TL;DR:
- Many crypto scams leverage psychological tactics like the promise of fast money or our tendency to trust too easily.
- Asset holders must educate themselves on common red flags and take steps to properly secure wallets and accounts.
- Ready is a highly secure wallet app that can serve as an invaluable tool for users to guard against prevalent crypto scams.
The explosive growth of cryptocurrencies has brought not just fortunes but fraudsters. As crypto goes mainstream, scams are mushrooming in number and variety. Scammers are also innovating new ways to exploit this larger, less tech-literate base.
In this article, we uncover the most common crypto cons to help you detect and sidestep them.
Common Crypto Scams
Romance Scams
Romance scams in the crypto world are a twist on an old deception. Here, scammers create fake profiles on dating sites, social media, or other online platforms. After building trust and forming a “relationship” with the victim, they introduce the idea of a promising cryptocurrency investment.
The scammer might weave tales of immense profits they’ve made and urge the victim to invest too. Once the victim transfers their cryptocurrency to the scammer’s wallet, the scammer disappears and leaves the victim with a broken heart and an empty wallet.
Phishing Scams
In this scam, attackers impersonate a legitimate entity, such as a cryptocurrency exchange or wallet service. They lure victims through seemingly genuine emails, messages, or even ads. These communications often sound urgent and urge the user to take immediate action, like clicking on a link or downloading an attachment.
Once the user takes the bait, they might be directed to a fake website that looks identical to a legitimate one. They’re prompted to enter their private keys, recovery phrases, or login credentials. Once the scammer has this information, they can easily access the victim’s cryptocurrency holdings and transfer them away.
Rug Pull Scams
A relatively new term in the crypto lexicon, “rug pull” refers to a malicious maneuver in the decentralized finance (DeFi) space.
Here’s how it typically unfolds: Developers introduce a new cryptocurrency project, often accompanied by slick marketing and the promise of high returns. They attract investors to buy their token and provide liquidity.
However, once they accumulate a significant amount of capital, these developers “pull the rug” by suddenly withdrawing all their liquidity and disappearing. The investors are left holding the bag with worthless tokens.
Giveaway Scams
Giveaway scams capitalize on the allure of “free” money. You can find these scams often on social media platforms or forums.
Scammers impersonate well-known figures in the crypto industry or even mainstream celebrities. They announce fake giveaways and promise to double or triple the amount of cryptocurrency sent to a specific wallet address.
The catch is that victims must first send a certain amount of cryptocurrency to the scammer’s address to “qualify” for the giveaway. Once the victim sends their crypto, the scammer disappears.
Pump and Dump Scams
Pump and dump schemes are a classic, notorious type of market manipulation that has found its way into the crypto world.
Organizers often operate in coordinated groups. They select a relatively low-volume cryptocurrency and begin heavily promoting it, or “pumping” it, through social media channels, forums, or even messaging apps. This artificial hype drives unsuspecting investors to buy and creates a rapid increase in the cryptocurrency’s price.
Once the price reaches a predetermined level, the organizers “dump” or sell off their holdings en masse and make a hefty profit. Meanwhile, the sudden sell-off causes the price to plummet, leaving those who bought in during the “pump” phase with devalued assets.
Extortion Scams
Extortion scams work by using fear and intimidation. Victims receive messages claiming that the scammer has compromising information about them or has hacked into their computer. The scammer threatens to release this information or data unless a ransom is paid. They typically demand payment in cryptocurrency due to its pseudonymous nature.
In many cases, the scammer doesn’t actually have any compromising information but relies on the fear generated by the threat to coerce victims into paying.
How to Prevent Crypto Scams
Know the Common Red Flags
Being aware of common warning signs can be your first line of defense against crypto scams. Here are some red flags to watch out for:
- Promises of high returns with little to no risk.
- Urgent calls to action, pushing you to invest or send money immediately.
- Unexpected contact or offers from unknown sources.
- Lack of transparency about the company’s operations or leadership.
- Investment strategies that are hard to understand or are vaguely explained.
- Web addresses that don’t match the supposed company’s name or have slight misspellings.
- Any entity asking for your wallet’s private keys or recovery phrase.
Research Before Investing in Cryptocurrency
With its allure of quick riches, cryptocurrency has many diving headfirst into investments. But as with any financial venture, always do your homework first.
Instead of being swayed by flashy marketing campaigns or the promise of overnight success, dig deeper into those claims. Start with the project’s whitepaper. This document is a treasure trove of information with the project’s objectives, the technology backbone, and the roadmap ahead.
But don’t stop there. Turn your attention to the team steering the ship. A credible team with a good track record can often be the difference between a legitimate project and a fleeting one.
Tap into crypto communities to research first-hand user experiences and, sometimes, warnings about potential pitfalls. While the past performance of a cryptocurrency shouldn’t be your only guiding star, it does offer a broader understanding of its trajectory.
Protect Your Wallet
Your cryptocurrency wallet is the gateway to your assets, and protecting it should be a top priority.
One of the first steps in this security journey is choosing the right wallet. Opt for reputable self-custodial wallets. They give you full control over your private keys, meaning you and only you can be able to access your funds. On the other hand, custodial wallets store your private keys on behalf of you, making them more vulnerable to scams.
Make sure to layer additional security measures for your wallet with strong passwords or PIN codes as well as enable biometric authentication when possible. And most importantly, never send your private keys and recovery phrases to anyone for any reason.
Consider backing up private keys and recovery phrases using trusted password managers with dedicated crypto wallet features like Locker. By using them rather than paper or a drive, you can protect them from theft by malicious actors. At the same time, integration with wallet apps makes it easy to retrieve when needed for account recovery.
Stay Safe With Ready
Designed with the modern crypto enthusiast in mind, Ready offers a suite of features that not only make managing digital assets a breeze but also protect them against potential scams.
At its core, Ready is a self-custodial app. This means you have complete control over your private keys and your assets remain in your hands and away from potential threats. With its integrated chat feature, you can securely communicate and send cryptocurrency to trusted contacts.
With a security-first approach, Ready plans to provide more cutting-edge features that help you make informed decisions and avoid costly mistakes with your crypto assets.
The token scanner deeply analyzes tokens using multiple risk criteria before you transact. This determines associated risks like vulnerability to pumps or dumps. Meanwhile, Ready’s scam detector can warn you about sending to wallet addresses that have been reported for involvement in scamming activity.
Ready also boasts compatibility with a wide array of chains and tokens. This flexibility ensures that as your portfolio evolves, your Ready wallet will still remain useful and versatile.
Safeguard your crypto by downloading the Ready app today.
