Cryptocurrency users have long been targeted by digital predators looking to exploit their vulnerabilities. From phishing attacks that mimic legitimate sites to Ponzi schemes that promise unparalleled returns on investments, users need to know the characteristics of common cryptocurrency scams and hacks so that they can avoid them.
Use this page as a guide or a starting point to equip yourself with an understanding of the red flags that you can identify to protect yourself from attackers.
Common Cryptocurrency Scams
Let’s talk about the characteristics of the most common crypto scams:
- Phishing attacks
- Ponzi schemes
- Fake ICOs
Identifying Phishing Attacks
Phishing attacks happen when hackers trick people into giving them sensitive information like keys, passwords, and personal details. These scammers manipulate people, and knowing the signs of a phishing scam can set you up to avoid these manipulations. Sometimes phishing scams are referred to as social engineering attacks because they prey on human psychology, vulnerabilities, and trust.
Most phishing attacks lure people in by posing as fake exchange platforms or websites. Users will unknowingly provide their login credentials to the illicit site, allowing hackers to access their real accounts. Other phishing scams create apps that imitate real crypto wallets. If you download one of these apps to your phone or computer, malware can be used to access your information.
You should also look out for phishing emails. These are some of the most common types of attacks. Hackers will send out emails that appear to be legitimate messages from reputable crypto exchanges or wallets. A big red flag is always emails that require urgent responses or emails that ask for you to input personal information. You should do your best to avoid clicking links that could lead you to fraudulent websites.
Phishers can also capitalize on the trust established in face-to-face interactions by placing fraudulent QR codes out in public spaces. When you scan these codes, fraudulent websites and apps can request data or use malware on your device.
Avoiding Phishing Attacks
If you want to minimize your risk of becoming a victim of a phishing attack, you need to always check a website’s URL before entering private information. If a crypto exchange or wallet needs your information they will use a secure, encrypted domain.
You can also use a hardware wallet to store your keys and information to avoid issues with malware. Staying educated and informed about the latest phishing tactics will help you spot suspicious websites, emails, and apps that aim to cause harm.
One more tip: a legitimate platform will not use social media to request your information. If a person is posing as an affiliate that needs your information, do not engage with them. Social media phishing scams will prey on people by posing as a celebrity, persona, or friend to get information out of them.
Identifying Ponzi Schemes
Another common crypto scam is a Ponzi scheme. Ponzi schemes are investment projects that promise high returns with little to no risk for investors. A scammer will lead you to believe that the profits are legitimate when in reality, returns are paid for by new investors. The success of a Ponzi scheme relies on the continuous recruitment of new participants.
The biggest red flag for a Ponzi scheme will be the promise of consistently high returns (that are way above the market averages). Ponzi schemes also claim that their investments promise stable returns that do not fluctuate with the market: this is a lie.
If anyone is contacting you about an investment with consistently high returns, low risk, and great stability, then you should question their legitimacy. Ask questions. Ponzi schemes will typically lack transparency when it comes to their operations and strategies, while legitimate investments provide clear information about their work.
If you are being pressured to recruit other investors, then more alarm bells should be going off in your head. These scammers rely on consistent recruitment.
Avoiding Ponzi Schemes
To avoid Ponzi investment schemes, always conduct thorough research to verify the legitimacy of the investment, review the project’s records, and check for any of the above-listed red flags. You can also seek out a professional who will help you navigate the legitimacy of the investment opportunity.
Always make sure that you fully understand the strategies and operations of an investment opportunity, and if it is confusing, ask questions. You can also conduct research to confirm whether the business is registered and compliant with crypto regulations.
Identifying Fake Initial Coin Offerings (ICOs) And Fraudulent Token Sales
A fake ICO is when a scammer creates a misleading project to steal an investor’s funds. Deceptive marketing is central to a fake ICO and the promises of high returns should be a big red flag.
If an investment opportunity sounds too good to be true, it likely is. Legitimate projects will outline risks and returns realistically. If a project is not transparent about its goals, team members, and funding, it should raise suspicion. Watch out for ICOs who claim to be anonymous: a legitimate ICO will provide details about its development team.
Avoiding Fake ICOs and Token Sales
One more major red flag for crypto users to be aware of is the pressure to invest immediately. Scammers will create a sense of urgency, pressuring their victims to send money quickly. Legitimate ICOs allow time for due diligence.
It is a good idea to check out the ICO’s online presence and community. Verify the identities of the team members and evaluate the ICO’s whitepaper. Your research will safeguard you against malicious scams.
More Security Measures To Avoid Hacks And Scams
Take matters into your own hands by practicing these standard security measures.
Two-factor Authentication (2FA)
Taking the security of your assets into your own hands will require some basic practices. The first is two-factor authentication. This is a second layer of security to protect your logins to digital wallets, apps, and exchanges. Many platforms use two-factor authentication as a layer of defense against hackers and malware. To access your accounts, you will use your password as well as a secondary access requirement. This can be a one-time code sent to your email or texts. It could also be your fingerprint or facial recognition.
Two-factor authentication is especially useful for crypto accounts because if a hacker gains access to your information, they can steal all of your assets stored on the platform. If your information is compromised, it is very difficult to track down and you can almost guarantee that you will never retrieve compromised funds. Only a password or PIN is not sufficient for this type of security.
Secure Wallet Practices
There is a large variety of crypto wallets out there, and when making your selections for key storage the security features should be your priority. The two main types of storage are hot storage and cold storage.
Hot storage is more vulnerable to cyber-attacks because it has an internet connection. Some examples of hot storage options are mobile wallets and desktop wallets. Using a hot wallet is common practice for crypto users who partake in daily crypto transactions. Some users will transfer small amounts of crypto into a hot wallet at a time so that they can have an accessible point of use through their mobile apps.
Cold storage is more desirable for peak security. Since cold storage wallets rely on hardware to store your information, they do not require an internet connection. You may decide to use a combination of storage types to suit your needs.
Regardless of the types of wallets that you use, secure wallet practices are important. Never share your keys with anyone, keep your cold storage devices safe, and back up your hot storage devices regularly to be sure that your wallets have the most up to date security measures in place.
Importance Of Educating Users About Scams And Hacks
It is important for all crypto users to be aware of the vulnerabilities that hackers prey on. The crypto ecosystem thrives off of community-driven initiatives to share information and experiences. You can find forums online to read about other user’s experiences with security issues and solutions.
It is always a good idea to be proactive when it comes to the security of your data and assets. As cryptocurrency continues to gain popularity, cybercriminals continue to seek out unsuspecting users. Crypto users need to arm themselves with knowledge and awareness to avoid these attacks. Still, there are refined and reliable technologies in place to protect the security of your transactions on the blockchain. If you are looking for a reliable and safe platform to buy, sell, store, and trade crypto then check out RockItCoin!
Now that you have the tools to identify common cryptocurrency scams and hacks, like phishing scams, Ponzi schemes, and fake ICOs, you can take the security of your funds into your own hands by honing in your storage practices and continuing to educate yourself about current scamming threats.
