Millennials, Beware Of Bitcoin & ICO Fraud
Data collected by the North American Securities Administrators Association (NASAA) shows that millennials are more likely that other age groups to use fintech products. Eighty-four per cent of financial regulators identify them as the demographic most likely to show an interest in these new opportunities.
Unfortunately, fraudsters have taken advantage of people who want to make money but have little understanding of the technology involved. A NASAA survey revealed that 94% of financial regulators rate Initial Coin Offerings (ICOs) and cryptocurrencies as “high risk” for this reason.
How To Avoid Scams
Fortunately, you can learn to spot the signs of a scam and keep your money safe. Keep the following points in mind:
Double-check domain names: Scammers often set up websites that imitate legitimate online ICO campaigns. Such sites are designed to trick investors out of their money and personal details and offer nothing in return.
Run the URL through a search engine first to make sure you are visiting the correct site. Use the EtherAddressLookup extension for Chrome to check whether a site has been identified as a phishing scam.
You should also be aware that some ICOs are in themselves scams. For instance, some blockchain ventures will lie about their expertise, products, or intentions. It can be hard to decide whether an ICO is a legitimate opportunity. It’s been suggested that at least 78% of all ICO “opportunities” are scams.
You should research the history of the company, read up on the people behind the venture, and examine all available documents closely. If you don’t understand what you are buying, don’t buy it.
Use only mainstream, well-trusted exchanges and wallets: Cryptocurrency exchanges are unregulated in most countries. This means that scammers are able to create websites with the appearance of legitimate exchanges that they can then use to extract money and financial details from unsuspecting visitors.
If you come across an exchange that claims to offer incredibly good prices, you should be skeptical. Other warning signs include a site that is written in poor English and is not properly secured. A secure, reputable exchange will have HTTPS at the beginning of their URL.
If you want to use a hardware wallet, buy one only from a trusted source: Hardware wallets are USB-style devices designed to offer an additional layer of security for those who want to protect their Bitcoin both on and offline.
Unfortunately, some of these devices are sold with vulnerabilities that render them easily hacked. In the worst-case scenario, you could lose all your digital assets within minutes. The solution is to buy wallets from reputable companies.
Do not click on Bitcoin or ICO-related links in social media messages: If someone sends you a website from a user who claims they are representing an ICO, ignore them. Under no circumstances should you send them money or personal details. Scammers may also set up social media profiles that, on first glance, appear to represent an ICO. They might make the profiles look especially convincing by using the ICO’s logo or slogan.
Think twice before signing up to a cloud mining service: The only way to generate new bitcoins is to mine them. This is done by solving mathematical equations that validate blockchain transactions, and requires powerful hardware.
Because bitcoin mining equipment is inaccessible for most people, cloud mining companies have been able to set up highly profitable services. In brief, cloud mining companies mine bitcoins on behalf of a user in exchange for a fee.
Cloud mining is a legitimate way of acquiring bitcoins, but you need to be aware that unscrupulous individuals have set up mining schemes that take investors’ money and give nothing in return. They may lie about possessing the right hardware, use hidden fees, or simply take money from investors and disappear.
When choosing a cloud mining service, do as much research as possible into its reputation. Ask the right questions. Be sure to choose a service that uses HTTPS, has a public mining address, has been registered for a respectable length of time, and enjoys positive, legitimate reviews. They should also be able to prove that they have the right mining equipment.
Keep your anti-malware software up to date, and do not download untrustworthy programs: Just as conventional malware is designed to infect your computer and access your credit card numbers and other financial details, cryptocurrency malware breaks into – and empties – your cryptocurrency wallets.
Take all the precautions you usually take against malware. Use a reputable anti-malware program, avoid downloading and opening unknown attachments, and scan your machine on a regular basis to detect threats.
Pyramid schemes are old-school tactics, but they remain popular to this day: Cryptocurrency pyramid schemes attract naive investors with promises of high returns on their investment. Initially, they may see some “returns,” but the money is actually transferred from contributions from other investors. This encourages them to contribute increasingly large sums of money.
Eventually, the people at the top of the pyramid abscond with all the money. Avoid any scheme that entails recruiting other people in exchange for coins, gifts, or financial incentives.
If it sounds too good to be true, it probably is: This advice is a cliché for a reason. If anyone offers you overnight riches in return for little effort, walk away. You should also be aware that cryptocurrencies are vulnerable to market manipulation. If you suddenly notice that a particular coin is the subject of much attention and hailed as “the next Bitcoin,” be on your guard.
It is relatively easy for a group of individuals to buy huge amounts of a low-price coin so that naïve investors will follow suit, thus causing the price to skyrocket. They can then sell their coins to people who want to follow the latest crypto trend and make a healthy profit.
ICOs and cryptocurrencies can be a profitable investment option as part of a diverse portfolio. They are considered a high-risk investment, but this doesn’t mean you need to avoid them entirely. However, to keep your money safe, you need to stay vigilant. If in doubt, always undertake further research before taking action.