Cryptocurrency is a playground for daring investors, but you must be informed before venturing in.
The lack of regulation or central authority has made cryptocurrency a haven for scammers, and they prey on uneducated newcomers.
If you want to get started in cryptocurrency, you will need to identify and avoid potential scams.
A list of what to watch out for is detailed below.
It is often difficult to judge whether an ICO is legitimate or not.
Before investing, you must check for proof of endorsements and involvement from reputable figures to determine if the project is headed up by a legitimate team.
If you are knowledgeable about blockchain technology, reading the project’s whitepaper can shed light on whether the ICO is to fund a working prototype, or is just hot air.
Even after following these steps, there is still no certainty that the project will succeed in the long term and give you a return.
Online software wallets are one of the more risky ways to store cryptocurrency if not researched and vetted.
Use wallets from reputable providers and preferably ones which do not store your private key – and are therefore unable to access your funds.
Scam emails are prevalent in the realm of cryptocurrency.
Signing up for online cryptocurrency services can expose your email address, which could result in you receiving tailored scam emails.
Recently, a number of blockchain enthusiasts have received emails from an address claiming to be MyEtherWallet. They were prompted to log into a fake version of the site to prevent losing their funds.
Scammers often pose as wallet providers and use approaching hard forks as a way to scare customers into divulging their private keys.
When buying and selling cryptocurrencies, ensure you use a reputable and populated exchange.
While small exchanges may be safe, larger exchanges are generally a better bet.
Using more populated exchanges will also help you avoid strange price fluctuations or manipulation.
Fake exchanges can generally be identified quite easily, especially if you know how a cryptocurrency exchange works.
Popular exchanges include Poloniex, ShapeShift, Bittrex, and Luno.
Slack bot announcements
If you are interested in a cryptocurrency project, a great way to keep up to date with developments is to access its Slack channel.
This also allows users to interact with the development team and other fans of the project.
Many scammers use Slack bots to impersonate the development team, however, and send out “announcements” to users in a group.
Users may receive emails allegedly from the channel, which ask them to log in to their wallets through a link.
The bot announcement sends a link to a phishing website, which collects the victim’s login information as they enter it.