It can be profitable to invest in cryptocurrency. This can help you earn extra income if it is done properly, using knowledge, diligence and an investment strategy that has been well thought out. As with every type of investment there are always risks. The possibility that you will be scammed is one of the greatest risks associated with cryptocurrency.
To avoid falling for these scams, it is important that you are aware of what they can do. These are the three most popular types of cryptocurrency frauds.
Fake ICOs
A ICO is an Internet of Things, initial coin offeringThe ICO is an avenue for businesses to raise capital by selling crypto tokens. These tokens are bought by investors in the hope that their value will rise over time.
There have been many fake ICOs. The companies that created them vanish with their money leaving investors without a dime.
Look out for signs that a fake ICO is being offered, such as unrealistic promises or a lack thereof of transparency and a well-known team in the crypto community.
Ransomware
Ransomware is a type of malwareThe attacker encrypts the files in your computer, so they are impossible to access. An attacker will then demand a ransom payment in cryptocurrency for the decryption of your files. However, even though you pay the ransom you are not guaranteed to get your files back.
A phishing email is the most common way to infect your computer. The ransomware starts encrypting your files once the email is opened. The ransomware is very dangerous and can be spread to other computers within your network.
WannaCry ransomware infected thousands of computers worldwide. For the decryption of files, attackers requested a ransom payment in Bitcoin.
You can protect yourself against ransomware by only opening emails and attaching files from trusted sources. For example, if you’re browsing online for a funeral directorIf you receive an email suddenly from someone you have never met, it is best to not open the mail. Keep your computer updated with security updates, install a trusted antivirus program and take regular backups.
Ponzi Schemes
Ponzi schemes involve fraud that involves the recruiting of investors in order to receive payments from earlier investors. New investors are lured by the promise of high returns. Later, their investments will be used to repay earlier investors. The scheme eventually collapses when it is not possible to find enough investors.
BitConnect is a case in point. The company claimed it would offer returns up to 30% each year. The company collapsed after it was revealed to be a Ponzi scheme. Investors were left with substantial losses.
You can identify a Ponzi scheme by looking for guarantees or high returns that come with minimal to no risk. It is possible that it may sound too good to true.
These are some examples of common cryptocurrency scams. These scams can be avoided by becoming aware.