10 Tips For Staying Safe In Crypto
Where there’s money, there’s fraud, and cryptocurrency is not an exception. In the USA alone, over 80,000 crypto frauds were seen in 2020. A skyrocketing market attracts crowds of gullible newcomers, and, together with poor regulation, that makes it an appealing target for fraudsters.
Whenever any innovation is introduced in the crypto market, scammers are right by. They run fraudulent ICOs, create pump-and-dump tokens, hack vulnerable flash loans and write malicious smart contracts. The crypto market lacks security — but there are good ways to protect yourself, and these tips are easy to follow. In this article, we will describe the typical characteristics of fraudulent projects. Avoiding them will help you prevent money loss.
1. Avoid shiny promises
The first red flag relevant to financial offers of any kind is: if it looks too good to be true, it probably is. When someone offers you 50% weekly interest with zero fees, it’s easy to buy into that — but the head should stay cold. Crypto is no place for guaranteed yields and firm promises. Google the project well and see what others say.
2. Investigate suspicious founders
Crypto is a very tight community, and most of the founders are known by the crypto enthusiasts at least to some extent. It looks odd when someone not ever seen in the market comes out with a cryptocurrency project — that may be the sign of a scam.
Whenever you plan to use or invest in a new project, see what its founders are. If they are tied well to the community and have had partnerships with renowned projects — that’s good. Users of Quadriga exchange in 2019 might not have checked who its founder Gerald Cotten was before putting $215 million into the platform. After Cotten died under mysterious circumstances and all the money vanished, everyone realized how dodgy his past was.
3. Centralized platforms pose a risk
You may have seen some crypto projects being criticized for their centralization. This is a very reasonable concern: when an entity has too much control over the network, that gives it tools to manipulate transactions and commit fraud. And it’s not solely about scams: for instance, Binance is a renowned company, but Binance Smart Chain is criticized by many for being too centralized. That brings its risks: the way the platform functions may be easily altered by a small group of people at their will.
4. Beware of dodgy websites
When you visit a website of a crypto project, there are several red flags to pay specific attention to. Firstly, websites made with no effort at all, where the interface is overly simple and plain, are a common sign of a scam. Further, other elements that may hint there’s something wrong are stock photos, poorly made logos, weird office location, dodgy-looking reviews. To check the platform’s reputation, you can try finding team members on LinkedIn, checking TrustPilot and their social media. Let’s consider the latter more precisely.
5. Check social media
Fraudulent projects don’t like promoting on legitimate crypto-related forums including Reddit as they know they will be unmasked by seasoned users. Rather, they prefer reaching out to the gullible audience on social media. There, they give many glittering promises but aren’t transparent on their team, roadmap, and work principles.
6. Verify suspicious claims of influencers’ support
Statements like “Vitalik Buterin supports our project” or “CZ hails our approach” raise trust, and scammers often use it. However, it’s easy to verify these statements on the internet, and if you find they are false, that’s an explicit sign of fraud. Question such claims particularly in case the project’s scale is incomparable with big figures such as Vitalik or CZ and you think it’s odd if they have even noticed it.
7. Check compliance with the law
8. Recognize empty claims
Most of the crypto projects, fair and fraudulent, claim they have great speed, usability, and security compared to their competitors. Fair ones provide extensive documentation and FAQs to prove these statements, while the fraudulent ones barely suggest any compelling grounds for their claims.
9. Make sure it’s not only about bringing friends
There is this type of projects that ask you to bring friends to get more profits. If that is just for a raffle or goes as a bonus — fine, but if there’s nothing more to this mechanic, it must be some type of a scam. A legitimate project always lets you profit without bringing more people in.
10. Don’t enter your passwords or seed phrases outside the platform where you use them
Here’s an example right away: whenever anyone besides the MetaMask wallet login page is asking you for your MetaMask password or seed phrase, be sure this is a scam. Even the MetaMask team won’t ask you for this information. Another thing to protect yourself is: always check you’re at the correct website. Legit platforms sometimes have fraudulent clones with one letter changed in their URL. Entering your login data at such a website may result in money loss.
Cryptocurrency scams prosper for two main reasons. First, the field is underregulated, and it’s relatively easy to build an attractive project, collect funds, and exit scams. Secondly, fraudsters capitalize on our unawareness: crypto newbies often miss the signs of a scam and ultimately lose their funds.
While you can’t affect the former, you can easily avoid the latter. Follow the tips above, do your own research, and you will never fall victim to those who profit from our greed, thrill, and unawareness.