Blockchain Scam – A Guide to Understanding and Avoiding Schemes

The ever-dynamic cryptocurrency markets are massively attracting investors and crypto enthusiasts from all corners of the world. Since basically everyone with a connection to the internet can buy and sell digital assets today, countless traders are rushing to invest in this volatile market and try out their luck.

And while some may be bragging about winning from a single position or market event, others are not so lucky. Losses also often happen on a great scale because of various crypto scams.

In order to protect your digital wealth and stay safe in the global market, please pay attention to this article about the basics of a blockchain scam.

Introduction to Blockchain Technology

Blockchain is a software protocol that allows its participants to conduct secure transactions while keeping a permanent record of them.

Also known as a ledger, it is important to understand that the construct is constantly growing, with the transaction permanently being put into it once it’s initiated. The information is stored safely through the advanced cryptographic protocols and the data is written into it chronologically, which means one takes place after the previous is completed.

Blockchain was created out of the need for faster transfers without authority needed to confirm and allow the transaction (like banks and governments). That means parties conduct transactions between themselves without mediums.

Furthermore, the information is locked inside the ledger and is, therefore, safe. Lastly, the system always operates despite nodes failing, so it’s a reliable transfer method.

Common Types of Blockchain Scams

Blockchain and fraud go hand in hand today. Scammers have, of course, found their way to abuse this system as well, regardless of its superior characteristics and advantage over traditional transactions. While some fraudulent methods are unique to blockchain technology, some remain based on the old strategies that worked in other finance fields.

Either way, if you want to stay safe and confidently navigate the crypto world, you should learn to recognize the most common fraudulent tactics.

Ponzi and Pyramid Schemes

This common blockchain fraud uses existing members to promote the company under the conviction that they’ll be rewarded. Clients are promised higher returns, special bonuses, incentives, and other benefits depending on the number of affiliates they have enrolled in the Bitcoin scam.

The fraudulent campaign itself usually lasts as long as the members keep bringing in new victims. The project usually collapses after half a year or so, depending on how long it takes for it to be noticed by authorities. This sort of a business model is banned in the majority of countries.

Phishing Attacks

In the era when digital communication has become a prevalent way of keeping in touch, everyone uses emails, chat apps, social media, and similar platforms. Fraudsters create copies of famous sites, send out emails, or create ads that promise high returns.

After victims click on these links, they’re asked to input their sensitive information, which goes to scammers and helps them gain access to the victim’s digital wallet. That is how the MetaMask scam usually occurs. Once the cybercriminals can enter your crypto wallet, it is only a matter of minutes before they can empty it and leave you penniless.

Fake ICOs

Those looking for new investment opportunities constantly look for new projects and launches. Oftentimes, crypto criminals tend to abuse the hype and promote a crypto service, app, platform or similar. The product is advertised in a way that makes it seem extremely promising.

Initial coin offerings (ICO) are supported with promotional campaigns on social networks, so as many people as possible would invest money and fuel the project before it goes live. While victims expect to be earning when the project is launched, they end up with a ton of cash less than they had before getting involved.

Pump and Dump Schemes

This trickery works in a similar way to fake ICOs, as it uses false advertising and social media hype to artificially boost the price of a coin. Another method cyber criminals like to practice is timely buying, which also inflates the price of the product as the amount of supply drops.

Once the coin price is “pumped” enough, fraud perpetrators start selling the fake token. The more people buy it, the lower its value drops until the investors have accumulated a large pool of worthless coins, while scam organizers get away with what they’ve gained from the sales.

Exit Scams

An especially dreadful type of cryptocurrency fraud is the exit scam, as it can happen before, during, or after a coin is launched. As per usual, everything starts with the project owners heavily advertising the product and promising large profits to whoever invests.

The more people get motivated to invest, the better. As the number of investors increases and the project takes full swing, the criminals disappear with the entirety of the investors’ money. Whoever has invested their cash has hoped for the coin to skyrocket in price but has, instead, been left empty-handed.

Red Flags to Watch Out For

Suspicious entities, shady companies and non-transparent websites shouldn’t be trusted. Especially if they tend to conceal their legal data and do not want to reveal the identity of their ownership team. Because blockchain fraudsters always want to keep their anonymity, you can easily spot those who wish to remain in the shadows and those who actually reveal their identity as project owners.

Before investing in anything that promises huge profits and unrealistic returns, you should be aware of the fact that there’s no getting rich overnight. Extravagant claims about quick money and ridiculous wealth are certain red flags.

Furthermore, these impossible profits are usually aggressively advertised all over social media or news outlets and should not be trusted.

How to Protect Yourself From Blockchain Scams?

Speculating on cryptocurrencies can undoubtedly bring as much profit as it can cause financial disaster. The key is, as always, to have realistic expectations, remain vigilant, question everything to the core, and keep enriching your existing knowledge.

It’s of utmost importance to always keep up with the latest discoveries, technology innovations, and market news. That way, you will always be a step ahead of the competition and predators.

Questioning the company’s validity will keep you safe, as familiarizing yourself with the company’s legal status, whitepaper, and corporate information will help you make the right investment decision. Lastly, please do not believe fairy tales about getting rich quickly or whatever ads on social media promise.

“Blockchain scammed me! What now?” If you have fallen victim to crypto fraud, please contact our recovery team immediately to recover funds that blockchain criminals have stolen. We’ll do our best to help you regain control over your assets. Bitcoin scam recovery is hard but not impossible!