What is Cryptocurrency?
A cryptocurrency is a form of digital money that is decentralized and built on blockchain technology. Although the most well-known versions people are aware of are Bitcoin and Ethereum, over 5,000 distinct cryptocurrencies are in use. It is a digital, encrypted, and decentralized way of trade. There is no central body that administers and regulates the value of a cryptocurrency, unlike the US dollar or the Euro. Instead, these responsibilities are split throughout the network among the users of a cryptocurrency.
Although crypto may be used to purchase everyday goods and services, most people invest in cryptocurrencies in the same way they would in other assets such as stocks or valuable metals. While cryptocurrency is a fresh and interesting asset class, investing in it may be dangerous since you must conduct extensive studies to comprehend how each system operates appropriately.
A rise in Cryptocurrency Scams
In India, cryptocurrencies like Bitcoin and Ethereum have acquired enough popularity in investors as a result of the rising uncertainty caused by Covid. The crypto industry has seen an increase in investment all over the world. According to an analysis issued in April 2021 by Markets & Markets Research, the crypto industry is predicted to increase from $1.6 billion in 2021 to $2.2 billion in 2026, at a Compounded Annual Growth Rate (CAGR) of 7.1 per cent.
With such tremendous growth of the crypto market, there has been a considerable rise in scams and thefts. According to the Crystal Blockchain analysis released in December 2021, there were 115 security assaults, 40 Defi protocol hacks, and 26 deceptive schemes till December 17, 2021, resulting in the theft of about $10 billion in crypto assets. While cryptocurrency trades have resulted in a massive loss of wealth, the International Monetary Fund’s recent study report believes that crypto poses a threat to global financial stability.
6 Major Cryptocurrency Scams and How to Avoid Them
The purposeful attempt to affect or interfere with asset prices is known as market manipulation. Scammers frequently influence markets to quickly shift the balances in their favour and profit. This blanket word encompasses a variety of illegal trading practises, including:
- Spoofing: Fake accounts and algorithms are regularly used by fraudsters to conduct huge deals, giving other traders the appearance that demand is rising or declining.
- Front running: The technique of striking deals based on information of upcoming transactions is known as front-running.
- Churning: This is when a broker engages in aggressive trading in a client’s crypto account to make higher commissions.
To begin, one should trade on bigger, more renowned exchanges with established security rules and internal procedures. Furthermore, before executing any financial decisions, investors may protect themselves against illegal practices in the crypto world by properly studying currencies, traders, and exchanges.
Fake help desk offering assistance:
New crypto fans sometimes turn to forums to inquire about simple things such as where to buy, which wallets to use, and so on. These newbies may acquire a direct message from an “official customer service person” from one of the main exchanges, offering assistance. These “reps” will frequently direct users to phoney websites where they may create wallets or accounts to acquire cryptocurrency, which can be exploited to steal cash. When it pertains to crypto wallets or trades, never trust URLs from strangers. It is always best to go straight to the original URL on authentic websites.
When crypto programmers quit a project but pocket the revenue obtained from investors, this is known as a rug pull. Bad actors can issue a new token on a decentralized exchange to attract investors, couple it with a real cryptocurrency, and generate buzz on social media. The creators scrap the program and flee with investment cash once enough money has flowed into their token.
Keep a close eye on the web pages and 3rd party partners involved. No matter what the majority say or how many nice evaluations there are, don’t depend on remarks from strangers on social media. If there are no reliable reviews, the offer is more likely to be a fraud. Adhering to centralized cryptocurrency trades, which are more likely to have a more significant impact and regulations, increases the chances of avoiding shady ventures.
Initial Coin Offering (ICO) scam:
Corporations can use an ICO to obtain funds for a crypto project, such as a coin, software, or relevant service. The investor expects to receive an issue of coins in exchange for pledging cash. While IPOs are traditionally reserved for well-established private enterprises, corporations who seek ICOs aren’t in the same boat. They might be brand-new businesses with no track record, making it impossible to distinguish between a legitimate service and a scam.
A background check on the ICO’s creators and management team is possible. If the company’s proprietors are unknown or have a shaky track history in the crypto industry, this should raise red flags.
Luring with success:
Occasionally, you’ll come across someone who claims to have made a lot of money on their transactions and wants to share their wealth. This scam may be carried out in various ways, but you will most likely wind up on the website that forces you to deal with your wallet to “give” you the money. Hackers will empty the wallet for you instead of offering you anything. To avoid this, keep in mind that no one is handing out free crypto even if they seem loyal.
Traditional Phishing scam:
Phishing is a common fraud in which a con artist tries to get private information like a user’s name, address, Social Security number, and passwords. A scammer’s efforts may be meant to gather the seed words or secret key from one of the bitcoin wallets in the situation of cryptocurrency investment. It may involve many forms and start with a harmless phone call, text, or email. They are also spread on message boards, messaging applications, and social networking platforms. The fraudster will eventually imply a government official or a corporate representative as to someone else and try to get you to share similar information.
Edited by Prakriti Arora