What is a Bitcoin scam?
In order to investigate any cryptocurrency that you’re interested in, the first thing you’ll need is to understand what that means. After all, a cryptocurrency is more than just a number of digital coins, and you’ll have to learn more than just math to understand it. A Bitcoin scam is one that tricks people into thinking their money is in cryptocurrency, when it’s not. Here are just a few examples of what you’re likely to encounter in a cryptocurrency scam:
Flappy Bird-type games that are designed to trick people into downloading it.
Social-media campaigns encouraging people to use Bitcoin, but only to donate money.
Unregistered websites and companies selling crypto-only software with no connection to the actual blockchain.
How to avoid Bitcoin scams
Scammers often approach people online or via social media. Be especially careful to avoid them if you don’t already know their personal information. Generally, scammers change names or identities often, making it difficult for you to tell whether you’re talking to a real person. It’s also best not to meet in person if you’re considering using a cryptocurrency company. If you’re unsure, it’s best to proceed with caution.
On the other hand, companies like Kodak and Microsoft are currently accepting bitcoin payments. Both use Coinbase as a payment processor, and their terms of service explicitly forbid usernames and passwords. If you meet with these companies, you’re told to give out other personal information, like your name, mailing address, and phone number.
How to identify a Bitcoin scam
For starters, you should be wary of anyone touting a cryptocurrency without being able to explain exactly how it works. Here are a few warning signs of a Bitcoin scam to look out for.
The newbie cryptocurrency investor might be tempted by a blockchain-powered company with no known physical address and no website to verify it. If your inbox is flooded with messages from a company with names like “SolidX” or “CryptoHire” that are far too generic to have legitimate contacts, it’s probably a scam.
Scammers can be convincing when it comes to work placements at businesses in Russia and Nigeria. Russian job hunters may receive messages from legitimate organizations in the name of American-sounding companies with US-based addresses.
Find out if the startup is blockchain-powered
Avoid Scams that Require You to Install Software or Add Coins
If your browser prompts you to download software or provide access to your online account to make purchases, it’s a scam. Don’t sign in to your crypto wallet or send a payment through an email address or QR code.
Always make sure you’re dealing with a legit company by researching the company on local and national consumer protection websites.
Don’t Fall for ‘Free’ Cryptocurrency
Avoid scams promising that you can earn free money by simply reading or watching tutorials. Chances are you can’t download or run a cryptocurrency app, or even buy crypto on an app. The promotional offers come from start-up companies that are trying to raise funds or gain publicity.
Get a free cryptocurrency
Maybe you’re planning on making a bitcoin or ethereum investment, and you don’t want to wait a few weeks for the stock to hit $1 million on the NASDAQ. Maybe you don’t even have a savings account to put the money in. Regardless of your situation, using an investment opportunity like a stock swap is a great way to get your hands on cryptocurrency with little risk. However, do your homework to ensure you aren’t losing money in the process.
Avoiding Bitcoin Scams
To learn about the best ways to avoid bitcoin scams, check out these valuable resources:
Detecting Bitcoin Scams
If you’ve fallen victim to a bitcoin scam, you may be tempted to return to cryptocurrency’s dark days.
Do your due diligence
If you’re lucky, you might meet a cryptocurrency visionary that is ready to tell you their vision. This could be a magnet for scammers, so be sure to research their reputation, too. Experts advise finding out how long the team has been working on the project and the names of people who have been involved. You should look up the team’s website and social media accounts to make sure it doesn’t have any of the telltale signs of a scam.
Do your research
You might be tempted to start by looking into where the company is located. However, make sure you’re going to a legitimate business, says Jeff Berwick, the CEO and editor of The Dollar Vigilante blog. Berwick, who has studied cryptocurrency closely, says, “Bitcoin isn’t a money-making machine; it’s a bubble waiting to burst.
Ask about the team
Cryptocurrency startups can look promising because they can generate huge returns. However, you want to make sure the team behind the company is capable of making you their primary customer. Beware of scammers who have good deals and bad reputations.
Understand the risks
If the startup has pre-sale and crowdsale programs, which are used for early customers, the startup is asking you to pay too much, and in some cases, without any guarantees. These aren’t the best opportunities for you, since you are exposing your money to the startup, which may fail and leave you without a return. Also, beware of scammers, who can claim that the coins you’ve invested are now worth $1 million (or more).
So, with all of this in mind, how can you know if an ICO or cryptocurrency is legit? Keep reading for ways to cut down on the risks of working with these companies.
1. Do your research
Before signing any agreement, always verify that the company is legit. How do you get in touch with them? If you want to do this anonymously, you can use a service like Whisper, an anonymous instant messaging platform that only requires an email address to log in.
Another way to learn more about a cryptocurrency is to contact companies already involved in the blockchain space to get a feel for what their organization’s structure and goals are.