CRYPTO SCAMS TO AVOID — 10 TRICKS SCAMMERS USE

CRYPTO SCAMS TO AVOID.

INTRODUCTION

While the crypto space keeps growing with the rapid advancement in blockchain technology education, a number of people have hopped in while undergoing their learning phase, as some others began their journey without having a handful of experience concerning the space. These experiences have left scars on these sets of newbies.

Due to the nature of blockchain’s interoperability, cryptocurrency has gradually evolved into a universe of its own where deep learning may be applied to fully understand because even the early adopters of cryptocurrency and bitcoin proponents may not be spared in the face of potential scams due to the fact that new scam patterns emerge at different intervals and the need to stay alert cannot be over-emphasized.

Many have lost their life savings and investments to these scams to the tune of $5,000 and more. While this may be a bit difficult to believe, blockchain technology which powers cryptocurrency was built in such a way that activities executed in the space cannot be hidden since its application is decentralized. The highlighted reasons and more birthed the need to reveal 10 tricks that scammers use and ways to avoid them.

QUICK TAKES

• Crypto-related recurring crimes in the year 2020 rose to about 79%.
• In the year 2021, scammers across the globe absconded with a record of $14 billion in cryptocurrency.
• According to Federal Trade Commission, between 2018 and 2022, over ten thousand Americans lost an approximate amount of $1.18 billion to crypto fraud.
• There will likely be no end to crypto scams at the moment until solid regulatory structures are fully implemented and set up. In the meantime, staying on guard remains a viable option.
• Be good at carrying out deep research before making investments in crypto projects by following recent trends, looking up the project(s), etc.
• Cryptocurrency theft increased 516% in 2020 to $3.2 billion equivalent worth of cryptocurrency. Of this total, 72% of stolen funds were taken from Defi protocols.

TOP 10 SCAMS TO AVOID

1. ANY WEBSITE ASKING FOR PRIVATE KEYS

To get started in crypto, there are quite a number of activities to do in order to have a good take-off. One of such activity is to set up your crypto wallets like Metamask, Coinbase, Exodus, Trust Wallet, Bitgo, and so on. Crypto wallets are applications that function as a wallet for your cryptocurrency to store and keep digital assets.

In recent times, scammers have taken advantage of the insufficient knowledge that newbies have to exploit them. The trick they start with is by asking for very sensitive information like Name, Email Address, Private Key, etc. Among these sets of information demanded by scammers, the most sensitive is the private key.

Once the seed phrase is gotten, they can have access to all the crypto funds in the wallet. Most scammers use tricky statements like “Hey, What is your seed phrase, I want to send you some money” or “Hey, you just won one whole Ethereum. Tell us your seed phrase so that we can deposit the funds in your account”. For newbies, the habit of gaining knowledge and knowing a bit of all that goes on in the space can help in keeping one’s face above water.

An example of basic knowledge to have is that every user has a private and a public key. A private key is very personal. It’s more like giving a stranger the key to your home while you were away on a trip or even if you simply went across the road to fetch an item. You can’t be rest assured of meeting your possessions and assets intact. On the other hand, a public key is more like an individual’s email address, it can be shared to probably receive funds transfer without much harm, compared to private keys. To learn more about public and private keys, you can read more about the concept of asymmetric encryption.

Read also: WEB 3.0 -A SIMPLE GUIDE (1).

2. ASKING TO INVEST ON YOUR BEHALF AS A TRUSTED CREATOR

Shortly after its inception, the crypto and web3 space encountered a surging need for some creative skills which has kept the space booming. This workforce may not be talked about very often but quite a few know it as crypto jobs. For individuals who are conversant with these jobs, certain apps are required in order to work efficiently and this has been a nest for scammers to operate anonymously.

The platforms where these activities happen mostly involve Discord, Reddit, and Telegram. The scammers start by creating a bot that looks very official in a bid to impersonate a project. They act like team members of the project by asking for approximately $100, promising to invest and return $2,000 within a stipulated period. To stay fresh in the game, they often change their username and profile pictures just to appear convincing and real.

