Bitcoin burst on the scene in 2009 bringing about the usage and exchange of cryptocurrency. After that watershed moment, blockchain news, including specifically Bitcoin news and Ethereum news, proliferated. Since then, tech observers and adventurous investors have sought out Blockchain stocks, including Bitcoin stocks and Ethereum stocks.
Notable individuals in the tech industry have commented on cryptocurrency, and Bitcoin in particular. In 2014, the Eric Schmidt, Executive Chairman of Google, said, “Bitcoin is a remarkable cryptographic achievement. The ability to create something which is not duplicable in the digital world has enormous value. The Bitcoin architecture, literally the ability to having these ledgers that can’t be replicated is an amazing advancement.”
The notable monetary success of cryptocurrency and Bitcoin stocks has attracted the attention of opportunist scammers.
Bitcoin’s price has increased significantly since its inception, ultimately reaching billions of dollars in market capitalization. Like in any other booming industry, cryptocurrency, and specifically Bitcoin, has attracted scammers. However, that should not deter investors from pursing Bitcoin. They should, rather, be aware of how an investor can protect himself or herself. Bitcoin scammers target unprepared victims, who usually lose their Bitcoin as a result.
The key to fighting cryptocurrency scammers is to be aware of their tactics and how to best defend yourself against them and protect your Bitcoin investment.
One type of scam preys on potential victims’ frugality. On social media, you might see a link promising Bitcoin for 5% under market value. If it looks to good to be true, it almost always is. This is a trick set up to try to dupe you into using a fake exchange.
Before you visit any exchange site, you should make sure that it is HTTPS secured. This ensures that the web traffic is encrypted and secured. If it is just HTTP, consider this a red flag and do not conduct business on this site.
Also, be wary of any exchanges offering Bitcoin for PayPal. On these sites, you might see a web form to enter your PayPal information and an amount to sell. After submitting this information, you will be given a QR code to which you are supposed to send your Bitcoin. However, the money will likely never arrive.
Fake Bitcoin exchanges are designed for temporary set up and move to new domain names frequently.
A lot of these fake exchanges exist for a short amount of time. They will appear, disappear, then reappear with a different domain name later.
Bitcoin users need to be aware of fake Bitcoin exchanges; they also need to be aware of fake Bitcoin wallets. Identifying fake Bitcoin wallets is a little more difficult than spotting fake Bitcoin exchanges. (To learn more about choosing a Bitcoin exchange, read How to Select a Bitcoin Exchange.)
Guard yourself from other cryptocurrency scams such as fake Bitcoin wallets.
Unlike Bitcoin exchanges, Bitcoin wallets are designed to store, not buy or sell, the cryptocurrency. Fake Bitcoin wallets are typically scams intended to allow malware to infect your machine (phone, computer, etc.) with the intention of stealing your passwords or private keys. You can protect yourself against fake Bitcoin wallets by using ones that are proven to be trustworthy and reliable. Bitcoin recommends its own, official Bitcoin Wallet for both desktop and mobile users.
The same tip we gave with respect to using Bitcoin exchanges with HTTPS applies to Bitcoin wallets as well. HTTPS offers users assurances that the Bitcoin wallet will be secure. However, be wary of wallets with names or sites that seem to be impersonating reputable Bitcoin wallets.
Outside of obvious traits, it is at times difficult to determine whether a Bitcoin wallet is safe and trustworthy. It is a good policy to research Bitcoin wallets and to ask people in the Bitcoin community whether they have used, or even know of, a specific Bitcoin wallet of which you might be uncertain. The Bitcoin subreddit and Bitcoin forum are also good places to ask other Bitcoin users for their input and feedback on specific Bitcoin wallets.
Review the experiences of other cryptocurrency users or perform your own Bitcoin research to protect yourself from scam artists.
You do not have to reach out to other Bitcoin users for help; you can do your own research. For example, if the wallet is a downloadable client, be sure to check the site for malware, a common scam. VirusTotal, and other similar sites, are great resources for checking executables to determine if they contain viruses.
Phishing is another common scam that can impact Bitcoin wallets. This is when a nefarious web programmer tries to trick someone into thinking that they have accessed a trusted company or website, which is in reality a fake site posing as something that it is not.
Usually, phishers contact their potential victims via email or through a fake web advertisement. Individuals see these ads, and they go to the website, which can end in their machine contracting malware, or even losing Bitcoin through a fake sale. To be safe, implement a general policy of never clicking through links from unknown senders or that seem suspicious.
These are just a few ways in which you can avoid fraud when using Bitcoin. By being cautious and keeping up with the latest Bitcoin news, as well as the latest news about malware threats and Bitcoin scams, you can avoid fraud.