How to Avoid Two of the Most Common Scams in the Cryptospace

Mina Down
Mina Down
Aug 9, 2018 · 7 min read
Fake mining sites and fake faucet wallets are two scams I have seen repeatedly in the cryptospace.

Don’t Blame the Victim

If you’ve spent time in cryptocurrency communities you know there are many scams out there. You’ve probably also heard people say only “idiots” fall for scams, or that victims somehow deserve to lose their coins because they are “dumb.” I think these attitudes are wrong. The reason people fall victim is that they are inexperienced. And even if intelligence were a factor, why would it mean someone “deserves” to be ripped off? This attitude is anti-social and toxic in any community. It also makes the cryptocurrency community hostile to newcomers.

Fake Faucet Wallets

A faucet wallet is a website that appears to be both an online crypto wallet and a faucet. As a wallet, it will typically offer the opportunity to register for an account and receive addresses for Bitcoin and various altcoins. As a faucet, it will offer free daily deposits of tiny amounts of cryptocurrencies into your wallet. However, unlike conventional faucets, which actually pay out claims even if they are small, faucet wallets are pure scams. The point is to lure you into depositing your own coins into the site. Here is a screenshot from a fake faucet wallet that was still live at the time writing:

The balances are supposedly from free daily deposits. In reality, there is nothing there

The QoinPro Saga

Over the last few years, I have seen multiple faucet wallet websites come and go. However, one has proven particularly tenacious, existing for several years and scamming people the whole time. QoinPro claims to be an online wallet that deposits Bitcoin and various altcoins into users’ wallets daily. I’m familiar with QoinPro as I encountered it early in my time in the cryptospace. Back then I was naive about scams and registered for an account. I thought I was getting daily deposits and even shared the site on social media. Fortunately, the only people who signed up were family members, none of whom deposited their own coins.

QoinPro’s Tactics

I dug deeper and discovered QoinPro had gone live on February 6, 2014. A user posted on Bitcointalk announcing the launch of a “multi-currency crypto wallet” with free coins deposited daily. For a few weeks, there were posts from users trying to profit from the referral bonus. They were offering to send small amounts of altcoins in exchange for signing up to QoinPro via their personal link. Some posters organized promotions where those who signed up were entered into a draw for some BTC. While there is little evidence many people responded to such outreach (i.e. almost no replies to these posts), people were pushing their referral links quite aggressively.

Fake Mining Pools

Fake mining pools are websites that offer to sell or rent hash power. Hashing power is the power a computer uses to run and solve hashing algorithms. These algorithms are used for generating new cryptocurrencies and allowing transactions between them. This process is also called mining. A fake mining pool site will let you sign up for free, promising you can mine small amounts of crypto without having to pay (tip: something for nothing is always a red flag). Once you register, you discover the free coin amount is very low but can be increased with the purchase of more hash power. Here is a typical example:

This image is from a fake Litecoin mining pool website offering to sell hash power

Spotting Scam Faucet Wallets

The best way to spot a fake faucet wallet is to look at whether it’s offering free coins in exchange for a deposit. This is a huge red flag. Genuine crypto wallets do not give out free coins. They try to design the best possible product so users want to use it. If in doubt, try searching the name of the website with the word “scam”. If the site has been around for a bit you will likely see hits about it ripping people off. A related option is to consult social media. Check for mentions of the site on Twitter, Reddit, and Bitcointalk. Often people who have been burned by scam sites will post their stories to warn others

Spotting Fake Mining Pools

Unlike fake faucet wallets, fake mining pools are trickier to spot. This is because there are legitimate mining pools where people combine resources to benefit from communal hash power. Mining in pools began when the difficulty of Bitcoin mining increased to the point where it could take centuries for slower miners to generate a block. For these miners, the solution was to pool their resources so they could generate blocks more quickly and receive a portion of the reward on a consistent basis, rather than randomly once every few years.

Conclusion

Fake mining sites and fake faucet wallets are two common scams in the cryptospace and newcomers are most at risk of falling victim. Some good rules of thumb are that faucet wallets are always scams, so steer clear of them. The telltale sign of a scam mining site is it offers to sell or rent hash power. You will not make money from such an arrangement so steer clear as well. Finally, when dealing with any website that offers to sell you something in exchange for crypto always do research online. If you see reports of people losing funds, stay away.

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Mina Down

Written by

Mina Down

Writer interested in blockchain projects that will add to the social good

HackerNoon.com

Elijah McClain, George Floyd, Eric Garner, Breonna Taylor, Ahmaud Arbery, Michael Brown, Oscar Grant, Atatiana Jefferson, Tamir Rice, Bettie Jones, Botham Jean

Mina Down

Written by

Mina Down

Writer interested in blockchain projects that will add to the social good

HackerNoon.com

Elijah McClain, George Floyd, Eric Garner, Breonna Taylor, Ahmaud Arbery, Michael Brown, Oscar Grant, Atatiana Jefferson, Tamir Rice, Bettie Jones, Botham Jean

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