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How to Identify Crypto Scams ?

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How to Identify Crypto Scams ?

Cryptocurrencies have matured over the past decade so that both experienced and inexperienced traders continue actively joining the crypto world.Luckily, a handful of them made great fortunes, while others lost millions to crypto scams. As of 2017, crypto scams became rampant, which led social media giants like Facebook and Google to ban crypto advertisements on their platforms.

For the experienced folks, skillfully maneuvering atop the crypto wave will not be an uphill task. However, the inexperienced ones have a lot to worry about as they glide through the rising tide. The first tide began in 2009, with the flagship cryptocurrency, Bitcoin. It had a significant impact on the industry on the whole.

The emergence of Bitcoin gave birth to altcoins as many projects began developing and issuing their own cryptocurrencies. Without a doubt, the journey has been a rollercoaster ride, with a slew of investors who rushed in without understanding the nuances of the technology behind it.

However, the crypto buzz is paving the way for new technologies like decentralized finance (DeFi), non-fungible tokens, and a host of others. These emerging technologies have likewise arrived with their challenges.

It’s worth noting that with the further development of technologies, bad actors keep creating new methods to deceive and manipulate users and, thus, get their money. Often, even experienced investors fall victim to bogus crypto investments.

Identifying scams is a game of wits and strategies. Beating scammers to their game requires one to be smarter. There are a plethora of scams and exploits pervading the crypto space so that it is quite easy to get caught up in any of them if one is under or ill-informed.

Some of these scams include pumps and dumps, flash loan attacks, rug pulls, honeypots, and flash coins. Till date, scams like these are pulled off by bad actors in the industry.

Some of them appear as genuine investments, but a trained eye would easily identify one at a glance. One of the most common crypto scams is flash coins.

What are Flash Coins?

Flash coins can be any cryptocurrency, be it Bitcoin, Ethereum, or others. However, they are called flash coins because of what they represent. A flash coin refers to any coin sent to one’s wallet that does not remain in such a wallet for long.

This happens especially when a user plans to buy cryptocurrencies from another individual, who appears to be a scammer. Transactions like these are referred to as P2P. Peer-to-Peer transactions occur between two individuals.

Every cryptocurrency has a different confirmation time. For instance, Bitcoin transactions are usually confirmed within ten minutes. But a flash coin scam performed with Bitcoin does not undergo the normal confirmation process and timeline.

The coin appears in the user’s wallet giving them the impression that it is a genuine transaction. However, after some time, it disappears leaving them wondering how that happened. Usually, users believe they have been hacked, but given that it is just the coin that gets missing from their wallet, the possibility of a flash coin scam cannot be ruled out.

How to Avoid Flash Coins Scams

There are no textbook rules to follow to avoid being the victim of a flash coin scam. Notwithstanding, over the years, industry experts have developed certain ways to prevent such scams. They include;

  • Ensure you transact with a trusted party, which is the most relevant advice. Transacting with a trusted party will save you the stress of adopting other strategies. Most crypto exchanges provide a P2P platform within them. Using these platforms is considered to be the safest way.
  • Insist on Priority Fee. In the event that you are buying crypto from a random person, ensure that you insist on a priority fee. Priority fees help confirm transactions faster so that you do not have to wait for ten minutes if it is a Bitcoin transaction.

Phishing Scams

Scams like this bear some sort of similarity to flash coin scams, but are different in the way they are carried out by perpetrators. Phishing scams occur when a user’s non-custodial crypto wallet receives an unidentifiable token created for the purpose of scamming.

Most likely, when the user sees this, they are attracted to it because they get it for free. As expected, their first instinct is to swap the token, perhaps for USDT or any other preferred token. Doing this could put their wallet at risk.

Going ahead to swap such a token may likely give the scammers access to the entire wallet so that the user stands the risk of losing other coins or tokens they have there.

What To Do After Receiving A Phishing Token

In such cases, the best thing to do is apparently abandoning the wallet, but not before transferring the rest of your funds to another wallet. Being greedy by swapping the phishing token is a dangerous move. Abandoning the initial wallet puts you one step ahead of the scammers.

There are other crypto scams investors have to be wary of. Since there are no regulations in the crypto space, it is quite easy for scammers to get away with anything. The wise thing to do as an investor or crypto enthusiast is to update your knowledge as you journey through space.

 

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