For individuals who use discord, the harm can be curbed by checking out their username and the four digits attached to every name. For example, if you check for PracticalPsychology#9608, no two users can have that name and in case that name belonged to a member of the project you are working for, valid verification will be done with ease. For Youtube, it’s as easy as checking their account to see the number of followers which in some cases may be one or zero. In some other cases, they will have zero video upload and these indices can place you on the right track to stay safe.

3. BURNING A PERCENTAGE OF TOKENS OR SENDING IT TO A DEVELOPERS WALLET

In this scam technique, token developers implement something they call ‘BURN FEATURE’. The convincing words they use on their prey is by stating that every time a token is traded, a portion of the trade is burned forever. In real-time analysis, whenever a potential token is in low supply, the value is likely to increase tremendously when there is excess demand over supply.

Having witnessed this trend in the crypto market, scammers tend to use it smartly by assuring the scam prospects of potential yields when the token is traded and a portion of it burned too. In most cases, the funds get lost since the transaction cannot be retracted. Keep this in mind with tokens that have a deflationary feature, especially when that’s all they have to offer.

4. SENDING YOU A SEED PHRASE OR PRIVATE KEY WITH MONEY IN IT

This works in a very enticing fashion. For example, someone contacts you and says “Hey, crypto has just been banned in the United States and I want to get rid of my wallet so that I don’t get in trouble. So here’s my seed phrase. You can donate your funds to it or maybe have some of the funds in it for yourself”. The trick here is that they will actually send a real seed phrase to an active account with some funds in it, let’s say about $3,000 worth of Tether.

To get the Tether out, the recipient will need to have some Ethereum in the account that would be used to transact. Hence, to complete the transaction, some transactions may require an approximate fee of $50 while $10 will be the actual gas fee in Ethereum. So here is how it works — Once the Ethereum is sent to the scammer’s account, an implanted bot automatically detects that new funds have been sent and immediately takes out the $40 allowable fund from the account to another while $10 has been spent on gas fee, making it impossible to transfer the funds back when the individual detects a fraudulent act.

Read also: WEB 3.0 -A SIMPLE GUIDE (2).

5. SMART CONTRACT BUG

In this scam technique, a bug is created so that someone can buy a token but will be unable to sell it. These scammers achieve this in 3 different ways. In the first case scenario, when the developers are creating a token, they will simply disable the approve function in the Erc20 contract which implies that decentralized exchanges cannot get your approval for putting the token to be sold. The second way is by adding a rebase function into the token contract such that the moment you try to sell a token, you lose 99% of it.

Thirdly, the developer writes a few lines of code that prevent the token from being sold to a DEX, rather, it can be only bought or supplied which invariably means a lot of money gets into the project with nothing going out. This makes it a perfect situation for scammers to run away with lots of money.

6. PHISHING ON FAKE WEBSITES

The way this works is quite simple but technical at the same time. Some scammers replicate crypto sites to look exactly like the one you probably intend to invest in and it’s very dicey. They do it with the same interface and information on the original site. However, there is a way to sniff this foul play.

It can be done in two ways. The first is to check out the domain name used because it can’t be the same as the real site i.e two websites can’t have the same domain name. If there seems like any, with a closer look, the difference will be spotted. For example, the domain name can be switched from let’s say crypto.com to crypto.org or crypto.net, etc. In some other way, it can be in the spelling of the domain name, i.e changing it from crypto.com to crypt.org and if that little change is not taken note of just like this case, the user can be scammed easily.

The second way is by changing the smart contract. The scammers can change the smart contract code such that if you were to interact with it, they could get access to your funds in your wallet, which will result in an abrupt loss. They can literally make the contract anything which is why it is necessary to only trusted applications. Coingecko, Coinmarketcap, and Twitter are relevant sites that can aid to check for the authenticity of a project in the face of doubt.

