Introduction

Scamming in this sense can also be identified as digital theft and this has become prominent in our world today as almost everything has gone digital including financial transactions and hence, the introduction of cryptocurrency wasn't excluded. Cryptocurrencies didn't just come with its advantages but also promoted lots of scams.
There have been a high rate of investors spurting into crypto both newbies and experts alike. There are also those with ulterior motives who seek to make money faster at the expense of other people’s hardwork. Most victims of crypto scams have lost their hard earned money to these scammers and as such its very important for every investor to equip herself or himself with knowledge on crypto scams and how to avoid it. This knowledge will be very vital in one’s individual journey as a crypto investor.

WHAT ARE CRYPTO SCAMS

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Crypto scams are methods or procedures by which online scammers or hackers use to steal people crypto currency’s or carry out illegal activities such as money laundering or crypto thefts. Despite how strong the crypto blockchain is, even if transactions cant be traced or hacked, there are few loop holes through which crypto can be stolen.

According to the federal trade commission data , in the United States of America alone, Americans have lost about $80 million in crypto investments scams since October and a 1000% increase from the fall of 2019. Majority of these people were of ages of 20-39 representing 44% of the reported losses.

Crypto scams ranges from pishing, email scams, fake wallet apps, theft by hacking, phony job offers, fake investments, sim hacking, bitcoin-stealing malwares etc there are so many ways and eveyday these scammers just keep on inventing new loop holes to steal people’s crypto. Today ill be focusing on theft by hacking .

THEFT BY HACKING

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Crypto currency has always thought to be a secure investment that is impenetrable. Normally all transactions must go through the block chain which cant be hacked because the hacker would have to hack all computers on the chain which is impossible as there are a lot and more keeps on opening up with investors trooping in.
It may seem impenetrable but this fact is not completely true. Hackers have discovered loops holes through which they can commit their theft. They usually attack various parts of the market such as exchanges,mining companies and even digital wallets.
Most coins are held in wallets and are traded with exchange wallets like Binance or coin base etc. The developers of these wallets provide and improve wallet security as much as they can and if you notice some wallets make use of two-factor identification
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Even with these procedures some hackers still manage to get into these apps with the users security details such as their email or phone number. Meaning even with all the apps security it can’t control how your details are protected outside, if hackers can determine your non crypto personal information and details they can sure take advantage of it and gain access into your account.

There have been popular scams that have plagued the crypto market in the past.The most notable crypto hacks to date include:

• “The 2014 Mt. Gox hack, in which a Tokyo-based cryptocurrency exchange was looted of $460 million in cash and Bitcoin

• “The 2016 DAO hack, in which a venture capital firm operated via the Ethereum blockchain lost 3.6 million ether worth about $70 million

• “The 2016 Bitfinex hack, in which a Hong Kong-based exchange lost over $60 million worth of Bitcoin

• “The 2017 NiceHash hack, in which hackers broke into the payment system of a Slovenian Bitcoin mining company and stole $64 million

• “The 2018 Coincheck hack, in which hackers stole nearly $500 million in digital tokens from a Tokyo-based cryptocurrency exchange.^{Image Source}

How crypto scams have affected the crypto space.

The increase in crypto scams have been very disastrous to the crypto space. Due to the decentralized and anonymous nature of cryptocurrencies most small scam news dont come out much. Its quite difficult to measure the scope of crypto scams in the crypto world especially as crypto evolves everyday as well as its relations with the ICO. In 2018 alone about $1.36billion worth of crypto was stolen by fraudsters between the first two months of the year. It has grown so rampant and has caused alot of damages hence here are some of the ways by which crypto scams have affected the crypto space

• loss of credibility - most cryptocurrency tutors or experts claim crypto is security proof and fail to let investors know about the loop holes that can cause them their investments. Imagine where you invested most of your savings and lost it all. You dont just loose your money but your trust in crypto currency’s. In most countries like mine (Nigeria) most people fall for these scams especially the older people within the age of 40 and above. With this they believe all cryptocurrencies are the same and not to be trusted not just that but they share this ideology with their friends as well who may move away from it.

• promotes government restrictions - most government have looked for a reason to ban crypto currency due to its decentralized nature and their inability to control it. If they cant control it then they wish to take it out of the picture, unfortunately, cryptocurrencies can’t necessarily be full banned due to its flowing circulation . With the rise in crypto scams, governments have used this as a means to restrict their banks from dealing with it for example in nigeria 2021, the federal government put restrictions on banks from handling crypto currency’s with the reason of its abuse.

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_{a letter from the central bank of Nigeria legitimizing the ban}

Because of this crypto cant be sold easily and people have had to rely with P2P transactions with people outside the country, asides Nigeria is China , Malaysia( they later took it off), turkey tighten crypto restrictions on their citizens and many other countries too.

• Reduced participation - lets say your friend has been scammed of his crypto and he tells you about it filled with regrets. This eventually makes you not want to participate with other investors with the fear of risk. Some countries had a wide spread crypto pyramid scheme which many of its citizens lost most of the savings. Crypto scams reduces the amount of investors entering into crypto world.

• Encourages an increase in crypto scams: due to the decentralized nature of crypto currency’s most crypto scammers are almost impossible to track since transactions are difficult to track on a block chain. Asides that, majority of crypto scams are small scale which aren’t even heard of at all as they don't make much noise. Only few crypto scams have been made open due to the amount that was stolen

For example in 2018 over $500 million dollar worth of crypto was stolen and the news spread but people who steal about $100,000 or less are over looked. With the less risk and profit in these scams most people are encouraged to venture into this trade as its lucrative. Luckily most of them are never caught and some who bit more than they could chew were. So the rise in crypto scam leads to an increase in scam activities.

With no law body being able to track these transactions or a unit its quite difficult. With the invention of one i believe the rate at which crypto scams have grown will reduce drastically but that takes the whole point of crypto currency’s

will regulations in crypto add value to crypto space?

This feels like a question that requires your personal opinion. So i believe if regulations were put on crypto it takes out the meaning of cryptocurrencies.

Cryptocurrencies are built in a decentralized manner, a digital asset on a distributed network of thousands of computers with no central authority. Everybody is their own boss and slave with no restrictions what so ever. Due to this, transactions are safer and more hidden and it has enabled a better market with all the exchanges. Not only that it has encourage savings with promised increase in values. With the right knowledge and skills you can make a killing out of the crypto space all thanks to its nature.

Placing restrictions and regulations just establishes a form of central authority and this just makes cryptocurrency another centralized institution that can be controlled. Although crypto came with its good it also has its risks, both in investments and security. I believe people should be given more orientation such as this to avoid crypto scams rather than fall into them. Most people who fell victims to the prejudice had no idea about it and thats what made it easier for this scammers but their methods are open and can be avoided. With time i believe wallet development may imporve the strength of its security without being affected by external details, i also believe with correct guidance and research people can avoid gullible tricks which these scammers use to catch their prey

In conclusion

Crypto scams can be contained but impossible to get rid off . So long as cryptocurrencies are built the same way it always have, there will always be risks associated. I also think more news about crypto scams should be made open no matter how little to keep the public woke. It helps create awareness amongst crypto community and small scale investors and helps them avoid such scams. With these processes in check it build more trust and reliability.

Cc
@yohan2on