How goods of value are exchanged from one party to another has been transformed by cryptocurrency. Also, the fast expansion and widespread use of digital currency have created new chances for criminals to prey on unwary victims.
In 2021, $14 billion were lost to scammers worldwide. And with cryptocurrency growing in popularity, this number will surely rise in the future.
The media’s interest in cryptocurrency and blockchain technology has grown in recent years. However, many are unaware of the intricacies of blockchain technology in relation to cryptocurrency.
What is Blockchain Technology?
Blockchain is a method of storing data so that it is difficult or impossible to alter, hack, or defraud the system. Blockchain technology does not have a central system of information which makes it difficult to hack.
How Does Blockchain Technology Work?
Rather than being stored on a single central server, data is spread across thousands of computers worldwide. An important feature to take note of is that each of these computers has access to the data.
This gives everyone, including traders and crypto miners, access to the data. It is not under the control or authority of any central authority. Blocks, which are data storage devices, are used to organize transactions.
In 2009, blockchain was not known by its original name. It was given that name because transactions were arranged into blocks. These blocks are linked using a mathematical method that generates a hashcode.
The MIT Technology Review believes that blockchain technology is crucial to innovation across industries. The continued normalization of this technology suggests that it will be our tomorrow.
Blockchain is now a significant part of the industry 4.0 Technologies. And quite a number of successful companies are built on it.
Coruzant on Blockchain, for instance, is the world’s first and largest digital publication created on blockchain technology. Every piece of material, article, photo, audio, and video has a Coruzant Token or “NFT ” connected with it that is unique.
Cryptocurrency relies heavily on blockchain technology. Its financial system, or more specifically, distributed ledger system, might be built on blockchain.
Blockchain technology has multiple digital advantages. One of these advantages includes enabling individuals to design their blockchains using just one parameter.
Scams Involving Cryptocurrency and How to Avoid Them
It is undeniable that the high-tech aspect of crypto will continue to attract clever crooks. Some of the most prevalent scams are included below, along with tips on preventing them, especially in this emerging technology era.
Fake or Anonymous Identities
The lack of KYC processes on the blockchain is a huge question mark for its wide implementation. With a decentralized network, there are no controls to determine who is a good actor and who is not.
On the plus side, blockchain can bring a new degree of transparency to the world of finance. Because data can’t be modified or withdrawn, all transactions on the blockchain are public records.
Blockchain technology has transparency built into it. Because of this, you can now use sophisticated software to do an on-chain analysis and monitor where your digital items travel.
It’ll take a while for law enforcement agencies with the system. Along with this, they will also become familiar with techniques to probe smaller-scale blockchain scams efficiently. There’s still a chance that bad actors will utilize crypto tokens, NFTs, and other digital blockchain assets. They’ll use these assets to launder money on both small and large scales.
Beginner cryptocurrency investors should stick to the two most popular cryptocurrencies, Bitcoin and Ethereum. These currencies have a longer track record of gaining value than other new altcoins.
Demanding Payments in Cryptocurrency Only
It’s most likely a scam if a person or retail establishment declares they don’t accept any currency other than Bitcoin or Ethereum.
According to analysts, legitimate institutions will not accept crypto without also accepting currencies via traditional methods. These include methods such as wire transfers, cheques, credit and debit card payments, and cash.
Anyone requesting payment in bitcoin may be attempting to hoard the currency and profit from its increasing value. Blockchain also lacks typical know-your-customer (KYC) protocols, unlike banks.
As a result, any bitcoin payment-demanding businesses should be avoided at all costs.
Investment Schemes in Cryptocurrency
An initial coin offering (ICO) is when a new cryptocurrency is released on the blockchain. ICOs, on the other hand, can be utilized to commit fraud.
A corporation or an individual may claim to have a once-in-a-lifetime opportunity to invest in a new kind of cryptocurrency. They usually guarantee 1,000% returns.
They might try to persuade you to deposit a large sum of money into a hacked digital wallet next. They’ll sell it when the price rises dramatically.
As a newbie investor, you should be cautious of these seemingly tempting offers and stick to your regular crypto business.
Romance or Dating Scams
Crypto frauds abound on dating apps. According to the Federal Trade Commission, there was a substantial amount of money lost in romance scams. Around 20% of this money was transferred in Bitcoin. This report was from October 2020 to March 2021.
Long-distance or digital relationships are used in scams like this. One side urges and persuades the other to buy or provide money for a new cryptocurrency. That is a simple technique to defraud people.
However, be careful not to invest in any new cryptocurrency while dating via apps. Unless you’ve done your homework and determined that it’s genuine.
Email and text messages are the most prevalent methods of publicizing crypto phishing scams to potential victims. The substance of the messages will vary. They will always include a link or a link embedded in a button that will direct you to a scammer-controlled website.
Scammers want you to provide information that will allow them to access your Bitcoin. This can be in a form of a cryptocurrency exchange or in a cryptocurrency wallet.
Scams about giveaways spread swiftly on social media sites like Twitter and Facebook. Scammers frequently create accounts to impersonate notable figures or well-known crypto firms on social media platforms.
High-profile Twitter hackers, for example, have once hacked the accounts of the following:
- Joe Biden
- Elon Musk
- Kim Kardashian,
- other public personalities and businesses
The link to the cryptocurrency wallet used in the giveaway fraud was then tweeted by these hijacked Twitter accounts. The scammers apparently collected at least USD110,000 in bitcoin before the tweets were removed.
Social media networks have recently begun to crack down on scam posts and phony accounts. Unfortunately, scammers have continued to come up with new ways to market their giveaway schemes.
Nobody wakes up one day and decides to lose a large sum of money by handing out a large number of bitcoins. As a result, you must avoid such giveaways.
Blockchain is accessible to the public and provides permanent, open-access records. Anybody can deal with it anonymously. Unfortunately, this also makes it easier to defraud you, take your money, and flee. The best way to prevent all of this from happening is to be armed with information.
That’s why it’s important to understand how blockchain works. It’s also very important to understand the common crypto scam attacks so you can easily identify them right away.
Just like your physical wallet, you need to protect your digital wallet from hackers. Practice good digital security habits akin to how you’d handle large sums of physical cash.