Published Apr 19, 2022
By Qredo Team
Crypto Hygiene 101
Crypto is often portrayed as a financial wild west, an industry that is creating a host of opportunities, as well as its own new set of pitfalls.
Like all innovations, when you engage with cryptocurrency you also open yourself up to risks.
And we don’t just mean price swings. Sadly, there are also nefarious actors out there who are willing to get really creative to try and take some of that hard-earned crypto out of your pockets.
As technology advances, so do malicious actors. Crypto criminals are getting more inventive in how they obtain funds and compromise crypto wallets. It's important to stay vigilant and protect your digital assets so you don’t fall victim.
Here are 5 of the main types of scams, grifts and schemes you need to be aware of in the cryptocurrency markets.
1) Pump and Dump
The pump and dump scheme is one of the oldest financial scammer tricks in the book, and the scheme has gained a new lease of life with the advent of cryptoasset markets and their potential for massive price swings and a huge audience to capture.
These outfits work by first pumping a certain coin; hyping it up on social media and advertising the project in order to push the price up to a higher level. This is after those on the inside have already gotten their share at a much lower price.
Then comes the dump. Insiders coordinate to sell off their assets at or just before the peak of the market, leaving unsuspecting investors to deal with the fallout and inevitable fall in the price once the hype dies down.
2) Rug Pulls
Rug Pulls are a type of scam that have proliferated throughout the DeFi space, and essentially involve the developers/ owners of a fund or project running away with any and all of the funds they have been given by investors.
DAOs, dApps and even some exchanges have fallen victim to these nefarious schemes, with management taking advantage of the lack of regulation or oversight in parts of the industry to dash off with investors’ money.
3) Social engineering scams
Ever had a seemingly legitimate looking email land in your inbox purporting to urgently need some sensitive information?
Or maybe you have gotten a call from an unknown number trying to pressure you into handing over personal details?
Social engineering scams are unfortunately widespread, and the scammers themselves have expanded their horizons, from impersonating the tax authorities, to working their way into the crypto universe.
These actors attempt to use a range of strategies ranging from scare tactics to romance scams to try and get users to part with information such as private keys, which can then be used to steal assets with little recourse for those affected.
4) Airdrop scams
Airdrops have become a popular way for crypto projects to build some momentum within the community by handing out free coins to early users. These act both as an asset investment and typically give some sort of governance claim or similar authority to the owner.
One such recent airdrop scam involved dropping fake tokens into users’ crypto wallets. When they tried to transfer those coins onto an exchange, they were redirected to a phishing website which enticed them to reveal account details which the perpetrators could then exploit.
5) Phishing
Phishing scams are another classic type of scam which have found a new lease of life with the development of the cryptoasset market.
Direct crypto phishing scams often involve getting victims to click on an email link or similar where they are directed to a website which entices them to part with their private keys.
Stay Safe
The world of digital assets can be wonderful, but — like all things online — its potential brings with it significant risks of which users and investors have to remain aware at all times.
Looking for a secure place to store your cryptoassets? Set up a Qredo Wallet here.