Online scams are rampant, and it is no different in cryptocurrency exchanges. Cryptocurrency scams are more common than they were a few years ago, and they manifest in different ways. Many of these crypto scams come in the form of blackmail emails or fake business opportunities.
Here are the most common scams in the cryptocurrency landscape.
- Bogus Wallets and Exchanges
A crypto exchange is a platform where traders can buy and sell cryptocurrencies. A crypto wallet is a purse where you can store your digital assets, such as Bitcoin. An exchange works by matching bids and asks from users. Fake wallets and exchanges steal from you your deposited digital assets.
- Fake ICOs
Initial Coin Offerings (ICOs) is one method startup owners raise money without any legal body involvement. A crypto-based firm can use Airdrops and create a community that serves as a platform for gifting individuals who like or share social media posts. Unfortunately, most of these ICOs are fake, leading to loss of coins by those who invest.
In crypto-phishing, cybercriminals spoof a legitimate website or social media account, change the real URL, and trick users into thinking they are communicating with the actual website or account. A crypto-phishing scam hit the Electrum wallet in December 2018, and almost $1 million was reported as stolen, with the hacker wetting up several malicious servers. As late as August 2020, two more people from the same wallet said their coins had been stolen.
How to protect your coins
You have to be very careful in storing and trading cryptocurrency in various ways.
- Investing in a VPN
A Virtual Private Network is among the best protection you can use while trading cryptocurrency. Downloading a VPN allows you to stay anonymous. The app hides your IP address and allocates a virtual location for your device. Most cryptocurrencies are not anonymous but enable you to use pseudonyms. This makes tracing you in cryptocurrency exchanges possible. A VPN also encrypts your data, ensuring nobody can snoop in on your information when you log into your crypto wallet.
- Secure email service subscription
Subscribe to a secure email service, which will provide:
- End to end encryption
- Security restrictions
- Strict confidentiality
- Cold storage
Cryptocurrency hardware wallets also referred to as cold storage are used for coin and asset storage. Hardware wallets are standard in cryptocurrency environments, with investors looking for offline security.
- Multisig addresses
Multisig or multisignature addresses are permission slips that allow you to stay safe while performing your digital transactions. A multisig uses more than one key for authorizing transactions in your wallet. This means you need to involve two or more individuals to hold the other keys. The other key holders cannot access your funds without your consent and knowledge, so your funds are safe.
- Separating funds
To keep your funds safe, make sure you have at least two crypto-wallets, depending on how considerable your savings are. The first wallet should be used for trading and transacting. The other wallet or wallets should be for savings storage. Store the savings wallet in a secure location or in a cold storage wallet to prevent theft and fraud. Keep the private keys offline, split them up in two or three portions, and place them in different locations.
When trading in cryptocurrency, you need to be very careful, as scams are rampant. Taking the above measures will keep your funds safe, as well as caution and common sense. If something does not feel right, it probably is not. While using cautionary measures is critical, so is due diligence.
Be wary of any emails asking you to divulge sensitive information, as well as clicking on suspicious links. Many have lost, and many will continue losing funds, so make sure you are not among the statistics.