With mainstream interest in cryptocurrency growing, blockchain-based currencies have become a worldwide sensation – attracting many investors.
The decentralised and unregulated nature of cryptocurrencies, however, means a haven for scams and fraud has emerged.
While tech-savvy investors are conditioned against obvious scams, new investors used to the security of international stock markets may find themselves at risk.
One of the biggest dangers for new cryptocurrency investors is phishing.
The proliferation of imitation wallets and exchanges requires crypto holders to constantly be alert for potential attacks.
One of the common forms of these attacks is the imitation of online wallet providers.
Cryptocurrency holders use their private keys to access and send funds from their wallets, and if this private key is compromised, an attacker can clean out their funds.
MyEtherWallet, a popular online wallet for Ethereum, if often imitated – including by fake websites and social media accounts.
These websites usually change a single character in their name or URL to trick cryptocurrency owners into logging in to their fake version.
Many phishing attacks are also conducted through Slack channels, where attackers leverage the Slack bot features to send false emails to subscribers.
These often prey on those with a lack of knowledge, warning of hard forks and asking users to sign in to their wallets to keep their funds.
1. We don’t have your email address
2. Even if we did, we would never mass-email you
3. Forks, like ETC vs ETH, dont require any action on your part
4. Never click any links from email. Use your bookmarks & navigate directly
5. Always check the URL https://t.co/DFKoK2awyS
— MyEtherWallet.com (@myetherwallet) January 6, 2018
Dodging phishing attacks is unfortunately a component of cryptocurrencies, as is the avoidance of scams.
The number of legitimate cryptocurrency projects can easily be rivalled by the chorus of scam tokens and dishonest ICOs in the market.
Those who only purchase Bitcoin through an exchange and hold it are relatively safe from these scams. For users who are interested in altcoin investments, however, there are dangers.
Dishonest ICOs and crypto projects are usually not widely adopted, but a few questionable cryptocurrencies have seen mass acceptance.
The most notable example of this is BitConnect, a ponzi-like scheme which promises massive returns on investment.
Everything about BitConnect is covered in red flags, but it was the 26th biggest cryptocurrency in the world at the time of writing.
Keeping your head
The hype surrounding cryptocurrency and its potential for massive returns has captured the tech community’s attention.
Everyone from developers to Wall Street bankers is cashing in on the craze and peddling their preferred token across YouTube, Reddit, and Twitter.
This is exacerbated by efforts within the crypto community to pump-and-dump coins and spread FUD – fear, uncertainty, and doubt.
Investing in cryptocurrency can be rewarding for those who keep their heads and stay out of the echo chambers, but you must research a project instead of taking others at their word.
When seeking advice online, stay away from YouTubers and communities with vested interests in a cryptocurrency – and instead seek objective analysis of crypto projects.
Fake news and rumours are also commonplace within the crypto community, and users should consult reputable news sources and fact check their information before acting.