10+ Cryptocurrency Fraud and Scams You Need to Pay Attention to

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The most (un)common cryptocurrency fraud and scams you need to look out for

Cryptocurrency is not exactly a newfangled contraction; the idea of a decentralized digital asset was coined in the late ‘80s by David Chaum, the American cryptographer whose works ignited the computer science revolution that gave birth to Bitcoin, Blockchain, Altcoin, and a whole new way of looking at monetary transactions.

The Birth of Bitcoin

Ecash, the first form of cryptocurrency and Chaum’s brainchild, was launched in 1983 as an alternative to paper money. Digicash, the company regulating this novel ‘non-corporeal’ monetary asset, managed to raise over $10 million in a span of a decade.

The concept was sound and the idea of getting rid of traditional money appealed to the general public. And in 2009, a group called Satoshi Nakamoto launched Bitcoin, which was unanimously considered the first (and true) decentralized digital currency.

With the advent of a new era of non-bank-dependent digital currency, numerous Bitcoin alternatives were seeded on the market. Altcoins they’re called and, at the moment, there are over 4,000 of them in use.

Living the dream, right? Well, not my intention of casting a dark cloud over this brave new world, but wherever money’s involved, there’s bound to be someone trying to bamboozle a goose.

Cryptocurrency fraud, the subject du jour, has gained quite a foothold, with hundreds of thousands of people being swindled every day. Not exactly breaking news, but the ploys have become so intricate, that it’s increasingly difficult to tell apart the fake from the legit one.

Hence this little handy hand-guide will tell you all about the wondrous world of crypto scams and how to avoid them. Let’s start with a rundown of the most (un)common scams.

Cryptocurrency scams

As a rule of thumb, you should never accept crypto-trading with companies or startups that are not blockchain-powered. In layman’s terms, that means that all transaction data can be tracked and reviewed.

Furthermore, before committing to a company or another, you may want to review their credentials – look for status quo indicators such as adherence to initial coin offerings rules and digital currency liquidity.

That’s about it at a glance. Up next, we’re going to dive into the most common and uncommon cryptocurrency scams. Enjoy (or not).

Fake ICOs (initial coin offerings)

Here’s how ICOs are defined:

“An ICO is a type of funding using cryptocurrencies. Mostly the process is done by crowdfunding but private ICOs are becoming more common. An ICO is a quantity of cryptocurrency sold in the form of tokens or coins to investors or speculators, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ethereum. The tokens sold are promoted as future functional units of currency if or when the ICO’s funding goal is met and the project launches. In some cases, like Ethereum the tokes are required to use the system for its purposes.”

Impeccable textbook definition, don’t you think? But what does it really mean? Let’s water it down a little. Imagine the following scenario: assume, for a moment, that you’re running a tech company that has come up with an entirely new cryptocurrency management system or a crypto coin. All fine and dandy, but how on Earth are you going to raise enough money to streamline your idea?

Certainly, you can try to go through banks or call up some capitalist investors, but that would mean dividing or even giving up the ownership of your small business. Fortunately, there’s a better way to go about this – the ICO.

First, you will need to get the attention of some people willing to invest in your idea. Not so fast; to pull this off, you will also need a way to show your future partners that your idea is sound. You can do that by creating a crackerjack whitepaper.

It’s essentially the documentation that proves that your crypto idea works and is, of course, worth the money. You should also consider setting up a website to increase your company’s credibility.

The second step you should take would be to convince the interested partners to give you some of their money in exchange for a small amount of your ‘homemade’ currency.
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