Scams on Blockchain and How to Outsmart Them

Last year, Blockchain came into the spotlight. The potential of the blockchain investor excited a general investor about the future. Unfortunately, every time something pathbreaking (like blockchain) comes into the picture, there are always con artists waiting for their next opportunity to scam the innocents.

Understanding the most common types of scam on Blockchain is essential to ensure that consumers don’t fall prey to tricksters. Most scams have clear warning signs, and just by being aware investments can be protected.

Below we talk about some of the common scams plaguing the blockchain, and ways to outsmart them.

Is your Hardware Wallet safe?

Most people agree that hardware wallet for storing cryptocurrency is enhanced security and privacy. However, if a consumer is not careful about purchasing the wallet from a trusted source — there can be potential vulnerabilities. Hackers can pre-built specific hacking algorithms into the hardware wallet. This opens up the wallet to hackers, and they can easily steal the cryptocurrencies. This type of scam is becoming more and more common. However, you can avoid it by purchasing a wallet from only a trusted and verifiable source.

Scams on Exchanges

Ironically, despite cryptocurrencies inbuilt decentralized nature, most of them are traded over exchanges. Most exchanges make lives of consumers easy by giving access to multiple cryptocurrencies at one place. The fact of the matter is also that governments do not govern most of these exchanges in most countries. Thus, the potential for scam multiplies if the consumer is not careful. It takes no complex algorithms to spot exchange scams. However, if you overlook the visible red flags — then you’re in for big trouble. The most common way to spot a scam is when an exchange is offering a massive discount on one or more than one cryptocurrency. This technique is usually a trap to lure everyday investor. Another way to confirm whether an exchange is authentic or not is by looking at its URLs certification and undertaking research.

Scams through ICOs

Along with the word ‘Bitcoin’ and ‘Blockchain’, investors have also been hearing the term ‘ICO’. ICO stands for the initial public offering. Through ICO, companies can raise capital for their unique ideas and projects. The popularity, however, also gives rise to people and organizations looking to cheat first-time investors. One way in which ICO scams take place is through the creation of fake websites for users to deposit coins. The bigger scams under ICO, however, take place when a group of people come together to create an organization to scam. There have been several cases like that in 2017 and before. As a rule of thumb, you should not invest in an ICO until you’ve done significant research about the organization. Don’t forget to give a thorough read to their white paper along with reading up on their team and other investors.

Fake Schemes Concerning Cloud Mining

A lot of companies these days are coming up with schemes that give outstanding returns once you rent a server to mine any cryptocurrency. Since the mining activity is unique and is known to be resource-intensive, the difficulty of mining cryptocurrency is significantly high. Most of these companies make fake bold claims about returns to scam the general public. Some even operate as a ponzi scheme right from the start. Before associating with mining cryptocurrency as an activity, it’s paramount to do intensive research.

Conclusion

Blockchain and cryptocurrencies have a long way to go, and their potential is just being realized. As the days pass, both transparency and security in Blockchain are bound to be better. All investors should be aware of the common scams on the blockchain and the ways to avoid them.