How to Avoid Three Common Cryptocurrency Scams
Billionaire investor Carl Icahn is noted as recent as 2021 saying that he is getting big into cryptocurrency because he wasn’t missing out on “one of the biggest transfers of wealth in modern history.” And he’s right.
No other time in the history of mankind could someone download an app on a handheld device, transfer “digital money” to the app, tap a graphic button with the word “buy” and a month or two later, 1.5x, double, or even quintuple their money just a few months later. Not without risk of major losses of course. And huge financial rewards bring scammers — people who lie and make false promises to you and take your money without ever delivering on the promised good.
There is a big difference between a scam and a legitimate opportunity that just doesn’t work out. And it can be tough to tell the difference sometimes.
So in this article, we will look at three common cryptocurrency scams. The scams range from simple to more advanced. And while it’s possible for incredibly skilled computer hackers to steal from the average person if they wanted to, chances are, it wouldn’t matter whether your assets were in “digital cash” via a bank app, or whether they were in cryptocurrency.
Arm yourself with some of these basic ways to protect yourself, and you will gain a better understanding of cryptocurrency. And when you have a better understanding of anything, you become more confident in “working with it.” So let’s get started.
1. Stealing Your Keys and Wallet
DDTFGxG7B9ixdDHZggGLRWWxSsqu4sbFkS — What the heck is that? It looks like a hacker’s code! Uh oh! Am I getting scammed right now just looking at scary complex alphanumeric text?
That’s the address to my Dogecoin wallet. For the sake of this article, we use Dogecoin because I have personal interests in Dogecoin, but this is not a recommendation of Dogecoin in any way.
I’m sharing my wallet code to prove a point, that it is generally safe to share your wallet. But before we do let’s talk about one of the key problems with sharing your wallet address.
The major problem when it comes to sharing your wallet address is if your wallet get’s “really fat” and flush with cryptocurrency. If you are constantly posting your wallet address online, and you have a lot of money in it, then people can basically tie that address back to you.
All addresses are technically “publicly visible” because that is the nature of “the blockchain”. But when people know exactly who owns that specific address, they can follow your trades. The only thing you lose if you post the wallet address for your coins is a bit of anonymity.
We also need to know “why” anyone would even want to share their cryptocurrency publicly. Sometimes, it’s a way to seek donations such as an artist or video gamer who wants to accept cryptocurrency on their video channels. If you are a major influencer in the cryptocurrency space for example, you might want to ask for donations on your content and post your address publicly. You can always have a secondary wallet too.
And it would take a very sophisticated hacker to “steal your cryptocurrency” just based on your wallet address. And if they could steal your cryptocurrency, they are probably good enough to steal from any bigger fish by knowing an address. It is incredibly complex and the rewards typically wouldn’t outweigh the consequences.
So moral of the story thus far, it is SAFE to share your wallet address with others, even though it looks intimidating for someone who is not computer savvy. Otherwise, how can someone send you cryptocurrency?
Now let’s quickly explain this real quick.
Whenever you open a cryptocurrency wallet, think of this example using your physical wallet. Imagine a physical wallet and as if DDTFGxG7B9ixdDHZggGLRWWxSsqu4sbFkS was more an address like 5555 Five Lane, Fivetown, CA, 55555. 5555 was where you had your REAL physical wallet, except it was stored safely and locked. But people like friends, family, or people you make trades with could send cash or other assets directly to your wallet, and you would receive it.
That’s basically what DDTFGxG7B9ixdDHZggGLRWWxSsqu4sbFkS is. That address to your wallet. But no one can “take” your wallet address. UNLESS, and here’s where the common scam comes in, you give them the “secret key” to claiming your wallet and all the assets in it.
A good wallet will require you to enter passwords and have secret codes, to “claim ownership” of it. Usually in the form of 10-16 different unique words which you will want to store somewhere safe.
For example, you might get a list of words when opening a wallet like:
1 justice 2 text 3 distribute 4 talented 5 get 6 cat 7 soil 8 drown 9 tree
10 climate 11 trench 12 strike 13 language 14 wagon 15 peasant 16 profound
No one should EVER NEED to know those words to send or receive cryptocurrency so never give that passphrase out. They are the keys to your wallet’s “hidden address.” (Special note here — if you are using a wallet that does not allow you access to your “private address,” some experts recommend considering another wallet that does).
