Cryptocurrency scams

As a rule of thumb, you should never accept crypto-trading with companies or startups that are not blockchain-powered. In layman’s terms, that means that all transaction data can be tracked and reviewed.

Furthermore, before committing to a company or another, you may want to review their credentials – look for status quo indicators such as adherence to initial coin offerings rules and digital currency liquidity.

That’s about it at a glance. Up next, we’re going to dive into the most common and uncommon cryptocurrency scams. Enjoy (or not).

Fake ICOs (initial coin offerings)

Here’s how ICOs are defined:

“An ICO is a type of funding using cryptocurrencies. Mostly the process is done by crowdfunding but private ICOs are becoming more common. An ICO is a quantity of cryptocurrency sold in the form of tokens or coins to investors or speculators, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ethereum. The tokens sold are promoted as future functional units of currency if or when the ICO’s funding goal is met and the project launches. In some cases, like Ethereum the tokes are required to use the system for its purposes.”

Impeccable textbook definition, don’t you think? But what does it really mean? Let’s water it down a little. Imagine the following scenario: assume, for a moment, that you’re running a tech company that has come up with an entirely new cryptocurrency management system or a crypto coin. All fine and dandy, but how on Earth are you going to raise enough money to streamline your idea?

Certainly, you can try to go through banks or call up some capitalist investors, but that would mean dividing or even giving up the ownership of your small business. Fortunately, there’s a better way to go about this – the ICO.

First, you will need to get the attention of some people willing to invest in your idea. Not so fast; to pull this off, you will also need a way to show your future partners that your idea is sound. You can do that by creating a crackerjack whitepaper.

It’s essentially the documentation that proves that your crypto idea works and is, of course, worth the money. You should also consider setting up a website to increase your company’s credibility.

The second step you should take would be to convince the interested partners to give you some of their money in exchange for a small amount of your ‘homemade’ currency.

The point is to up the currency’s rate of circulation and usage of thereof. That, in turn, will increase the value of your newly-created digital asset which translates into a steady cash flow for your company. In this case, the incentive would be a higher return on investment.

Sorry for the rather long detour, but it’s important for you to know the mechanics behind ICOs in order to understand how scams work and how swindlers act. Enter fake or fraudulent ICOs which are specifically engineered to bleed cash from naïve investors.

How do they do that, you ask? By promising astronomical gains in the span of a couple of weeks. For instance, by spinning the fake crypto coin’s white paper (that would the project’s documentation I was telling you about), the fraudster will attempt to lure in investors by promising them astronomical gains (100x or even 1,000x) in a short amount of time – try a couple of weeks or event days.

Fake ICOs count as some of the most common types of cryptocurrency scams. Unfortunately, over the past couple of years, the scales kind of tipped in the ‘favor’ of the fake one.

In fact, according to a Bloomberg study, over 80 percent of ICOs are fraudulent, with less than 8 percent reaching out. Yes, they can be avoided, but we will talk more about that in the third part of this article.

‘Overnight’ exchanges

Another cryptocurrency scam is the so-called shady or overnight exchange. How does that work, you ask? Let’s assume for a moment that you want to exchange your digital token for a better-performing crypto coin.

One would naturally assume that this is what every crypto coin possessor should aim for if he (or she) is looking to increase gains. The best way to go about this would be to exchange your coin with another that outperforms it.

Still, before you go full wolf of Wall Street on this one, consider choosing a legit and regular showbox 5.14 download ated cryptocurrency broker or exchange system. Why? Because you would risk losing your entire portfolio by tying them in a venture that simply sounds too good to be true.

Shady exchanges tend to follow a similar pattern – boy has crypto-money, boy finds better price, boy makes deposit coaxed by shady deal-man, boy asks about how the deal’s performing.

Teary-eyed deal-man says that he couldn’t Eid Mubarak the business, the price dropped, and that the coins are worth zilch. The dénouement – the shady dealer gets your coins and you end up with a dent in your wallet.

Fraudulent wallets

There’s nothing wrong in picking up an app to manage your cryptocurrency portfolio – plenty to choose from and, speaking on behalf of the vast majority, they’re great-look and easy to use.

Yes, I know that you know that there’s a big “but” around the bend, but it is an article on cryptocurrency fraud. Lately, a great deal of fraudulent wallets has been discovered on Google’s Play Store.

Though Google is making efforts to root these posers, their efforts are hindered by malicious developers which seed them by the hundreds. Anyways, the latest crypto-wallet apps to be cloned was Trezor. So, what happens when you use one of these apps to manage your portfolio? Money goes in and, poof, it melts into nothingness. User beware!