It is important to understand that Bitcoin and the underlying blockchain technology is not a scam, however it can be used to scam people in the same way that the internet has been used to scam people out of their money but the immense benefits of the internet outweigh the negatives of its existence and the same applies to Bitcoin.
You’re aware of how to protect yourself from internet scams like phishing emails online and the same is necessary for anyone involved in Bitcoin.
It was recently estimated that scams are stealing $9 million in cryptocurrency per day. They take many forms due to the anonymity offered by the internet and cryptocurrencies and the best thing you can do is understand the most common scams so as to avoid them at all costs.
We GUARANTEE that you will come across these if you are involved in Bitcoin:
Multi-level marketing/ponzi schemes/pyramid schemes. Easily avoided, it does not matter how genuine they appear, if you are being offered guaranteed returns or being guaranteed that the value of a coin will rise then it is a scam. There are NO guarantees in life. Usually takes the form of the more or longer you invest the higher the guaranteed return. You will also be asked to refer others to invest, with you taking a percentage of their ‘guaranteed’ returns.
Initial coin offerings (ICOs). This deserves its own special section!
Dodgy exchanges. They offer little or no service fixing mistakes that cost you and many have been hacked or closed down with customer funds stolen. Only ever use recommended and trusted exchanges ideally following some regulations and do not leave your bitcoin on an exchange.
Pump and dumps. The price of a coin is artificially increased by a group of people who already own large amounts of it for it to be quickly sold by them and dumped on those investors who were chasing the price increase. There are whole groups set up around doing this but it is easily avoided by not chasing rapid price increases and never join these groups as you will probably find that an even smaller group of people is using your group as the target to dump on.
Bots/HYIPs. Anything offering the use of trading bots, algorithms or high yield investment programs to make guaranteed returns is a lie. Often found on websites with pictures of people making money not working whilst they are on a speedboat or beach. Telegram is a haven for trading and investment bots.
Celebrity endorsement. From the likes of Floyd Mayweather, Steven Seagal, DJ Khaled, Paris Hilton, Jamie Foxx, Akon, Jason Derulo, Peter Gabriel etc. Celebrity endorsement means nothing good for a crypto asset and should be seen as a massive red flag.
Cold calling. If someone calls you asking you to invest in crypto assets then the asset probably doesn’t exist. This is Bitcoin, the internet of money, making phone calls is so late 90s.
Free giveaways. Mainly on social media, particularly Twitter, impersonating known accounts eg. they encourage you to send them 1 Bitcoin and they will send you 5 back. Never ever do this as they will not send anything back.
Being physically robbed/extorted/kidnapped. If you let it be known how much bitcoin you own, if it is a large amount and the price increases then you are a target for criminals. Never make it public how much bitcoin you own, it may be worth little today but incredibly valuable in the future.
Crypto wallets hacked or faked. If a vulnerability is found in a wallet then hackers have been known to exploit these to withdraw the funds for themselves.
Malware. Software on your computer designed to steal your login details for wallets/exchanges, best avoided by using up to date anti virus software.
Hardware Wallets. If bought 2nd hand of from a re-seller the scammer can already have a copy of the recovery seed words. You may not know the unit has been tampered with so only purchase from the main or reputable dealers.
Cloud mining services. Some are legitimate but many are used as a vehicle to con investors out of their bitcoin.
Phishing scams. Users are directed to a fake version of the website they want to visit via fake adverts and misleading domain names where they enter their passwords allowing their funds to be stolen by the scammer. Bookmark the sites you want to visit and double check domain names for accuracy and always use two factor authentication.
Some of our extra recommendations:
If it sounds too good to be true, then run away. Quickly.
Use Two Factor Authentication (2FA) on all online accounts, we recommend Google Authenticator and strong as well as different usernames and passwords on any bitcoin websites you use.
Take security very seriously, in Bitcoin you are your own bank. No one will un-do mistakes you make or compensate you for stolen bitcoin.
Always do your own research, thoroughly and still be skeptical.
Remember this chart so you know what can happen if you invest in a scam, RIP Bitconnect: