It is a natural consequence of the complexities that some participants in the Ethereum and cryptocurrency industry may engage in fraud. Moreover, you will get live customer support. Unfortunately, fraudsters often operate to maximize their gains at the expense of others. Let’s discuss four common types of fraud scams happening in cryptocurrency ether, which can be leveraged against potential victims, and how to protect yourself from these cons.
The four types of frauds in the ether are:
1. The Pump & Dump – This tactic involves selling excessive quantities of an asset (in this case, ether) to create a rapid price rise. Once the price rises, the fraudster sells the asset at increased prices. Conversely, once the price drops, the fraudsters sell it at a loss for even more profit (a “pump and dump”).
2. The Ponzi scheme – A Ponzi scheme has multiple participants making promises of high returns to investors for their investments, which are promised to be paid through more investments by new investors. The fraudster can then pay out old investors with new investments from new investors. The Ponzi scheme can keep working as long as there are new investments.
3. The Pyramid Scheme – This is a 3-stage operation involving three parties: one person who promises a high return to contributors, another party that makes contributions, and a third participant who will distribute the money among contributors (either publicly or privately). This scam typically never pays out to the contributors.
4. Cloud mining schemes involve fraudsters advertising an investment opportunity, not on an official exchange. In many of these scams, the fraudsters do not mine either. Instead, the victim sends money to “cloud mining” companies to rent mining rigs (hardware), which can provide them with a profitable mining venture.
Cloud mining scams are currently the hottest ones, as these scams will lure you to invest in a particular platform to make easy money. Most fake cloud mining companies come up with a fake dashboard and a fake number of miners operating on their platform. To check whether the cloud mining service provider is legit, check their roadmap and the development team behind the platform. For example, if the company has a good development team and a proper roadmap, check whether the hash rate dashboard is legit.
The following guide is aimed at new ether users and is intended to help protect users from the most common scams in the industry:
Now that portion mentioned above has defined four common types of ether fraud, let’s look at how you can prevent yourself from being scammed in the ether ecosystem.
Prevent scams in the ether
1. Be selective when looking for information and make sure that trustworthy sources have written the articles you read. Many fraudsters often publish articles with domain names that resemble reputable professional media, such as news sites, community sites, etc., to trick others into believing the content of their site is legitimate.
Always check a publisher’s credibility and transparency before engaging with them. For example, many cryptocurrency forums subjected to ether provide fake information regarding a particular event. Also, try to lure people by offering fake bonuses and schemes.
Usually, these forums and websites perform scams under the name of airdrop and freebies. Undeniably airdrop is an utterly legit phenomenon in the cryptocurrency ether. Still, before falling into any trap, you must check whether some legitimate sources are providing any airdrop. To cross-check, you can follow the social media handles of the Ethereum developer and have a safeguarded venture in the Ethereum ecosystem.
2. Invest what you can afford to lose and always keep your Ethereum wallet safe and secure on your computer or mobile device. All transactions are published on the network – ether or any other smart contracts. At no point should your private keys be stored in online internet-connected storage unless you are on a reputed cryptocurrency exchange or other trading platforms.
3. Make use of a hardware wallet. If you are investing a lot of ether, it is highly recommended that you should keep your ether offline in a hardware wallet. It will help to keep your ether safe if there is any case of cyber-attack or any other security breach.
4. Always research the ICOs you are interested in participating in – particularly their authenticity and legitimacy before investing. ICO information should be on an official website before investing.
5 Avoid making large transactions as fraudsters are likely to harvest your personal information and hold on to your funds.
6. If you receive an e-mail with a link, even if it sounds too good for the real deal, do not click on it, and never enter your personal information. Never trust anyone who asks for any information from you.
The information contained on this page is provided on an “as is” basis with no guarantees of completeness, accuracy, usefulness, or timeliness. As the information contained on this page is provided by an independent third-party content provider and hence there are no warranties or representations in connection therewith.