Popular Crypto Scams and How to Keep Away
Popular Crypto Scams and How to Keep Away – The cryptocurrency structure was built to be invulnerable to fraud, but the scammers managed to seep in.
Nearly $14 billion in fraudulent transactions occurred in the cryptoverse in 2021, 79% higher than the previous year. And the number is nowhere near its end.
Researchers continue to document the most common frauds and found out that there is a huge gap between crypto consumers and security. The scammers understand the technology on which cryptocurrency is built and the venues where they are traded much better than most crypto users.
There is no deposit insurance that can be taken against a cryptocurrency scam as you do with conventional financial investments. The criminals here are free to run off with your money with no one to put limitations on them or question them.
Scams cash in on the lack of expertise of crypto investors to aim to earn outsize returns. People have made big fortunes by investing in unknown digital tokens which were newly minted. Scammers are all about taking advantage of this appetite of investors to invest in the next big thing. So, in most scams, hackers create their own currencies embedded with hidden computer code that leaves them worthless.
In another common scam, hackers take advantage of the vulnerabilities in the websites where crypto investors buy, sell, and store tokens.
Here are some of the most common cryptocurrency scams and how to stay safe:
Cryptocurrencies with hidden charges
This is pretty similar to the scams in the real world where people take advantage of the fine print in the contracts; crypto scams ambush unsuspecting buyers with the fine print in contracts.
Fortunately, the success of the Ethereum platform and others means you can link cryptocurrencies to “smart contacts.” You need a basic knowledge of computer coding to read and write a smart contract, and most people do not fully understand what a smart contract consists of.
Launching your own cryptocurrency is inexpensive and easier if you have knowledge of computer programming. And so hackers now sell cryptocurrencies with a clause in the smart contracts stating that any resale will remit to the inventor huge portions of the asset’s value in fees. MetaMoonMars changed its fees to 99% right after it was launched.
The scam exploits the community’s obsession with potential giants. Last year, investors in brand new tokens like Shiba Inu witnessed a drastic rise in their holding in just a few days, which was led by mere hype and short-term momentum. Now investors replace the top gainers or the “trending assets” for something that is new and promising and hope to discover the next big “meme coin” before the price surges.
So as to not fall for a faulty coin, buy only a small amount of the new token that has caught your eye. Buy $1 worth of token and sell it soon after for the same price so you can know if there are any exorbitant resale fees that have been programmed into the token.
New tokens you cannot resell
The cryptocurrency world is evolving every minute, and everybody tracks the fastest movers. The biggest daily percentage gainers are listed at the top of many Websites. So this becomes quite the environment for pump-and-dump schemes, which are quite popular in penny stocks. A cryptocurrency example of it would be Squid Game.
Here, hackers write into the smart contract a clause stating you cannot resell their new cryptocurrency at all, giving the hacker complete control over the new token’s price. To get the ball rolling, scammers buy the token themselves and initiate a rise in the prices. And any unsuspecting investor who joins the game will not be able to sell, meaning the price cannot be pushed down.
You can defend against such scams by avoiding newly launched cryptocurrencies and sticking to the top 50 or 100 digital currencies, so you are sure that you are dealing with known quantities.
Be very careful about where you click.
NFTs with Hidden Code
Shopping for new non-fungible tokens is riskier than buying untested cryptocurrencies. To buy a popular piece of digital art, you will have to move some of your holdings off-exchange websites onto marketplaces. The exchanges style themselves after conventional financial websites, but the free-wheeling nature of NFTs means that the marketplaces resemble more “buyer beware.”
Hackers are smart when it comes to exploiting the security vulnerabilities in these platforms.
The bottom line
Cryptocurrency scams continue to evolve as the technology does, at times also resorting to age-old tactics to capitalize on the naivety of new traders. So, be as wary as you can about new tokens, unknown websites, NFTs, etc., so you do not fall for the next big scam. Read the basics of cryptocurrency and the fine print and white paper of the new token before you entrust it with your money.
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Review Popular Crypto Scams and How to Keep Away.