How to Detect And Avoid Cryptocurrency Scams

in cryptocurrency •  9 months ago


   The cryptocurrency market is growing every day as it continues to gain the public interest, but so are scams. 

   It's sad to know that the situation is currently uncontrollable; a downside to the digital currency market being completely anonymous. Because of this, every investor is charged to be aware of how to detect and avoid cryptocurrency scams. More so, you must be quick to detect a cryptocurrency scam; it’s useless to find out when your transaction is completed. Some people tried to use Escrow which involves a third party; that calls off the deal if it’s a scam. 

   To help protect investors, some groups have published a list of cryptocurrency scams, which is constantly updated. Some of them are asking for donations or some sort of commitments for cloud mining, but others like coinscamlist and are free. With that said, here are some tips on how to detect a cryptocurrency scam without losing your money.

    Pyramid and Ponzi schemes  

                                               (Image source)

   Pyramid and Ponzi ideology usually sound realistic but the truth is, infinite money supply is an illusion. There are a lot of websites asking for your cryptocurrency donation, only to double it or to offer back a good percentage within a small period of time. That is a scam! Some call it multi-level marketing (MLM), where you have to refer someone to earn a certain amount of token. The offer is usually very interesting and the investors are hyped to have a happy ending, banking a lot of money for the referrals they bring. It will not work forever! The scheme will go on until the 'top of the pyramid', the head team have their fill or they are caught. The popularly known OneCoin in India ripped investors about $350 million worth of cryptocurrency before the representatives were nabbed. Investors lost a lot of money in the form of cryptocurrency. Others that were promoting the coin got investigated by the police. This ponzi scheme span the globe, with 'partners' in 190 countries and amounting to 3 million people.

   Fake ICO's

   Even today, scammers are still using fake Initial Coin Offerings to separate investors from their cryptocurrencies. Although, ICO ideology has proven to be of great help to our business environment as it allows companies to raise capital for unique ideas, scammers have hijacked the idea; creating fake ICOs, sometimes in resemblance with an existing ICO to mislead investors. You should scrutinize any ICO that you are interested in before making donations; they are all potential routes for cryptocurrency scams. To avoid beeing scamed, it's very important to learn much about the company before making any investment.

Fore example:

  1. Knowing clearly what you're buying from the company. Usualy there are: the right of ownership to a certain part of the company's intellectual property, the right to a percentage of the company's revenue (dividends), the right of ownership to an internal resource (virtual values, for example) or something else.
  2. The company's partners. Namely, which electronic platforms/exchanges/systems are actually ready to exchange company tokens for electronic money. If these partners are shady, then probably the company which sells the tokens is too.
  3. SSL certificate. When opening a company's website in the browser, look for a green padlock icon in the left part of the address bar. If there is no such icon, you should be concerned. 



   There’s something fishy when you get a deal from cryptocurrency representatives through their social media accounts. Impersonation is real! Many scammers pose as representatives or team members of various organizations by creating accounts looking similar to those of the true representatives, to scam investors. Do not strike deals through social media accounts. The impostors may offer a discount for cryptocurrency purchases or ask individuals to invest in the company projects. Beware of such situations.  

   Fake Cloud Mining

   Mining is the only means to earn cryptocurrency without purchasing or exchanging it and the process involves a lot of digital energy. However, some companies with the abilities to mine could offer individuals a space on their server for mining (cloud mining), but the contracts are usually huge. These days, a lot of people are using the opportunity to steal by posing as a company that can offer you a mining space, getting you to pay for a yearly contract, only to see that the 'mined' currency will never get to your wallet. Others would offer to sell devices(which will never arrive after purchase) as a means to have your coin. You would be dealing with scammers if physical agreements and are not involved. 


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