Common Crypto Scams And How To Avoid Them

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BRIEF INTRODUCTION

Isn't it wonderful how far the crypto world has come?
From the innovatory concept of Bitcoin to the astonishing world of NFTs and then, the Metaverse, the blockchain ecosystem has metamorphosised into a billion-dollar industry providing millions of people with the opportunity to earn from the innovative products.

Sadly, not all that glitters is gold because people of questionable characters has decided to scam crypto investors out of their hard-earned money.

These dubious people has been successful in pulling off several heists that scammed eager investors, traders and even developers. As they say, "Knowledge is power", and the proper way of avoiding this is to know how they work.

Read along with me as we venture into a list of commonly known scams in the crypto world and how we can avoid them...

COMMON CRYPTO SCAMS

• PUMP AND DUMP

First on the list, we have the pump and dump. It has found its way from the stock market and into the crypto world.

This is done by a group of scammers who will pool resources together to create a token — a token is a cryptocurrency built using blockchain technology.

This token will then be excessively promoted across various social media platforms attracting investors scared of missing out on the opportunity of having the tokens at a cheaper rate.

As the number of investors rises, the group then slowly sells off the tokens at a relatively high price sparking panic in the market. This is referred to as dumping as the scammer's profit increases at the expense of investors leaving them with tokens that has lost value.

• PHISHING CRYPTO SCAM

A phishing scam is a common scam method that has been in existence since the invention of the web. The crypto version is mucg similar to the traditional phishing scam.

The plan is simple. Victims are convinced into giving away their personal information which is now used to have access to their exchange account or crypto account.

These scams follow the same flow. You receive emails from accounts claiming to be a security operative, bank staff or even government official referring you to a link that you should click or give out sensitive information about your wallet address or exchange account like an OTP.

Once you've clicked on the link, you'll then be redirected to a website where you'll be asked to connect your wallet. If you connect your wallet, the scammers will now hack into your wallet address and do away with the money saved in it.

As simple as it is, phishing scams are very effective and many people have fallen victim to this trick, my brother was once one of them. In order to avoid a phishing crypto scam, don't open suspiciously- looking emails or emails that you didn't subscribe to.

• THE RUG PULL

Scammers often attract investors by promoting the tokens on various social media with the claim of building several products for the token.

Potential investors rush due to FOMO (Fear of missing out) in thinking that they're investing in the next Bitcoin project and the price of the token starts to rise in value.

This is similar to the Pump and Dump, as the scammers dump their tokens in the market, they leave investors with huge amounts of worthless tokens and valueless projects.

What makes rug pull different is that unlike pump and dump, where users can at least sell their token for little returns, the rug pull is usually designed so that only the originators of the token or insiders benefit.

In essence, you'll be left with huge amounts of worthless tokens that can’t be sold. An example is the Squid Game token which was released in 2021 after the popular Netflix series "Squid Game."

The coin, named SQUID, rose exceedingly in value from 1 cent to $2820 within two weeks due to massive hype generated from the Netflix series and social media of which many people invested in the token.

However, investors were unaware that the token developers placed a feature that only allowed them to sell the tokens and the investors could only buy the token.

As such, investors were left with tokens that they could not sell, and this caused a major panic in the market when the scam was revealed. The price of the token, SQUID, quickly fell to zero and investors were left to count their losses, quite unfortunate.

• THE AIRDROP SCAM

Airdrop scams have gain popularity in recent years . Airdrops are rewards given out by new crypto projects to attract investors and create active communities worldwide.

You get rewarded in crypto to participate in a crypto project, and these tokens are then deposited into your crypto wallet. In most airdrops reward programs, you'd be given a form to fill in your wallet address details so that you can receive the rewards rewards.

Scammers have found several ways to scam victims by using airdrops. A known way is to request for your private keys or seed phrases within the airdrop form required to fill to receive reward. Once that has been exposed, they can use those keys or seed phrases to steal crypto from your wallet.

HOW TO DETECT CRYPTO SCAMS

• THE ICO SCHEME

Initial coin offerings (ICO) are done at the birth of a new token. They provide opportunity for individuals to invest in/own a stake in what could become the next Bitcoin or Ethereum.

Ordinarily, an ICO is risky as no one can predict the future of a token. But these scams make it impossible for investors to make any money from the project they have invested in.

They come in two ways; A fake ICO or cloning of a real ICO.

In the fake ICO, scammers create a fake token, promote it as far as possible and do away with whatever investments they've gotten.

The second scheme involves the imitation of an actual ongoing ICO.

Scammers will imitate and match the campaign of another cryptocurrency and lure in investors into their website. The unsuspecting victim, thinking that they are investing in the right project, ends up losing their money to them.

• THE "PIG BUTCHERING" SCHEME

The pig butchering crypto scheme is often done through dating or social media websites. The victim is usually lured in by a beautiful or handsome person who then gains their trust over time via online messaging and interaction

Over time, the scammer shares details of a cryptocurrency project that they've invested in and made returns on, this spikes the interest of the victim then they invest into the project and if that is done, the victim would've lost his investment.

HOW TO SPOT THESE SCAMS

If it doesn't make sense to you but it is profitable, it is usually a scam that's why you're required to always make research before investing in a project.

The whitepaper hold the information of what the token would do, read it and research on its founders. Are they well known in the crypto community? Crypto projects that offer unreasonable returns on investment i.e. 50% returns in one month or even a few weeks should be avoided.

• SUSPICIOUS OR VAGUE WHITEPAPER:
  A white paper holds in it all the information needed to make a wise investment decision. They explain how the project will work and is crucial for an Initial Coin Offering (ICO). If the whitepaper isn't too convincing, you should probably stay away from it.

• EXCESSIVE HYPE:
  Since promotion is an essential aspect of marketing, one must watch out for crypto projects that are overhyped. Most scams kick-off with a lot of publicity, only to end up as a failure. If you feel that the marketing for a crypto offering seems a bit excessive or it makes extravagant claims without backing them up, hold on and make further research.

• ANONYMOUS FOUNDERS:
  Like all scams, anonymity is a very important element. It is usually very easy to find the founders of any project. If you can't find out who runs a crypto project, you ought to be cautious.

CONCLUSION

The crypto world has offered a lot of opportunities to us, the Steemit platform being one of them. In as much as we want to make money, we must try our best to avoid being scammed by making proper research before going into a project.

Thank you for reading this post, do have a nice day.

Yours always,
@chikezie4l

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