So basically, your wallet address DDTFGxG7B9ixdDHZggGLRWWxSsqu4sbFkS is just a wallet for one specific cryptocurrency, within a “bigger wallet.” And that bigger wallet contains multiple wallet addresses for different assets. Like one for Dogecoin, another for Bitcoin, another for Polygon, another for Ethereum, and many more (depending on your coin).
Sharing your wallet address is pretty self-explanatory. You access your wallet, go to the cryptocurrency you wish to “receive” and usually you just tap receive, and it should take you to a copy-paste address.
BUT WARNING — If someone asks you for your “BIG WALLET’s” address, and you need to access more keys and stuff, that’s something to basically shut down instantly, and run the other way.
No one should ever need the “key” to all your wallets except you. It’s like giving someone your social, plus driver's license, plus voice, plus giving them access to your telephone number, and bank information. Even you will rarely need that key — only in situations where you need to change computers, or you lost passwords and need to reaccess it or something.
So to repeat standard wallet address is ok to share, particularly as a way of receiving cryptocurrency. But NEVER give out your “full wallet’s” credentials. If someone is demanding that you do anything more complex than simply send them the “receive address” so they can send cryptocurrency there for exchange of something, it should send instant red flags.
And now let’s look at the REVERSE of those scams.
2. Unwittingly Handing Your Money to Scammers
Hacking and trying to convince someone to give you more information than necessary can be a complex task. That’s why modern cryptocurrency scammers pull off virtual cons.
And here’s how they do it. And remember this, if you want to receive cryptocurrency, you only ever need to share the “receive address” of your wallet where the cryptocurrency needs to go.
If you need to send it, it’s the same process, in reverse. Someone else must give you the address to their designated cryptocurrency wallet, and you need to “send it” to that address.
The basic form of this scam is someone posting online something like “send me cryptocurrency and I will promise you 10x your money back in one week!” And from there, the scammed sends them money only to never hear from them again. The situation can change of course. But the fundamental is the same — the person who was scammed sends money for something they were promised but never received after the scammer runs away with it never being discovered (unless you're able to track the person who publicly posted the address).
But here’s where those scams get even more complex. Hacker’s are hacking the social media accounts of famous public figures with millions of followers, and quickly “request cryptocurrency” to get huge inflows of cryptocurrency from their followers who willingly give their cash thinking the offer is real.
You can’t help public figures protect their social media. They have to do that themselves. And it may be difficult to tell the difference between a real celebrity raising cryptocurrency for whatever reason, and someone who hacked the account and is posting ways to take your money for the wrong reasons.
But ultimately, knowing this common scam will set you ahead in terms of understanding cryptocurrency.
3. How Certain Cryptocurrency Coins Can Become Scams
There are new cryptocurrencies popping up all around us. If you are not familiar with them, let’s take an unrealistic example.
Imagine if people in your country were allowed to create different types of currency from their living room. They need investors who will help fund the materials, and then they need people to adopt, use, and trade the currency, so they sell it to people who hope it will be worth something later.
Except unlike random people creating “physical” currency in the above example, people cryptocurrency with real use cases. There has to be a reason for people to use a cryptocurrency in order to be valuable — even if it is just for trading.
So looking at new cryptocurrencies, you have the big ones who have been around for a while like ETH, BTC, LTC, etc… But every day, people around the world are adding new altcoins or alternative tokens, or sometimes called s*&%coins.
They can build a community around it, find some initial funding, and sometimes they make something worthwhile out of it after they get lot’s of people to put their trust and money into the new crypto idea.
But the truth is most cyptocurrency’s fail. That doesn’t mean they’re all scams. But depending on the algorithms involved with a cryptocurrency, and the people involved, some of them could result in “pump and dump” schemes.
For example, someone starts an altcoin, convinces a handful of influencers to promote their currency, the currency rises up a lot in value, and the people who started it dump their coins for cash leaving everyone else holding the bag of a coin that has no community to grow it. That’s why most cryptocurrency enthusiasts won’t recommend any cryptocurrencies outside of the top 20 on coinmarketcap with less than 1 or 2 years on the market.
The length of time and the market cap of the currency is used as a metric to determine trust.
And these are three ways people have been scammed with cryptocurrency.
Want to learn how to Mine Dogecoin? If you can learn to mine one cryptocurrency, you can learn to mine just about any cryptocurrency. And it’s as simple as getting your computer set up with the right software. Check out our guide here: https://dogemundo.com/mine-dogecoin