Bitcoin officially launched in 2009 as a means of transferring money away from standard Fiat payment systems. And, in 2010, bitcoinmarket launched as the first official cryptocurrency exchange. A year later, the Mt. Gox exchange had launched, and Litecoin had become the second cryptocurrency on the market, shortly followed by Namecoin.
Ethereum only launched in 2015, after a dozen or so other coins had launched, including Dogecoin. Today, bitcoinmarket.com no longer exists, Mt. Gox went bankrupt after a large-scale hack, and you would be hard-pressed to buy Namecoin away from decentralized exchanges.
The cryptocurrency market is still in its infancy, and the disappearance and bankruptcy of some of the earliest sites point to the fact that, unfortunately, crypto scams are relatively commonplace. Users need to take steps to ensure they remain safe and avoid scams that do exist.
Learn About The Cryptocurrency Market And Types Of Scams
First and foremost, users need to do their research on the cryptocurrency market and blockchain technology as a whole. Before researching a promising new cryptocurrency to buy, learn about ledgers and blockchain, as well as exchanges and wallets. As crypto editor, Alan Draper, writes, “rug pulls and scams are constant threats” so investors need to understand what these are and how they work to best avoid them.
A rug pull occurs when the developers walk away from a project, leaving investors with nothing.
Pump and dumps are schemes most commonly associated with smaller coins, and are especially prevalent with meme coins. They involve groups of investors getting together and buying coins to artificially pump the price. Other investors see this price movement and buy into the coin for fear of missing out, and when the price hits a peak, the original investors dump their coins, causing the price to plummet and leaving later investors with worthless coins.
These types of scams aren’t specific to cryptocurrency, but they are commonly seen in this space.
Use A Reputable Exchange With A Good Reputation
Mt. Gox was once the largest exchange that dealt with more than 70% of all Bitcoin transactions. However, this was before any kind of regulation and before exchanges took security seriously. It does point to the fact that investors need to do their due diligence when it comes to choosing an exchange to buy cryptocurrency. Check the history of the exchange, ensure it has plenty of users, and look at the team behind the exchange, too.
Use A Secure Wallet To Store Money Away From The Exchange
While it is possible to leave cryptocurrency stored on exchanges, using an external or cold wallet is more secure. Most hackers and thieves target exchanges because they are somewhat prone to security threats.
Cold wallets, on the other hand, cannot be hacked and they offer a safe way to store coins. There are hundreds of wallets available, including desktop and mobile wallets, as well as those that allow the storage of specific coins or groups of certain types of coins. Research the wallet you intend to use and take advantage of all the security features they offer.
If It Seems Too Good To Be True…
Other common scams include confidence scams. These can come in the shape of unsolicited emails promising massive returns for moderate investments. They can also be found in forums and even on established websites. As with any stage of your cryptocurrency journey, research is vital.
Avoid responding to or even clicking the links in unsolicited emails and do your research online. Check sites like Reddit for information on common scams and, if something seems too good to be true, it probably is.
Never Pay In Advance
The main purpose of Bitcoin is as a means of payment or a transfer of value. While it is still difficult to pay rent or your mortgage using Bitcoin, there are thousands of businesses, globally, that accept cryptocurrency payments. As well as the likes of Microsoft and Tesla, as well as real money online gaming portals, there are many other opportunities to spend cryptocurrency.
No matter the goods or services you’re paying for, do not pay in advance. Cryptocurrency payments do not have the same level of security and there is no support for fraudulent transactions. A cryptocurrency payment is effectively non-refundable.
Don’t Share Details
You can, and will need to share your wallet address when accepting cryptocurrency payments. This is how others send cryptocurrency to you, but avoid sharing with anybody who doesn’t need the information, and never share information like exchange login details. This includes inadvertent or accidental sharing.
Phishing and social engineering scams are common and these encourage you to add details on unofficial websites or even by email: details that scammers will use to steal your crypto holdings.
Research Any Cryptocurrency You’re Interested In
DYOR is a common initialism used in cryptocurrency investment and it means Do Your Own Research. Whatever investment advice you read or news story you read, don’t just assume the information is correct. Get online and do your own research.
Check social media discussions, search Google, and gather as much data as you can. If you’re looking into a specific coin, find and read the whitepaper, check the history of the team behind the coin, and make sure there haven’t been any known scams or hacks associated with the coin in the past.
Conclusion
It is virtually impossible to recover any cryptocurrency funds stolen. Crypto does not have the same protection as fiat currency, and this has led to a lot of hackers and scammers targeting cryptocurrency investors and entities. Don’t let your excitement or fear of missing out let you bypass thorough research or avoid due diligence.
There is a lot of information online regarding cryptocurrency, including extensive information on previous scams. Use reputable exchanges and wallets to conduct trades, and never give out personal information that you don’t absolutely need to.