Steemit Crypto Academy | Season 3 week 6 - Crypto Scams and how to avoid them

Hello Steamians;
It's Week 6 of Season 3 in the Steemit Crypto Academy and I'm happy to be here again this week.
Thanks to Prof. @yohan2on for the wonderful lecture on Crypto Scams and how to avoid them. It was indeed a great lecture.

Question 1:
What are Crypto scams?
Make your research on any Cryptocurrency scam. (Attach a few references to the news surrounding that scam crypto project)

Before I talk about Crypto scams I'll like to explain what cryptocurrency is.
Cryptocurrency is a virtual currency that is used through electronic medium.

Cryptocurrencies are traded online in exchange for other cryptocurrencies or in exchange for fiat currencies.
Cryptocurrencies operates through a blockchain technology, the blockchain is a decentralized system which is managed by many computers in the system, these computers verify transactions before they are added to the blockchain. The blockchain technology is what makes crypto secured.

Crypto Scams

This digital currency called Cryptocurrency is indeed a future currency that have come to stay, so many investors and traders have trooped into the cryptocurrency world since its inception.
The increase in crypto since its inception has also attracted fraudsters into the system since fraudsters are always looking for a place to steal from.

Crypto scam occurs when a crypto investor or trader gives out his/her vital informations/keys which are used at the end of the day to steal tokens from the trader/investors wallet.
These fraudsters carry out all manner of manipulations on traders/investor just so they steal from them.

Types of Crypto Scam

1. Pump and Dump

These scammers are involved in development of fake cryptocurrencies which they lure investors/ traders into buying it. When they finally succeed in selling off these tokens, they dump the coin which leads to the collapse of the currency.

How to avoid pump and dump scam:

Avoid participating in new currency that you have not made research on, before investing in any new crypto it is necessary to know more about it.

2. Giveaway Scams

These scammers pose to be known crypto investors who wants to help newbies. They lure investors into sending them some tokens which they claim will be multiplied at a specific period of time, at the end of the period these scammers make away with the tokens.

How to avoid the Giveaway Scams:

Avoid sending your token to any one that claims to be a well-known investor all in the name of multiplying it.

3. Fake Crypto Wallets

Cryptocurrencies are saved/stored in a crypto wallet.
Scammers develop fake crypto wallets and put it online or on mobile app stores for crypto investors to download, in a case where a user unknowingly download these fake wallets, the scammers take charge of the user's wallet account and make away with the tokens in the wallet at any point in time.

How to avoid Fake Crypto Wallets scam:

To avoid this type of scam one needs to be very careful of where one download crypto wallet. Also ensure to download crypto wallets from their official websites.
Try to use well-known crypto wallets so as to avoid fake crypto wallets scam.

4. Sim Swapping

This type of scam is done on the victim's cell phone, where the phone number that is linked to the victim's wallet account is changed by the scammers to their own numbers by so doing they can easily change the wallet password and make away with the tokens in the wallet.

How to avoid Sim Swapping scam:

Setting of security questions or unique pin for cellphone accounts can help prevent this type of scam.
Another way to avoid this type of scam is by not linking your crypto wallet to your cellphone number.

5. Phishing for sites

Phishing sites are replicates of the original exchange sites that looks almost like the original, these sites are created by scammers inorder to use it to retrieve users private informations such as private keys and passwords, which they use to steal from the users account.

How to avoid Phishing for sites:

Inorder to avoid this type of scam, users should be very careful of websites that ask for users private keys and also users should know and master the URL of the Exchange they use inorder not to fall a victim to this type of scam.

An example of a Flake Crypto wallet Scam

Cryptocurrency investment has become a very hot topic for investors in the society today, so has crypto scam been on the increase.

A good example of a flake crypto wallet scam is the Bitcoin Gold wallet scam which took place in 2017.
The scammer who was the developer of the site mybtgwallet.com was able to convinced the Bitcoin Gold creator into believing that he wants to promote the site mybtgwallet.com for storing of the coin.

The scheme urge users into submitting their recovery seeds or private keys inorder to generate their wallets and for users to claim their Bitcoin Gold.
After a successful retrieval of users recovery seeds and private keys, the scammer then made away with $3 million in Bitcoin, $107,000 in bitcoin gold, $72,000 in litecoin, and at least $30,000 in ethereum as reported by CoinDesk.

Some References to the news surrounding Bitcoin Gold wallet scam.

Reference

Reference

Reference

Reference

Question 2:
To what extent have Crypto scams affected the Crypto space?

Fraudulent activities has been a major problem in every financial system in the world today and the Crypto space is not an exception.

Cryptocurrency scam has been on the increase since the inception of cryptocurrencies. Scammers uses different means to steal from crypto users such as fake wallets, sim swapping, Giveaway Scams, pump and dump events etc.

Newbies are more prone to these crypto scam since they have little or no knowledge of the system and the importance of private keys or recovery seeds, so they easily give out these delicate information when convinced that they will be sent some tokens.
When a newbie is been scammed, they tend to back off from the crypto space never to have anything to do with crypto again and that is a reduction in population in the crypto space.

I know of a friend who was scammed in the crypto space way back in 2014, till date that fellow till conderms crypto which is a bad one for the crypto community.

Some expert users of crypto also fall victims of crypto scam such as fake wallet scam and hacking of official websites. In such situations where scammers made away with investors life savings, the investors becomes fraustrated and might end up taking their lives and this end up giving the crypto space a bad reputation.

Crypto scam has really affected the crypto space negatively in the areas of bad publicity and bad reputation of crypto from victims.

Question 3:
Will regulations in Crypto add value to the Crypto space?

Regulations brings about orderliness in every system and makes it function effectively and safely.
Therefore I think regulations can add value to the Crypto space by making it more secured and safe for investors.

The unregulated state of Crypto has led to its ban in some countries such as Nigeria.
On the 5th of February 2021 the Central Bank of Nigeria placed a ban on cryptocurrency with the believe that crypto is more often used for illegal activities.

The real-world identities regulation of crypto owners can be enforced following the recommendations of Financial Action Task Force’s (FATF’s) Recommendation 16, Financial Crimes Enforcement Network (FinCEN’s), Money Services Businesses (MSB), and Bank Secrecy Act (BSA) which can help reduce the the high rate of fraudulent in the crypto space since the above recommendations specifies the need for the provision of recipient's and the sender's informations.

Regulations will give cryptocurrencies an exact valuation of its worth instead of an over valuation which may lead to massive losses by investors. An example is when the price of Bitcoin claimed to $58,734 in March 2021 and presently its at the rate of $38,368 which means that investors that bought the coin due to over valuation are running at loss. Regulation can be applied inorder to get the exact valuation of crypto worth.

Conclusion

The more the Crypto world is expanding in interest growth is the more crypto scams is sure to expand along side with it. Fraudsters are not relenting as their sure to come up with more new possible means of scamming users.

Awareness of the types of crypto scam is the best preventive measure one can take inorder not to fall a victim. Always being at alert so as to be able to detect new crypto scams is another preventive measure.

Before investing in Crypto one should be very sure of the currency and try to make more research.

If you have ever been scammed in crypto try to report to the Internet Crime Complaint Center known as FBI’s in order for more users not to fall as victims of that same scam.

CC;
@yohan2on