How to Avoid Crypto Scams? A Beginner’s Guide

The Most Common Types of Scams in Crypto

Phishing

  • A link may look like a legitimate site but have a slightly different URL;
  • The website requests data such as private keys, that grants access to the funds in a wallet.
  • Do not open links or files in suspicious-looking emails or DMs. It is best to open a website from the URL directly or from a bookmark: search engines sometimes put phishing links on top as promoted results;
  • Do not enter sensitive data in an unreliable form, even in wallets. Sometimes scammers create fake crypto wallets and gain access to funds by asking the user to input their mnemonic phrase.

Social Engineering Attacks

Road sign with a pedestrian figure with a sticker saying “TRUST” plastered over it
Photo by Bernard Hermant on Unsplash
  • You are being asked or persuaded to make actions you may normally choose not to do;
  • The persuasion comes from someone who masquerades as a party you are inclined to trust — for example, a support service member;
  • Don’t trust, verify — one of the main principles of crypto! For example, if you are approached by someone who claims to represent a service, it wouldn’t hurt checking if they are really affiliated with it;
  • Take responsibility for your own choices. When things get sketchy, if you have the luxury to dip out, use it.

NFT Scams

  • The token seems to have an overly inflated trading history. This is usually a telltale sign of a token which price has been inflated by wash trading;
  • The token comes from an unverified source. Like suspicious files, it can contain a script;
  • The pop-up window or the web page you’re interacting with requests too much information. Anti-phishing precautions apply here, too!
  • Perform due diligence. It is best to check with the artist themselves whether they are the ones selling the tokens and on which platform;
  • Keep up with the news. Hacks and leaks are usually promptly made public;
  • Blockchain literacy is your friend. If you link back trades of an NFT to a few addresses flipping it between each other — congratulations on blowing a wash trade’s cover.

Pump-and-dump & rug pull

  • Sometimes anonymous developers do not hide behind aliases for the best of reasons;
  • Be wary when “star power” is involved: there have been numerous cases when influencers were paid to shill a coin and were with the insiders selling on top;
  • Excess centralization. Squid Game token team managed to keep so many investors holding the bag simply because there was no way to cash out.
  • Another important principle of crypto is Do Your Own Research, and for a good reason. More often than not, a rug pull attracts investors by ponzinomics that are simply too good to be true;
  • Ignore the shillers. It is true that we are more likely to give attention to the name we have heard, but think about who is keeping the name in the spotlight;
  • Keep an escape plan in mind and try not to ignore the red flags.

How to Avoid Being Scammed?

Conclusion

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