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Bitcoin Scams & How to Avoid Them

Photo by Bermix Studio on Unsplash

Bitcoin’s revolutionary price spike in 2017 aroused public curiosity in the first cryptocurrency, and the surge in interest has not been without repercussions. One of the drawbacks of new investors entering the market is the rise in the number of scams, frauds, and reports of retail investors losing their crypto assets to shady ventures.

Although dangers are a given on the market, the rewards can be enticing to some. However, being vigilant is still a priority, and there are obvious signs of scams that investors should watch for.

Scammy Exchanges

Most cryptocurrencies are still purchased and traded in exchanges, despite cryptocurrencies being decentralized in nature. Although this makes it easier to locate capital investors, there is no regulatory agency regulating these markets in many countries. As a result, many investors were left destitute when the markets they signed up to turn out to be pits.

These scams are not hard to detect, but they can be pricey if they are not stopped. One of the most significant red flags of the future is the prospect of unsustainable costs – Exchanges that offer strong discounts on bitcoin use this tactic to draw unsuspecting victims.

Besides, users can check URLs for exchanges. Remember, site addresses always should start with HTTPS, an indication that traffic is encrypted. Visiting unsecured websites is a terrible move, watch out for the right signs to avoid losing your cash.

Cloud Mining Schemes

Mining is becoming an extremely resource-intensive operation, and it’s the only way to mine new bitcoins without purchasing or selling them. Due to the unique manner in which new coins are mined, vast quantities of processing power and energy are required to mine a coin, rendering it a costly process. However, several businesses now offer to rent any cloud space to mine coins at a fixed cost.

Some businesses offer “lifetime contracts” that hold prices the same and are expected to provide outstanding returns. However, as the complexity of mining grows, the same investment yields smaller sums each time. In comparison, some businesses make bold promises on their returns without being clear on the real costs and the decrease of returns.

Others include Ponzi schemes that can lead to huge losses. It is vital to examine through prospects to consider the dangers and costs of mining before investing.

Hardware Wallet Theft

For users concerned about protection and privacy, a hardware wallet—a physical gadget that holds their private keys—is an increasingly common alternative. These wallets, as small as USB keychain drives, provide an offline way to help crypto investors secure their bitcoin much more.

However, sometimes scammers plant a “pre-configured” seed phrase hidden under a scratch card and will instruct users to set up their wallet with the compromised seed – This offers a backdoor that lets hackers drain funds before the wallet is enabled. These scams are becoming more common, but they can easily be avoided by accepting wallets from reputable sources.

Multilevel Marketing

Several multilevel marketing (MLM) strategies have arisen in the digital realms that promise naive buyers excellent prospects for exponentially greater quantities of bitcoin. MLMs are centered on delivering fast returns, but they require more money to promise even higher profits.

One such case is OneCoin, whose founders have been interested in various other shady operations and have repeatedly been caught. OneCoin offered huge earnings to customers, as well as lavish products and incentives for paying extra.

Even then, there is no information about the business outside of the site, and people have posted online scathing feedback. It is necessary to pay attention to a business’s fine printing and ensure that their statements are both feasible and true. Avoiding these early scams will secure your wallet for sure.

ICO Hoax

One of the most robust outcomes of the cryptocurrency revolution was the emergence of the Initial Coin Offering (ICO) as a way for businesses to collect money. With tons of innovative blockchain-based startups joining the market with creative innovations and groundbreaking ventures, consumers can now conveniently back their favorite enterprises.

That being said, this massive influx in prospects for ICO has undoubtedly increased the inevitability of fraud. There are aplenty ways that scammers can isolate investors from their cryptocurrency. One common approach is to build fake ICO-like websites and direct users to deposit coins into a broken wallet. Often, the ICOs are at fault.

Closing Thoughts

With advancing technology comes creative scams, and while it may seem like it’s the Wild West for buyers, it doesn’t have to be that way. We discussed some of the most popular scams and ways to avoid them. By avoiding traps like the above, you can increase your odds of success and protect your investment. 

For related articles, read DigiFinex Academy.

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