A hundred years ago our currency was tangible. You could hold it in your hand and count it out in varying denominations. Debit cards were next which meant goods and services could be purchased without an actual exchange of currency. If the money was in your bank account, all you had to do was swipe a card and the money would be transferred to the business. Today, Bitcoin and other types of cryptocurrency are once again changing the way we perceive and handle money.
What Is Cryptocurrency?
Cryptocurrency is an international form of “money” that is sold across the world. Bitcoin, one of the most well-known, has been used for several years is a digital currency that allows people to buy “coins” and use them to pay for internet transactions. Cryptocurrency is not controlled or managed by a bank or any type of financial institution. People who use the currency do not have to supply any personal information to create a “wallet” or account and can remain anonymous. Transactions are final once they are complete which means they can’t be reversed. A digital transaction is kept and cannot be altered.
What Types of Scams Are Out There?
There are many types of scams involving cryptocurrency and new types emerge every single day. Here are some of the most common types of scams we’ve seen in the industry:
One of the most common being the sale of fake “wallets” that carry a malware or other disruptive software. Once the wallet has been purchased, the malware is released into your computer causing sometimes irreversible damage. Be vary careful when choosing a storage method for your cryptocurrency and try to use the best wallets that are reputable and highly reviewed.
Another scam involves money “flipping”. Basically, a person will agree to buy your Bitcoins and pay real cash for them once you’ve agreed to pay a small fee. The reverse is also true. They may offer to sell you Bitcoins for a certain amount of money if you agree to pay fees and open an account. Because the transactions are not reversible, all they have to do is walk away with your currency and the fees you paid and do nothing in return. The anonymity of the system offers very little personal information for the impersonator so tracking them is next to impossible.
Pyramid & Ponzi Schemes
Pyramid or ponzi schemes are also popular scams in this industry and usually take place under the label of high-yield investment programs. Just like any other ponzi scheme, the scammer relies on two or three people to sign up three friends. Those friends sign up their friends, and so on. The person at the top of the pyramid collects from those below him who collects from those that are below them. Eventually, the pyramid topples and everyone on the lower levels will lose their entire investment and the entire company will “vanish”. These sites can even pay out and be profitable for months (or even years) before that happens.
Fake Initial Coin Offerings (ICOs)
Another major scam is the “initial coin offerings”. An ICO involves an offer of what would seem to be a great deal on your first purchase of currency. In order to get the deal, you may have to create an account with a specific deposit amount or other criteria. Many of these ICOs end up being nothing more than smoke and mirrors designed to steal investor money. On the other hand, some of these ICOs can be legitimate and have pure intentions, but their development team didn’t follow proper security protocols leaving their investors vulnerable to hacks. Always be sure to do you research and make sure you are dealing with reputable companies first.
How to Avoid Cryptocurrency Scams
While many of the cryptocurrency deals sound great, odds are the better they sound, the worse they are. You can’t get something for nothing and those who try usually lose. With only about 5% of the cryptocurrency market being verifiably legit, there are several things you can do to protect yourself from scammers. They include:
- Only use “https” URLs: http URLs aren’t considered to be secure
- Stay away from online offers that sound better than they actually are
- Be wary of a Bitcoin dealer who will only perform transactions on social media platforms
- Use common sense
Common sense will save you from disaster if you just think about what you’re doing. If the deal seems over the top, then it probably is. Once you find a legitimate dealer, stick with them. If you really want to get into cryptocurrency, find a dealer you trust and avoid trying to find a better deal. Odds are the money you would save using another dealer will dramatically increase your risk of loss over time.
Cryptocurrency is the money of the future. The idea of one universal currency is great, but along with it comes a new level of risk that is associated with scams and impersonators who can easily hide behind a computer screen. While the currency has its benefits, you still need to protect yourself from financial predators who are using Bitcoin and other types of cryptocurrency as their personal playground. With a little common sense and forethought, you can protect yourself from loss if you are diligent and know what to look for. Take some time to learn about the currency and how it works and then ease in slowly. A few precautions will help you secure your investment and allow you to gain a firm understanding of this type of market.