertips it only takes a few minutes to find out whether something is a crypto scam. If something sounds too good to be true, it probably is. We’ve put together a few more tips on how to keep you cryptocurrency safe:
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