Bitcoin Scams are on the Rise
Because cryptocurrency companies need money in order to create, the public sees them as well-funded, legitimate businesses. Unfortunately, even legitimate companies can be hacked, and scammers see this as an opportunity. “As an investor, you have to learn how to see through a whole lot of nonsense,” Akram Abi-Nasr, the founder of Middle East based start-up Monoloco, told me. “Blockchain is still new to people and there are scammers trying to take advantage of the hype.”
He cites CoinDash as a particularly flagrant example of this. Last year, the $33 million cryptocurrency company held a “dummy” initial coin offering (ICO), convincing would-be investors that the funds had already been distributed before CoinDash was even incorporated.
How to Spot a Bitcoin Scam
Bitcoin is incredibly hard to trace, which makes it attractive for scammers. But be careful when you’re dealing with bitcoin scammers. Some examples of bitcoin scams include:
Bitcoin mining or investment scams
As bitcoin mining can require lots of processing power, fraudsters go after miners with fake offers of paying off computers and then pocketing their earnings. Some scammers offer a one-time “free” investment by installing software on PCs to mine cryptocurrencies. These scammers may run ads on a website like Craigslist, or even advertise in the Google search results.
Virtual-currency mining scams
Another way fraudsters try to extract funds from unsuspecting buyers is to offer fake miners. Here, scammers ask victims to run their computers to mine cryptocurrencies.
Don’t Believe These Bitcoin Myths
But, before you decide, here are some cryptocurrency myths you need to know to protect yourself:
Myth #1: Bitcoin is the future.
Bitcoin is not the future, but it may have the potential to become a great way to use virtual currency. When you put the power in your hands, as Bitcoin users can do, you are going to want to use it.
Myth #2: Bitcoin is illegal.
If you’ve heard some people say Bitcoin is illegal, they’re not correct. In fact, bitcoin is fully legal. Bitcoin is decentralized, not illegal, and not taxed. There are some issues in regards to what cryptocurrencies can be used for, and regulation is a good thing to have, but don’t think that it’s illegal.
Not dealing with bitcoin scams may lead to your loss. Learn more about how to know what’s legitimate and what’s not.
How to Avoid Scams
Blockchain and digital currency scams can seem more prevalent than ever right now, but those scams will probably continue until more people become aware of them.
“Cryptocurrencies are an exciting and emerging technology with many positive opportunities,” Jirka Hyttinen, founder of Bitmainboom, a blockchain based taxi startup in Helsinki, told Digital Trends. “However, there are also a lot of negative aspects, and like any emerging technology, we have to learn how to deal with the bad as well as the good.”
Hyttinen pointed to the recent surge in interest of ICOs, which are stock market-like investment opportunities. These startups present themselves as special, and even legal entities, which is a mistake.