Learn everything about the most common Bitcoin scams and keep crypto fraudsters at bay.
As the first cryptocurrency in use, Bitcoin (BTC) has attracted many investors and technology enthusiasts. Unfortunately, it has also attracted scammers that have seen in this digital coin an opportunity to make money illegally. The great success of Bitcoin has fueled the activity of these criminals. When the price of Bitcoin goes up, so does the number of scams.
There is also a correlation between the type of scam and the infrastructure of this cryptocurrency. In the beginning, the Bitcoin network was not sophisticated. It used to break down when the number of transactions was large. In those days, criminal activity in Bitcoin’s ecosystem consisted mainly of the purchase of drugs and other illegal products on the dark web with this cryptocurrency.
The bullish run of 2017 created the conditions for new types of scams. During that cryptocurrency craze, initial coin offerings (ICOs) were regarded as good investment opportunities. Discussions about the most promising ICOs were common among crypto-enthusiast online communities. ICO scams multiplied as a result. In such a modality, hopeful investors were promised shares in newer blockchain projects that would bring enormous returns in a short time. Victims ended up losing all their investments.
Recently, Bitcoin has become widely accepted; even institutional investors are interested in this digital coin. The nature of Bitcoin scams has changed as well. Nowadays, scammers and hackers target Bitcoin wallets mainly. Their techniques and strategies for wallet theft are numerous. Phishing is one of the most common methods to steal information that gives hackers access to user wallets.
It is unlikely that scammers and fraudsters will lose interest in Bitcoin. Quite the contrary! Scams will become more sophisticated as Bitcoin evolves. To help you avoid being the victim of a scam, we describe the top five Bitcoin scams to be aware of.
Social Media Scams
Who doesn’t use a social media platform nowadays? Social media has made more people aware of Bitcoin and other cryptocurrencies. So, it was expected to see scammers and hackers using social media to find potential victims. A common scam on social media consists of creating fake accounts to solicit Bitcoin from followers. In other cases, real accounts of popular individuals are hacked. That was the case of a major hack that affected several Twitter accounts of entrepreneurs, investors, companies, and other personalities in July 2020.
In such scams, hackers asked followers to send Bitcoin to a given wallet address. They promised to double the amount and send it back as a charitable gesture. Hundreds of users fell for the scam. They never got their Bitcoin back. But Twitter is not the only social media platform targeted by Bitcoin scammers. Therefore, you have to be wary of promises on any social media platform that are too good to be true.
Bogus Websites
Other scammers use bogus websites to lure potential victims. They advertise attractive investment opportunities that allow making big profits within a short time. Others advertise Bitcoin mining pools that promise enormous returns with minimum effort. In all cases, victims are asked to send Bitcoin to a provided wallet to join the investment or mining pool. However, when victims try to withdraw their apparent gains, they are asked to send even more Bitcoin. In the end, they never get anything back.
So, as with social media scams, be wary of online offers that promise gigantic returns with minimum effort. Research thoroughly the website that advertises such promises before you send any Bitcoin to a wallet.
Wallet Hacks
A few years ago, hackers used to target exchanges to steal cryptocurrencies. However, after several major incidents, most exchanges have implemented advanced online security measures. Moreover, the majority of users prefer to store their digital coins in crypto wallets instead of leaving them on an exchange. Therefore, hackers prefer to target online cryptocurrency wallets nowadays. Ledger and Poloniex are two major online wallets that have been hacked recently. Hackers stole information that compromised the digital assets of thousands of customers.
To avoid being a victim of a hack, use reputable (preferably non-custodial) exchanges when you buy Bitcoin. For instance, LetsExchange.io is an instant exchange where you can buy Bitcoin and other 350+ cryptocurrencies safely. Our platform doesn’t store your private keys or digital funds. Besides, if you are going to hold your coins for a long time, you better store them in a hardware wallet.
Social Engineering Scams
Hackers and scammers have used social engineering for many years to deceive unsuspecting victims. Social engineering involves psychological manipulation and deceit to get the necessary information to access a victim’s digital assets. Phishing is one of the most common social engineering scams. Usually, a hacker sends emails linking potential victims to a fraudulent website. The said website solicits information about the private keys of online wallets.
Another social engineering scam involves blackmailing. For example, scammers may send an email claiming they have a record of adult-content websites visited by their potential victims. Then, the scammers will threaten to expose the said information if the victims don’t send Bitcoin to an address they provide.
The best way to avoid being a victim of a social engineering scam is to refrain from clicking on links in suspicious emails. Also, before typing sensitive data on a website, verify whether the web address is encrypted. Websites that don’t use HTTPS are unsecured.
DeFi Rug Pulls
Decentralized finance (DeFi) is one of the latest trends in the crypto sphere. DeFi solutions remove gatekeepers for financial transactions. There are a plethora of innovative projects that develop DeFi platforms. Unfortunately, some developers have made away with investor funds. This practice is usually referred to as rug pull.
The most common method used by developers to steal funds is through smart contracts that lock in funds for a fixed time. When a smart contract expires, developers use programming functions to alter the outcome of the contract and steal funds. Sometimes, the funds are stolen even before the smart contract expires.
To protect yourself from such scams, research thoroughly any DeFi project you’re interested in investing in. Learn about the development team and the reputation of each of its members. Beware of projects that don’t disclose the identities of the team behind them.
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