What is a scam?
“Scams in the cryptocurrency space are hard to prove," said Peter Van Valkenburgh, research director of Coin Center, a nonprofit that promotes digital currency and blockchain technology. "Cryptocurrency proponents tend to view them as annoying, but small, whereas I see them as predatory.”
The term "cryptocurrency" refers to an entirely new type of currency, one that runs on a network that cannot be hacked or stolen. But there are millions of scammers out there who try to take advantage of investors' naivety. Often, they try to sell "investment opportunities" with no purpose other than to trick people out of their money, or convince them to fork over a huge amount of it.
How scammers use the anonymity of the internet
When cryptocurrencies first arrived, scamming was fairly common, often featuring "phishing" messages that, if you were tricked into visiting a site or downloading a piece of software, gave scammers access to your online accounts. In 2018, however, things have changed: Crypto scams can take many different forms, from getting a fake bitcoin address to a fake Bitcoin ATM in the background.
"Unfortunately, in the digital realm, the only surefire way to be protected from cyberattacks is to avoid them in the first place," says Brian Wolff, co-founder of the nonprofit Bay Area Bitcoin. "For those looking to invest, there's a lot to be learned from the story of Charlie Shrem. After being charged by U.S.
Why cryptocurrencies are still unknown territory for many
Scam websites can also use claims that are vague and non-committal. The headline for one of the sites I visited claimed "Cyan Company Brings the World its First Ultra secure, Anonymous Currency – Cryptocash." The headlines on the websites that I visited did not directly tell you that the cryptocurrency these companies were selling was a scam.
"Oozing with more and more problems, cryptos have moved to the next level with the latest and most controversial being crypto-bulls," reads the description of one of the fraudulent sites I came across.
Cryptocurrency isn’t known for the cleanest codebase in the world. Scam cryptocurrency companies and startups are no exception, and there are myriad reasons to be skeptical.
Steps to take if you're looking into digital cryptocurrency companies
Reach out to companies for an explanation of how their digital currency works. You want to understand how it's divvied up and how transactions take place. Is the company using the latest version of their product? Have they experimented with a different blockchain in the past, and how did that version fare?
Before you decide on whether to get involved, check out their product: You should read the whitepaper on the product and try to find people to get to know about the product from a real, personal perspective.
Compare the cryptocurrency features of the company to its competitors.
Keep in mind that blockchain technology is still new and new companies are all the rage. That means your competition might be getting bigger by the day, which can put you at a disadvantage.