These are the classic scams which have plagued cryptocurrency investors over the years:
Coin Offerings: A so-called ICO (Initial Coin Offering) is a method for launching a cryptocurrency or blockchain-based product. A product may be a particular cryptocurrency, a blockchain-based financial product, or a useful piece of software. The company may even have its own cryptocurrency. These are legitimate and existent companies that are excited to make the first steps in using blockchain technology to create new companies. But don’t fall for the lure. These “applications” are often full of content that is meant to lure investors into buying in, even if they’re either scams themselves or simply poorly constructed.
It’s just too good to be true
By now, it’s well known that many initial coin offerings (ICOs) are scams. Like any startup, new companies raise money to launch products, create jobs, and build a strong reputation. But the money these companies raise is raised with extremely high percentages of their market cap (or token’s real worth) going toward a pool of developers, managers, and executives rather than to the actual product or service. ICOs might seem like an easy way to get an early-stage company off the ground, but it could be very difficult for someone to offer a product or service that’s better than what existing companies are already offering.
To take advantage of this, scammers may be tempting you to make a purchase, either to promote an upcoming ICO or even just to make money with a small investment.
Beware of these scams
When you join a cryptocurrency or blockchain-related startup as a journalist or investor, you’ll get emailed to review a business pitch or other documents, or to sign up for an upcoming conference or token sale. But if you click through, it may look like a legitimate email. Before you actually commit your information, double-check the source. “Legitimate-seeming websites, both online and off, often have an account or service you can pay with a credit card,” says David Koenig, a cybersecurity and technology advisor and managing partner of CyberSponse. You can do this directly or by placing a phone call to verify that a company is who they say they are.
Crypto security tips
As with anything new, scam artists are working overtime to use new technology to extract the maximum amount of money from investors. No matter what cryptocurrency you’re looking into, here are some tips to help protect yourself from scams and to avoid security pitfalls:
Listen to reputable news outlets, like the Wall Street Journal, CNBC, and/or TechCrunch. These sites offer smart and impartial news on cryptocurrency. Make it a habit to stay up to date. Avoid link shares or company profiles on social media and more popular sites.
Scammers often play on people’s fears by making crypto investments seem like money laundering or drug-running. Instead, invest in reputable companies with approved products.
Ultimately, to understand the workings of bitcoin, the blockchain, and the cryptocurrency world, you should do your homework. Rather than being in a hurry to make a quick judgment or purchase a digital currency, follow the expert advice of venture capitalists, financial analysts, and crypto experts for the best guidance on how to get ahead of the game.