In this article, DXONE, an innovative, research-based crypto trading platform, looks at some crypto scams that have hit the headlines in recent times, and provides recommendations on how to go about avoiding them.
Cryptocurrency investments, as well as overall interaction across various ecosystems, can be a lucrative endeavor. However, there are scams that exist throughout this industry and you need to be as informed and as well-educated as possible in order to avoid getting duped into a project that may ultimately run away with all of your invested cryptocurrencies.
To assist you with avoiding crypto scams, we are going to go over what you should look out for, as well as some of the best practices that you can utilize when it comes to investing in projects.
Biggest Cryptocurrency Scams From the Past
To give you a perspective of what to look out for, we will be going over some of the biggest cryptocurrency scams which have occurred historically.
- Onecoin – this was a project that seemed to have it all; a lot of hype surrounded it due to BBC’s Missing Cryptoqueen podcasts. However, what nobody predicted could happen is that the Onecoin project was actually a scam, which made off with an estimated $25 billion. Interestingly, the scam never had a cryptocurrency, and it was a big hoax from the very beginning.
- Bitconnect – this is yet another, a bit more bizarre yet famous crypto scam that occurred. Bitconnect was a scam that took $4 billion in a multi-level, marketing-led Ponzi scheme, which lured investors with claims of having an unbeatable trading algorithm, which ultimately did not exist. However, one scam just wasn’t enough, so they also launched a second scam known as BitconnectX.
- Squid Coin – this is one of the latest cryptocurrency scams. Throughout 2021, Squid Game became one of the most popular Netflix shows that truly took the world by storm. However, this led to an enormous rug-pull scam in 2021. Even the media fell for the coin. However, it was ultimately a malicious maneuver where the crypto developers abandoned the project and escaped with the funds they initially received.
While these are some of the Biggest Cryptocurrency Scams which have occurred throughout the crypto industry’s history, remember that there are also Cryptocurrency Scams on Facebook as well as other social media platforms.
Top 4 Tips to Avoid Crypto Scams
With those examples in mind, let us now dive a bit deeper into the top 4 tips you can use in order to avoid scams.
#1: Be Aware While Using Your Wallets
Whenever you visit any unknown pages, or simply pages that you are entering for the very first time, you might experience a “pop-up” that will ask you for the seed phrase or your private key, which is used by you to access your cryptocurrency wallet. There are even people who might individually message you on social media channels or even email you asking you for this information. Remember to never share this information with anyone. No authentic and legitimate business, project, exchange, anything else out there will ever ask you for your private key or seed phrase. That is information that only you should know.
#2: Use Multi-Factor Authentications
Whenever you are using a cryptocurrency brokerage, exchange, or any other platform or app, such as an online, web-based client, or app-based client on your smartphone, you should always enable the additional security measurements which are made available to you by the application or service. This means that you will need to enable things such as two-factor authentication (2FA). This might not be enough when you reach a point in time where you are handling a lot of cryptocurrency tokens, and when this happens, search for additional security measurements.
#3: Use Password Managers
You should never use easy passwords. Typically, a majority of people will utilize simple but memorable passwords. An example is “dogsname123” or “iamawesome!23!”. However, this puts you at risk. You should never use easy passwords and never store any of them online. Typically, you want to use passwords that have symbols, numbers, uppercase and lowercase characters, and ambiguous characters. The length of the password can be anywhere from 16 characters to as many as you want to use. The goal here is for the password to be as complex as possible. If you cannot initially memorize it, you can also use a password manager, but try to find one that locally stores the passwords.
#4: Use Hardware Wallets for Assets That You Hold
When you do eventually reach a point in time where you are handling too much cryptocurrency in terms of its value, it might also be a solid idea to invest in a hardware wallet to get the highest level of security possible. Typically, these hardware wallets are devices that can be completely disconnected from the internet, and the only way for you to reconnect them is for you to physically connect the device using the included USB cable. This will, in turn, keep your cryptocurrencies as secure as possible. Remember to do research on some of the best wallets that can be used for crypto.
Common Crypto Scams in the NFT Industry
Additionally, here are some of the most common crypto scams you can look out for in the non-fungible token (NFT) industry.
Customer Support Scam
Whenever you are using an NFT marketplace, you would need to connect your cryptocurrency wallet. However, none of these marketplaces will ever ask for your private information. A common scam found here is fake customer support services that are typically done on phishing websites that ask you for your private information. Even if the support system looks real, never reveal your private information to anyone.
Minting Websites Scam
There are even specially developed fake websites that might showcase a fake pop-up that will ask for your MetaMask used phrase and password or private key. Remember that this information is only for you, and only you should know it.
Projects Without a Purpose
With the increase in popularity surrounding non-fungible tokens (NFTs), there have been more projects than ever before entering the crypto industry. However, there are even projects which have good marketing but then run away when the mining phase is over, and the project is launched. Always go over the project’s history, the team behind the project, the documentation, and everything else you can find prior to minting NFTs.
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