TL;DR
There are several types of cryptocurrency scams in the blockchain space. The most common include blackmail, fake exchanges, fake giveaways, social media phishing, copy-and-paste viruses, phishing emails, Ponzi and pyramid schemes, and ransomware.
Let's briefly discuss each of these types so you know how to avoid common Bitcoin scams and keep your cryptocurrency savings safe and sound.
Introduction
With the advent of new technologies, scammers do not stand still and continue to invent ways to deceive users. Unfortunately, Bitcoin gives cryptocurrency scammers an interesting opportunity because it is a borderless digital currency.
The decentralized nature of Bitcoin allows you to have complete control over your investment. However, at the same time, it makes it difficult to develop an appropriate regulatory and law enforcement framework. If scammers manage to get you to do something reckless with Bitcoin, they will eventually be able to steal your BTC and there will be little you can do to get your funds back.
However, it is necessary to understand how scammers operate and know how to spot potential red flags. There are many Bitcoin scams to watch out for, but some are more common than others. For this reason, we will look at eight common Bitcoin scams and how to avoid them.
Common Bitcoin Scams (And How to Avoid Them!)
Blackmail
Blackmail is a well-known method used by scammers in which victims are threatened with revealing confidential information if they do not somehow repay funds. Typically, scammers require you to send funds in the form of cryptocurrency, specifically Bitcoin.
Blackmail involves scammers either finding or falsifying sensitive information about you and using it to trick you into sending them Bitcoin or other forms of money.
The best way to avoid Bitcoin extortion is to carefully choose your login credentials, keep an eye on the sites you visit online and who you share your information with. It's also wise to use two-factor authentication if possible. If the information that scammers are blackmailing you with is false, and you know it, problems can be avoided.
Fake exchanges
As the name suggests, fake exchanges are fraudulent copies of real cryptocurrency exchanges. Typically, these scams are mobile apps, but you may also come across desktop apps or websites. Be careful because some fake exchanges are very similar to the original ones. At first glance, they may seem okay, but their goal is to steal your money.
Typically, fake exchanges attract crypto traders and investors by offering free cryptocurrencies, competitive prices, low trading fees and even gifts.
To avoid being scammed by a fake exchange, bookmark the real exchange URL and always check it before logging in. To verify the validity of URLs, Telegram groups, Twitter accounts, etc., you can use Binance Verify.
For mobile apps, be sure to check information about the developer, number of downloads, reviews, and comments. For more information, check out Common Mobile Scams.
Fake distributions
Fake giveaways are used to scam you out of cryptocurrency by offering something for free in exchange for a small deposit. Typically, scammers ask you to send funds to a Bitcoin address so that you can receive a larger amount back (for example, “send 0.1 BTC and receive 0.5 BTC”). But if you transfer Bitcoins, you will receive nothing and will never see your funds again.
There are many options for scamming with fake giveaways. Instead of BTC, scammers may ask for other cryptocurrencies such as ETH, BNB, XRP, etc. In some cases, they may ask for your private keys or other sensitive information.
Scam giveaways most often appear on Twitter and other social networks, where attackers take advantage of the agenda of popular tweets, viral news or announcements (for example, a protocol update or an upcoming ICO).
The best way to avoid being scammed by fake giveaways is to never enter a giveaway where you have to send money first. Under the terms of fair promotions, funds will not be demanded from you.
Phishing on social networks
Social media phishing is a common crypto scam that, like fake promotions, you are most likely to find on social networks. Fraudsters create an account as if they were someone who has a lot of authority in the crypto space (this method is also known as identity theft). They then announce the fake giveaways through tweets or personal chats.
The best way to avoid being scammed by social media phishing scams is to verify that the person is who they say they are. Some social media platforms have indicators of authenticity, such as blue ticks on Twitter and Facebook.
Copy-and-paste viruses
Copy-and-paste malware is a very clever way for scammers to steal your funds. This kind of malware intercepts data from your clipboard and, if you are not careful, will send money directly to the attackers.
Let's say you want to transfer BTC to your friend Bob. As usual, he sends you his Bitcoin address so you can copy and paste it into a form in the cryptocurrency wallet app. However, if your device is compromised by a copy-and-paste virus, then the moment you paste Bob's address from the clipboard, it will be automatically replaced with the attacker's address. This means that after sending and confirming a Bitcoin transaction, your Bitcoins will be with the scammer and Bob will receive nothing.
To avoid such scams, be vigilant about your computer security. Beware of suspicious messages and emails that may contain infected attachments or dangerous links. Pay attention to the websites you visit and the software you install on your devices. You should also consider installing an antivirus and regularly scanning for threats. It is also important to keep your device's operating system (OS) updated.
Phishing emails
There are several types of phishing. One of the most common is through phishing emails that try to trick you into downloading an infected file or clicking on a link that takes you to a malicious website that looks like the real one. These emails are especially dangerous when they imitate a product or service that you use frequently.
Typically, the message from scammers asks you to take immediate action to protect your account or funds. They may ask you to change your account information, reset your password, or upload documents. In most cases, their goal is to steal your credentials to try to hack your account.
The first step to protect yourself from phishing is to check if the email is from a trusted source. If you are in doubt, you can contact the company directly to confirm that the email you received was indeed sent by them. Second, you can hover (without clicking) over links in emails to check if the URLs have spelling errors, unusual characters, or other anomalies.
Even if you cannot find any suspicious signs, do not click on the links. If you need to access your account, do so in other ways, such as manually typing the URL or using bookmarks.
Ponzi schemes and pyramids
Ponzi schemes and pyramid schemes are two of the oldest financial scams in history. A Ponzi scheme is an investment strategy in which profits are paid to previous investors using the money of new investors. When the scammer can no longer attract new investors, the money stops coming. OneCoin is a good example of a Ponzi scheme in the crypto space.
A pyramid scheme is a business model in which members are paid based on how many new members they recruit. When it becomes impossible to register new participants, the cash flow stops.
The best way to avoid any of these schemes is to do your research on the cryptocurrency you are buying, be it Bitcoin or any altcoin. If the value of a cryptocurrency is dependent on the arrival of new investors or participants, then most likely you have discovered a Ponzi scheme or pyramid scheme.
Ransomware viruses
Ransomware viruses are viruses that either lock victims' mobile devices and computers, or prevent access to valuable data unless a ransom (usually in BTC) is paid. These attacks can be especially catastrophic if they target hospitals, airports and government agencies.
Typically, a ransomware virus blocks access to important files or databases, threatening to delete them if payment is not received within the due date. Unfortunately, there is no guarantee that attackers will keep their promise.
Several ways to protect yourself from ransomware attacks:
Install an antivirus and regularly update your operating system and applications.
Avoid clicking on advertising and suspicious links.
Be careful with email attachments. Be especially careful with files that have the extensions .exe, .vbs, and .scr.
Set up regular backups so you can restore your files if you encounter a virus.
For helpful ransomware protection tips and free recovery tools, visit NoMoreRansom.org.
Conclusion
There are a lot of Bitcoin scams to watch out for. However, being aware of fraudulent schemes is an important step towards preventing them completely. If you can avoid the most common Bitcoin scams, your cryptocurrency savings will be safe and sound.