7. FAKE ICO

The idea of ICO is relatively not new in crypto. Some startups in the crypto economy usually come in with great use cases but may lack the funds to run the project in terms of creating their coin, app, or services, hence, interested investors pull funds together and buy into an initial coin offering to receive a new cryptocurrency token which may have some utility related to the product or service.

Fake ICOs are a really easy way for scammers to present a project to investors with zero intention of creating it just to get away with the investor’s money. This technique works in disguise. Due to the absence of a standard regulatory framework in crypto, the scammers present a nice surface value project to the investors and sometimes may ask for 100% funding or a little less.

A good thing to do before investing in a crypto project is to look for real whitepapers, even that of DAO, project timelines, or good tokenomics to back your investment.

Read also: Overview of The Most Popular Altcoins in 2022.

8. HIDDEN WHALES

In Crypto, projects with low liquidity and marketcap pose a red alert. It’s a total turn-off because the whales may be swimming underneath. Whales are simply entities that hold a large percentage of the project token. They can be likened to the decision-making board with veto power. Due to this, they have the ability to sell off all the tokens they hold, which may result in a crash.

Over time. Scammers have taken note of the fact this method is widely known, hence, they devised a new pattern to hide the fact that they hold most of the token. Instead of having one wallet with all the money, they simply split it between multiple wallets. Here is an example: If the total liquidity of a project was half a million dollars ($500,000), and maybe the team was holding $50,000 which is 10% of the entire project. They will then split the money into 10 different wallets with each wallet holding $5,000. In this way, they make it look like a safer and genuine project.

One easy way to get ahead of this is to look up the transactions of that project on Etherscan. In addition, spend some hours looking at the transactions on the blockchain it is built. Look out for where it is being transferred from and the wallet it is sent to. Going further, the simple way to ensure that developers do not hold most of the tokens is by taking a look at their first transactions and where the money originally got distributed to. If the first transaction is to send a lot of money to multiple addresses, this is not a good sign.

9. THE 10X PSYCHOLOGY GAME

This may not be fully regarded as a scam but it’s very tricky in the sense that the scammers make it look like it will be easy for small prices to hit higher prices. When a project launches, the tokenomics are established by the projects team and the developers get to answer questions like the max supply of the token or the initial price of the token, as well as who gets the early tokens.

The scammers achieve this scam technique by printing large amounts of tokens, that way the price stays low, and many investors usually get swayed by the number of tokens they have which may be in thousands whereas, the actual price of the token could be 0.001$ which is quite a distance from tokens that actually peg at $1.

For example, holding 100 tokens at $1 each is the same as holding a hundred thousand tokens with the tint of a penny. The misconception which plays out on investors is the feeling that when they hold such a large quantity of tokens, it will 10x, 20x, or even 100x.

10. GAMBLING WITH YOUR TRUST

Just recently, the news about the squid game which gained popularity was over the web. The fame that the movie pulled gave leverage for some developers to capitalize on it as they created a token. They rode on the hyped train by using the same name so that they could gain a lot of attention.

Going forward, the scammers got it all figured out like a money heist. To outsmart these scammers, one will have to think ahead of the game and out of the box as well. The scammers went on to create 10 fake profiles and bio’s with the same token of computer-generated human pictures so that prospective investors may feel like they will miss out if they don’t invest early since some other imitators were coming up. Unknown to them, the scammers were the ones who also created the other fake profiles. Other crypto scams in history include One Coin, Bitconnect, PlexCoin, etc.

Read also: Blockchain Bridges -A Simple Guide.

CONCLUSION

To stay safe within the crypto space, investors and newbies will have to be thorough in their research and investigations before having a thing to do with any project. There are two suggestions that can help in this regard. The first is to make use of sites that flag scam projects and this tool can be very helpful in staying out of trouble and potential fund losses.

Lastly, RugDoc.io is a recommendable site that analyzes projects and spots possibilities of exploits or scams in the contract code.

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