A group of values make up cryptocurrency. Similar to how traders and investors make investments when they believe the company will grow and share prices will increase, when investors buy a cryptocurrency, they are making a bet on the investment’s future value.
In essence, stock values are discounted forecasts of a company’s future cash flows. Since cryptocurrencies do not have a fundamental company, there is no comparable economic data available, and investor demand alone determines a cryptocurrency’s value.
One of two factors—the likelihood that other investors would buy the asset or the efficiency of the cryptocurrency’s blockchain—determines the value of a given cryptocurrency.
Cryptocurrencies are built on the blockchain, but what is the blockchain itself? Due to the phrase’s growing popularity, confusion occasionally surrounds its significance. Simply described, a blockchain is a computerised document with data or records.
A network of computer systems shares this logbook (or database). The logbook is actually managed by a number of different systems. Instead, a blockchain is maintained, and a decentralised network of computers authenticates its transactions.
Blockchain technology proponents assert that it has the potential to improve the security, reliability, and transparency of data shared across networks. Blockchain is said to be time-consuming, ineffective, expensive, and energy-intensive by its critics.
Types of Cryptocurrency Scams
Disruptive Crypto-Investment Proposals
Ponzi schemes, pyramid schemes, and other related fraud tactics are all possible. Furthermore, the fraudsters behind such schemes are skilled at convincing you to fund unsolicited business ideas only by:
- Mentioning on their websites celebrity endorsements or testimonies that aren’t trustworthy, safe, or real.
- After you send bitcoin to their bogus accounts, these con artists will lure you with long-term advantages like increased returns.
As a result, you should report these scams to law enforcement or federal authorities rather than falling into their trap and losing your hard-earned money.
Additionally, follow up via emails or chats if necessary. It will help many others avoid falling into unwelcome traps that promise you more profits on your investment.
Fake Apps and Social Media Scams
Social media, apps, and websites are an unavoidable component of scammers’ environments, and they are well aware of this. Oberlo estimates that there are currently more than 3 million users of social media worldwide.
Consumers downloaded about 250 million mobile applications between 1991 and 2021 (Decibels), and 1.88 billion web pages were accessed during that time (Statista). All of this gives fraudsters the opportunity to:
- Create bogus profiles on Facebook, Instagram, or Twitter to steal information.
- Based on your choices, they may give you financial aid such as rebates and refunds through phoney shopping websites if they believe you are simply dissatisfied.
DeFi Cryptocurrency Rug Pulls
These scams happen when investors fall for a DeFi scheme. This business, created by dubious developers, assures investors of a prosperous future. The owner of this project (which is sometimes referred to as a rug pull) and those developers will:
- Withdraw the funds, shutter the company, and go.
- As a result, threats like theft of money or loss of private information are growing more and more likely to affect the decentralised finance (DeFi) industry.
There have been a number of rug pull incidents recently, and most of them have resulted in investors losing $2 million or more.
SIM Swapping Scams
These SIM Swapping Scams, commonly referred as in the market as SIM Hijacking/SIM Jacking Scams, help scammers and hackers find another way to gain access to your cryptocurrency wallet or account. Think about how these scams start! At first, these hackers
- Can access all of your personal information, including your email address, mailing address, and phone number, on social networking platforms like Facebook and Instagram.
- They then locate the wireless service provider linked to your phone number, dial their number, and impersonate you on the call.
- Their goal is to transfer your number to another SIM card (the crooks’ SIM).
Instead of reaching out to you through fictitious attempts, they openly access your crypto wallet or account and completely empty it in a matter of seconds when the process is finished.
Initial Coin Offering Scams
Initial Coin Offerings, or ICOs, can be used to fund startups and support charitable causes, but they are also vulnerable to outright fraud and scams. Additionally, these frauds are generally apparent to a range of investors, bitcoin projects, and regular individuals as:
- Pump and dump-based plans
- Financial fraud
- Entrance fraud
In all of those scenarios, con artists will level outrageous allegations, such as claiming to be connected to famous people. Once you use their cryptocurrency platforms like Bitcoin and Ethereum, they will lead you to believe that the business they are running offers its customers superior returns. And in the end, the investors will be helpless as those con artists disappear with their money!
False Cryptocurrency-Based Job Offers
Accepted a job offer based on cryptocurrency during the conversation without thoroughly researching the company or the online source? If this is the case, there is a greater chance of being taken advantage of by such cryptocurrency-based job offers, which will initially:
- Give you work as a product designer, miner, investor in cryptocurrencies, or recruiter.
- These con artists will now demand more money from you if you want to apply for and get the job.
Stop right here because they will start extorting you and claiming that all of your personal information (such as your name, photos, and account information) under their control will be compromised as soon as it reaches a reimbursement to their crypto wallet or any other medium that receives those extremely unstable crypto coins.
Another prevalent variant is the giveaway con. Fraudsters pose as famous people or well-known bitcoin investors and claim to be able to help small investors. They promise to quadruple your investment if you send them your bitcoin and they match it with some of their own.
Actually, any money you give them goes straight into the wallets of the con artists. The FTC claims that con artists posing as Elon Musk conned investors out of more than $2 million in bitcoin over the course of six months.
The popularity of bitcoin scams will increase as that of cryptocurrencies does. Along with those mentioned above, there will undoubtedly be more frauds.
Current fraud schemes, including tax or utility frauds, may be modified by con artists to become crypto-centric. Or they might come up with completely original, difficult-to-predict methods.
The best way to protect oneself against these frauds that are on the rise is to stay vigilant. Start by learning as much as you can about the many categories of current frauds. This will make it easier for you to identify them as they take on new shapes.
Boost the security measures you use to protect your other bank accounts, such as using secure passwords and antivirus software. Maintain your cryptocurrencies in a secure wallet, and store many copies of the keys in a location that is quick to access for you but inaccessible to thieves.