Are you confused about the state of the cryptocurrency? You are not alone in this thought because many people have this doubt. So before you use or invest in cryptocurrency then you have to know about cryptocurrency Scams. Here we have gathered the five different types of Cryptocurrency Scams you need to avoid. You will know how to be wary of scams and also how to detect the scams. Then this will help you to use Cryptocurrency and manage it well. Also, you can know how to report such scams here. So continue reading to know more about this important topic.
What are the Cryptocurrency Scams?
1. Bitcoin mining scams
Bitcoin mining is an important process in the cryptocurrency market. It makes use of the computational power to add the transactions to the blockchain ledger. Then the computers on the network solve the problems to make the confirmation of the transactions. Afterwards, they add it to the ledger. This is how the process works. Many projects in cryptocurrency use this bitcoin mining.
But these years this process has become difficult. Now the mining operations for bitcoin need advanced hardware. Often this is difficult to get. Therefore people give the work of cryptocurrency mining to others. That is why many scammers are taking advantage of this and using it for their selfish gains. They pose as operators of the mining and take advantage of people who seek their service. Also, they easily convince their victims to invest in a mining pool. Then they disappear and do not respond to the messages of the client. So you have to be careful of such scammers.
2. Initial coin offerings scams
The initial coin offering is a kind of fundraising exercise that makes use of smart contracts. It automates the payments that happen between an organisation and its stakeholders. Also, the cryptocurrency companies use ICOs to raise money for the users. As many companies are using the ICOs now most of it is identified to be scams. Many have joined this fundraising exercise to gain profits but they are scams. Therefore if you are going to use the ICOs then make sure that it is a genuine one.
The companies that use the ICOs must have a good track record. Then you can ensure that the company is a good one. But be wary of entrepreneurs who are criminals that use a different identity. These fake projects have gone as far as taking the support of the best names in the industry. Therefore many have got scammed by these criminals.
3. Fake website scams
Some people create fake domains and pose as legitimate organisations. They will join the cryptocurrency industries to cheat others. Also, they can create fake wallets to scam other users. Further, some hackers take the personal information of the users and misuse them. These fake websites can also induce users to download dangerous software. The user will believe that it is a legitimate one. But the software they are downloading may contain a code that can steal the personal information in their device. So before opting to go inside any domain, check their reputation and also their track record.
4. Cryptocurrency Giveaway scams
The cryptocurrency giveaway scams are one of the ways used by scammers to steal the cryptocurrencies of the victims. Firstly the scammer will advertise their giveaway. They may try to convince the victim to send their cryptocurrencies with the promise of larger returns. The scammers can sometimes impersonate celebrities too. Therefore the victims might think that they are getting a reward.
Mostly in the environment of social media, many scammers have started to create fake giveaways to trap people. Then they use some high profile names on their pages to convince the users that they are legitimate. Further many Twitter accounts are identified to be fake pages created to entrap the cryptocurrency investors. Therefore this is one of the scams used by scammers to get the cryptocurrency of investors. Therefore you have to be wary of such pages in social media.
5. Yield farming scams
Yield farming is a term used to mean decentralized finance innovation. This is the process where the users can earn returns by staking the cryptocurrencies. Also, this software is available at the top of the Ethereum blockchain which automates the lending process. Then this allows the people to earn interests after providing liquidity. These yield farming projects also make use of bitcoin.
But many crypto scammers use this to con other people. They will copy the code of the genuine projects and will add their malicious code to it. Then they steal the funds. After getting all the funds they flee.
These are the five cryptocurrency scams you have to avoid. Although cryptocurrency is a beneficial platform it is not that secure. But if you are careful you can avoid the pitfalls.