This question crosses the mind of every beginner into the world of cryptocurrency.Everyone values their money, everyone works hard to earn it and in such when an opportunity arises to multiply that hard worked money, no one wants it to go fruitless in vain, everyone wants to make sure that their money is safe.
So is investing in Cryptocurrencies safe?
This question has 2 sides, it is safe & it is not safe.
If you do a quick google search of “Cryptocurrency Scams”, you’ll see the following results:
Now, what are all these about?
This does show us that cryptocurrency scams actually exist but how can you avoid getting scammed & safely invest your money?
It’s quite simple.Cryptocurrency scams exist in different areas which we will discuss below.
Using ICO’s to raise funding
Cryptocurrencies are everywhere: more than 20 companies have been launched in the last two months using the same blockchain technology on which Bitcoin is built. They launch what are known as Initial Coin Offerings (ICOs) to raise capital, much like a traditional IPO (more than $270 million had been raised by ICOs at the end of last year).
Unlike IPOs, ICOs are not formally regulated; thus, they are a key target for scammers..
Legit Companies may launch an ICO for different reasons but scammers may try to exploit this by quickly launching an ICO to raise funds, the public would rush towards it as they do not understand the underlying technology of how the whole process works, hence people end up paying.
This way scammers get away because of no formal regulations.
A recent example is of OneCoin
There are legit exchanges but then there are also ones that exist to scam people.Once you sign up and fund your account, you never receive your coins.
These are the few legit exchanges you should focus on buying from, they are well reputed & offer protection for your money, try sticking to them.
Fake Mining Pools
According to Wikipedia a Mining Pool is
the pooling of resources by miners, who share their processing power over a network, to split the reward equally, according to the amount of work they contributed to solving a block.
Most cryptocurrencies are mineable.To mine them specific resource intensive equipment is required which not everyone can afford or manage to run.Instead, people looking to reap the benefits of mining coins turn to mining pools which join your funds with other users to mine coins and the profit is shared between everyone.
To prey on innocent users, scammers have set up fake websites claiming to be legitimate mining pools.Some users may fall for this.
There are some websites that advertise themselves as “Bitcoin Generators” as shown in the above image. Nothing like this exists since Bitcoin or for the fact, any other currency cannot be generated.This is also a scam and also exists for other cryptocurrencies in the market such as Ethereum.
Fake Cryptocurrency Wallets
What better than to directly receive all coins a user buys?Fake cryptocurrency wallets can come in 2 ways:
- You’re prompted to download a desktop wallet which actually can be a trojan horse or have an executable malware along with it, this type of scam can be in any software but the point is, you should only download software from verified and well-reputed sites & have an anti-malware running at all times.
- Fake wallet apps have seen a surge in the Apple App Store & Android Play Store.
Alexander Lielacher from BTC Manager states:
Scammers, seeing the high demand for mobile wallets, have started to create fake wallets to defraud people. The fake bitcoin wallets usually have a name that is very similar to legitimate and trusted wallets such as Coinbase or Mycelium and, in some cases, even the same logo. These copycat tactics trick the user into downloading it believing it is the legitimate company’s wallet. Some fake wallets have crept onto the Apple and Android stores masquerading as genuine wallets.
This is something everyone can be vulnerable to especially considering the trust people put into the specific app stores considering they come from reputable companies.
One should always read the reviews of the app in-store, check whether they are paid reviews or actually real & verifying online by doing a thorough check by passing it through the community, cross-check the developer names & App IDs.
Overall to avoid any type of scam, there are 5 simple procedures you need to follow:
- Review the site personally and observe closely for any red flags or too good to be true schemes.
- Ask the large cryptocurrency communities that exist on forums such as Reddit.
- Check online for reviews by different sites & users, make sure to differentiate between legit reviews and fake ones, many service providers have paid reviews to promote their fake business which you should be able to spot.
- Observe the service’s social media pages to check for user engagement.Comments, tweets & other interaction will tell you how the public perceives the service to be.
- Who are the owners of the service?Are they public or are they hiding behind fake credentials?These alone should tell you a lot about the credibility of a particular service.
Badbitcoin.org is a website committed to unraveling the frauds and scams within the industry, if you are unsure of any website or app, simply contact them regarding it and they’ll help you make an informed choice.