There are several cryptocurrency scams in the blockchain space. Some of the most common include blackmail, fake exchanges, fake giveaways, social media phishing, copy-and-paste malware, phishing emails, Ponzi and pyramid schemes, and ransomware.
Let's briefly discuss each of them so you can learn how to avoid the most common Bitcoin scams and keep your cryptocurrency holdings safe and sound.
Bitcoin's decentralized nature allows you to be in full control of your investments. However, it also makes it harder to delineate a proper regulatory and law enforcement framework. If scammers manage to trick you into making mistakes while using Bitcoin, they may end up stealing your BTC, and there is virtually nothing you can do to recover your crypto.
That said, it's crucial to understand how scammers work and learn how to identify potential red flags. There are plenty of Bitcoin scams to look out for, but some are more common than others. For that reason, we're going to take a look at eight common Bitcoin scams and how you can avoid them.
Common Bitcoin scams (and how to avoid them!)
Blackmail works by scammers either finding or fabricating sensitive information about you and leveraging that information to force you into a position to send them bitcoin or other forms of money.
Typically, these fake exchanges will attract crypto traders and investors by offering free cryptocurrencies, competitive prices, low exchange fees, and even gifts.
To avoid being scammed on a fake exchange, you should bookmark the real URL and always double-check it before logging in. You can also use Binance Verify to check the legitimacy of URLs, Telegram groups, Twitter accounts, and more.
Fake giveaways are used to scam you out of your cryptocurrencies by offering something for free in exchange for a small deposit. Typically, scammers will ask you to send funds to a bitcoin address first so you can receive more bitcoins in return (e.g., "send 0.1 BTC to receive 0.5 BTC"). But if you make these bitcoin transactions, you won't receive anything and will never see your funds again.
The best way to avoid fake giveaway scams is to never participate in any kind of giveaway where you're required to send something of value first. Legitimate giveaways will never ask for funds.
Social media phishing
Social media phishing is a common Bitcoin scam that, like fake giveaways, you'll most likely find on social media. Scammers will create an account that looks like someone with a high level of authority in the crypto space (this is also known as impersonation). Next, they will offer fake giveaways via tweets or by direct chat messages.
The best way to avoid being scammed through social media phishing is double-checking the person is actually who they say they are. There are usually indicators of this on certain social media platforms, like blue checkmarks on Twitter and Facebook.
To avoid this type of scam, you need to be very careful with your computer security. Be wary of suspicious messages or emails that may contain infected attachments or dangerous links. Pay attention to the websites you browse and to the software you install on your devices. You should also consider installing an antivirus and scanning for threats regularly. It's also important to keep your device's operating system (OS) up-to-date.
Usually, scammers will include a message asking you to take urgent action to secure your account or funds. They might ask you to update your account information, reset your password, or upload documents. In most cases, their goal is to collect your login credentials to try and hack your account.
Even if you can't find red flags, you should avoid clicking the links. If you need to access your account, you should do it through other means, like typing the URL manually or using bookmarks.
Ponzi and pyramid schemes
A pyramid scheme is a business model that pays members based on how many new members they enroll. When no new members can be enrolled, the money flow stops.
The best way to steer clear of either of these schemes is to do your research on the cryptocurrencies you buy – be it an altcoin or Bitcoin. If the value of a cryptocurrency or Bitcoin fund is purely dependent on new investors or members joining in, you've likely found yourself a Ponzi or pyramid scheme.
Typically, the ransomware will block access to important files or databases and threaten to delete them if the payment is not received before the deadline. But unfortunately, there is no guarantee that the attackers will honor their promise.
There are some things you can do to protect yourself against ransomware attacks:
- Install an antivirus and keep your operating system and applications updated.
- Avoid clicking ads and suspicious links.
- Be wary of email attachments. You should be extra careful with files that end with .exe, .vbs, or .scr.
- Backup your files regularly so you can restore them if you get infected.
- You can find useful ransomware prevention advice and free recovery tools at NoMoreRansom.org.
There are plenty of Bitcoin scams to watch out for. However, knowing how these scams work is an important first step toward avoiding them completely. If you can avoid the most common Bitcoin scams, you’ll be able to keep your crypto holdings safe and sound.