Protect Your Pocket: How to Avoid Bitcoin Scams

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There have been a growing number of cases of Bitcoin schemes, fraudulent projects, exchange hacks and other malicious activity in the cryptocurrency market. While it would be unfair to label the industry as unsafe and risky, it is worthwhile noting that there are opportunists trying to take advantage of vulnerable users to steal their cryptocurrency assets. 

Cryptocurrency scams vs traditional fraud

The difference between the crypto market and traditional finance is that there is a lack of investor protection in the cryptocurrency industry. This is because of the nature Bitcoin and other digital currency projects have; where it is decentralised and untraceable. This protects from central authorities stepping but means that funds cannot be retrieved once given away (such as to a fraudulent scheme) or stolen (in a hack attack, for example).

With both options, however, there is a risk associated with investments. If the market falls, for example, it is up to the investor whether to hold and hope it recovers and sell out at a potential loss. This risk is not scam-related, and it is important for new Bitcoin investors to know that there is a difference between a scam and between general market volatility.

Checklist: What to look out for in a Bitcoin scam

If there is a cryptocurrency project which attracts your attention but you are not sure whether it is genuine or not, run through this checklist to avoid falling prey to malicious opportunists:

  • Double-check whether the website or platform connects securely. Ensure that it is over https (and not http).
  • Look out for the word “secure” or a security lock icon in the website’s address bar. These represent the security of a website and an absence is indicative of an unsecured site.
  • Look carefully to see whether the URL and name of the website are spelt correctly.
  • Look out for bad grammar and incorrect spelling. These often indicate quick schemes and might not be safe.
  • Look for any information about company employees or staff members and cross-reference to see whether they are legitimate. If not, proceeded carefully. (A lack of information might not mean the platform is a scam, as the cryptocurrency industry is privacy-centric, but it is helpful knowing that there is accountability on a platform).
  • Look for reviews and other testimonials and google the site’s name. If there is any news of suspicion, act with caution.
  • Don’t trust that a celebrity endorsement is genuine unless it comes directly from the celebrity.
  • Read thoroughly and conduct research before putting your funds into a platform or giving any banking information to a website.

Bitcoin scams to look out for

Phishing 

Phishing is fairly common across investment platforms, but in cryptocurrency there is the risk of having no chance of getting your funds back. It is a common method for scammers to solicit funds from vulnerable users by sending emails, texts or private messages from an account that looks identical to a platform or a bank asking to double-check information and details. The scammers involved in phishing can be sophisticated to the point that the email and request look genuine. If you have any suspicions that an email is fake, do not follow the link and don’t enter your information. Rather, call your bank or cryptocurrency service provider and proceeded with certainty.

Fake Exchanges and Wallet Providers

When choosing a Bitcoin exchange, do it with caution and a great deal of research. If an exchange looks too good to be true, with exceptionally low fees and boasting too-high profit margins, it probably is not legitimate. Make sure any sites or platforms you offer your details to are genuine and can be trusted. Do research about what security measures they might have in place too. Exchnages are a hot target for hackers and your funds might be stolen if the exchange is attacked without ample security.

Fake ICOs

Initial Coin Offerings (ICOs) are less common now than following the bull run in 2017, but they still are a means for startup cryptocurrency projects to sell tokens to get off the ground. Almost like shares, ICO tokens can be purchased so that a project can get public funding without raising capital through investment companies. This quickly became a target for vulnerable users and investors, however, who choose to fund a scam project believing it is genuine. Like with exchanges, wallets, and other platforms, do close research before investing any money into an ICO.

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Disclaimer: All content found on 7bitcoins.com is only for informational purposes and should not be considered as financial advice. Do your own research before making any investment. Use information at your own risk.

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