Key Features of a Scam
You might be sold a scam if a startup claims to be free of charge, for example. You should read their terms and conditions carefully. Once you sign up, however, the company is obligated to pay for the entire transaction, regardless of whether you’re happy with it. Some crypto schemes may falsely imply that the startup is not taking a fee. Scammers may also make promises that may not be kept. For example, they might claim that their virtual currency will double every month or twice a month. This is an unrealistic time frame.
You might also have to pay to buy or sell the cryptocurrency. This is when the scam begins. The currency will take a short while to arrive in your account. And in this time, there’s no one to protect you if the transaction fails.
How to Identify a Scam
A 2016 survey by the Federal Trade Commission on consumer scams found that scams increased in the fourth quarter of 2015. More than one-fifth of consumers fell victim to a scam in the last 12 months, up from 16 percent in the last quarter of 2014.
The most prevalent scam had to do with fraudulent check deposits. When you’re sending money online, before you ever take any steps to receive your funds, there are ways to spot a fraudulent transaction. Take the time to familiarize yourself with the warning signs.
Before you send the funds
Before you send any funds, make sure that the company can pay out its own customers. A quick search of reviews by people who sent money to the company confirms that many sent money without ever receiving it.
Warning Signs to Watch Out For
Scammers often make their way into crypto start-ups with a great idea, but a skimpy plan. Look at the team. Are they fully accredited? Are they affiliated with an established company? Are they already active in another, more reputable business? Once you’ve made your decision, ask around, and research the firm with legitimate people and organizations. One study by Reviewalizer found that, compared with traditional online reviews, blockchain-powered reviews, at least on sites like PuffHo and ReviewGeek, are one of the best available. It’s also important to ask the co-founder and advisors hard questions about their background. If they don’t come up with a solid answer, beware.
Scammers often make their way into crypto start-ups with a great idea, but a skimpy plan. Look at the team.
Notice the Red Flags
Here are a few of the red flags you’ll want to look for in cryptocurrency businesses:
Verified? The first thing to look for is whether or not the company has a verified website. If the website looks official and has “https://” in its address, it’s probably not a scam. You can also go to an online search for some of the most popular cryptocurrencies to see if they’ve received any press coverage or been reported on. If you do find a company that says they’re “verified,” research their verification certificate to make sure the company doesn’t look fake. It’s an easy way to ensure the company is legitimate.
Fake? These days, it’s easy to get scammed out of your money, but fraudulent websites and social media accounts aren’t the only way scammers steal from people.
How To Avoid the Most Common Bitcoin Scams
Follow the money. It’s usually the first red flag that something isn’t quite right. Avoid sites that ask for money upfront and allow payment only after receiving services.
It’s usually the first red flag that something isn’t quite right. Avoid sites that ask for money upfront and allow payment only after receiving services. Look closely. Like the diamond in the rough, you should also scrutinize the cryptocurrency startups you’re considering. Look for an address that you’re comfortable sending money to. Also, watch out for websites that don’t load, are confusing, or have links that lead to download pages that don’t exist.
Like the diamond in the rough, you should also scrutinize the cryptocurrency startups you’re considering. Look for an address that you’re comfortable sending money to.
Selection of Exchanges
Once you’ve found a cryptocurrency exchange, be cautious. In some cases, the exchange is affiliated with the cryptocurrency, so only use the ones you’ve heard of and trust. While there are dozens of major exchanges in the world today, most large exchanges have been associated with fraudulent activities. Similarly, many smaller exchanges lack transparency and are therefore risky as well.
You’ll know a cryptocurrency exchange is trustworthy if the company accepts bitcoin and other cryptocurrencies. And you should avoid dealing with firms that act as wallets and exchanges for several different cryptocurrencies—no matter how much legitimacy they have.
Selection of Wallets
You can have multiple wallets on a computer or mobile device. Experts recommend using a virtual wallet so that you’re not keeping sensitive information like credit card information on a wallet you can’t access. Plus, it can keep your assets safe from hackers. It’s important to be picky when choosing a wallet for security reasons. It’s even more important to keep track of your private keys, which are used to verify transactions.
Maintaining and Storing Bitcoin
It’s recommended that you always keep your keys with you or stored on a secure device such as a flash drive or encrypted password-protected drive. You should keep your wallet password protected, preferably with a double-layered encryption.
Trading Platforms
If you’re on a budget, the online trading platform is often the first place to go when looking to invest in cryptocurrencies. However, some online trading platforms have claimed to provide the same trading services as more established platforms, but haven’t actually performed that way. There’s nothing wrong with selling your cryptocurrency to a friend in exchange for another cryptocurrency. However, only invest in online platforms that you know have been vetted.
While it’s relatively easy to get started with cryptocurrency, anyone new to the space should do their research first to find a trustworthy company.