Bitcoin scams are one of the hottest topics of discussion in today’s time. Up until now, the whole world was going gaga over the benefits cryptocurrencies like bitcoins have to offer. But suddenly, crypto investors are trying to spot the rotten eggs to save themselves from falling prey to a bitcoin scam.
This situation has arisen due to several reasons. Some common causes are as follows:
- Little understanding of bitcoin gives an opportunity to scammers to make false promises and get away with it
- In the crypto world, accounts are not connected to the real world. That makes identifying the real identities of people difficult. Scammers take advantage of this feature as they do not get caught after stealing bitcoins.
- Bitcoins are not backed by any central authority like governments or central banks to watch over and regulate them. This makes it easier for scammers to steal bitcoins without any fear.
Pyramid and Ponzi schemes
Pyramid and Ponzi schemes are investment frauds that have cost many people their hard earnings. These two schemes are somewhat similar; they promise high returns with little risk to investors. Many people fall prey to these schemes in the hope of extraordinary profits. Now, let’s take a closer look at what Pyramid and Ponzi schemes are:
This scheme is structured as a pyramid in which the first recruiter is at the apex of the pyramid. The second recruiter is required to pay some amount to the first recruiter. To get back the amount of money invested by the first recruiter, he has to get more people under him. Each person who comes under the first recruiter also has to invest.
The problem with this scheme is that the recruiter often deceives people by making them believe that by investing money, they will get high returns. Also, this process also cannot go on forever; as a result, the pyramid cannot sustain itself. This leads to a loss for all the people at the bottom of the pyramid who invested in this scheme. This scheme is illegal in the US and most other countries around the globe.
The structure and working of a Ponzi scheme are similar to that of pyramid scheme, with the schemer at the apex. The only difference is that you will only be asked to invest in something and the rest of the work will be taken care of by the schemer, unlike in a pyramid scheme where every member has some tasks assigned to them in order for them to gain profits. The returns are promised to be given later.
Bitcoin scammers have been fleecing people from a very long time with these types of schemes. They are using such schemes to deceive people and carry out fraudulent activities. As people are still not well versed with the bitcoin basics, scammers find it easy to convince people to be a part of this scheme and accomplish fraudulent activities.
You can avoid falling prey to such schemes by being careful about the following if:
- The schemes seem to be unsustainable
- It resembles a Ponzi scheme
- A company that is offering you schemes is not registered with any credible authority in your country
This is the most popular way by which scammers can commit fraud with people. Fake ICOs promise people a newly created crypto coin that has “tremendous potential” or “exponential growth” in the near future. Since a lot of blockchain companies are coming into existence with new and exciting projects, scammers find ICOs a safe way to fool people. They do so by creating fake websites providing ICOs and instruct users to deposit crypto coins into their cryptocurrency wallets. But it is possible to spot the genuine ICOs from the fake ones if:
- You research whether a particular crypto coin has potential if growth in the coming time.
- You go through the white papers, review the team, board members, and investors associated with the venture.
Cloud mining schemes
Mining is a way one can extract bitcoins without buying or exchanging them. All bitcoin miners need to do is secure a bitcoin transaction by solving tough mathematical algorithms. Miners are offered bitcoins as rewards from time to time for solving complicated math problems that arise during the transactions.
Many companies offer limited server space to miners as bitcoin mining requires a lot of computational power, electricity, and eventually money. So, companies charge a small amount as an investment for providing server space and rewards miners with bitcoins for solving mathematical algorithms. Ideally, as the difficulty of mining increases, the investment the miners make should be proportional to the returns. But if the investment returns small amounts each time, it is a sign of a scam. Also, scamming companies are not transparent about the actual costs, and the returns start to diminish. As a result, miners lose a lot of money and get nothing in return. The only way to avoid such a scam is being vigilant towards mining schemes. If a company seems to have a good track record and is offering proportionate returns and investments, it may be genuine. If this isn’t the case, take a step back!
There is no way to get rich quickly. Bitcoin scammers find a way to fool people with the get rich quick schemes. Yes, acquiring cryptocurrency seems to be a good investment but only when done right. Crypto investors need to have bitcoins basics in place before investing. Also, before investing in cryptocurrencies, be very sure the source is a legitimate one. Don’t trust schemes that promise you bitcoins unless you have researched them well. Furthermore, never engage with any transactions and trading platforms via social media as it is a playground for cybercriminals.
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