Cryptocurrency technology is developing and attracting new investors at a faster pace than ever before. As of January 2022, more than 8,000 coins now exist on the market, with dozens more being launched each month. Though it can be exciting to join such a fast-paced, rapidly expanding business environment, it’s unfortunately also the sort of setting in which scammers thrive.
Why is that? Put simply, many crypto investors consistently demonstrate their willingness to gamble on highly speculative assets such as digital currencies. This courage to venture into uncertain territory, however, makes such investors prime targets for cryptocurrency scams. The accelerated pace at which crypto technology develops means that even experienced investors have to work hard to stay ahead of bad actors.
The existence of these fraudulent coin operations can make entering the crypto trading world intimidating for beginners. How can they walk the line between capitalizing on promising investment opportunities and keeping themselves safe from sketchy offers and tokens? While there’s no fail-safe way to tell if a crypto or blockchain-related project is the real deal, the following tips can help any investor minimize the risk of falling for a scam:
Go Over the Project’s Whitepaper
A cryptocurrency’s whitepaper should be your go-to source for fundamental information on the project as well as clues about its legitimacy. A well-made whitepaper comprehensively maps out the project’s background, objectives, anticipated issues, and implementation plan.
Studying the Monero whitepaper, for instance, will give you an idea of how an XMR wallet is designed to enable completely private, anonymous transactions using the coin. It also explains what public keys and private keys are and how these operate within the Monero network.
To properly analyze a whitepaper, start by reading the document as thoroughly as possible from start to finish. The information it offers should help you understand what differentiates this particular project from its competitors, what its particular metrics for success are, and how it intends to reach its goals. It’s also a good sign if the whitepaper contains supplementary resources on the project, such as information on any legal concerns, financial models, SWOT analyses, and others. All this information can go a long way to helping you make a more informed decision before putting any of your money into a cryptocurrency.
That said, it’s best to avoid dealing with companies that don’t offer whitepapers. The lack of such crucial documents may indicate that the project’s owners don’t have a solid plan in place or that the coin in question may be a vehicle for a fraudulent investment scheme.
Look Up the Developers
Development and administrative teams are the heart and soul of any cryptocurrency endeavor. Well-established developers and other big names tend to dominate crypto spaces, and the support of these superstar personalities often becomes a driving force behind the success of new projects.
For this reason, many scammers invent fake founders with increasingly long lists of falsified credentials to prop up their own operations. So, before investing in any coin, do in-depth research on the individual members of its dev team. Comb major social media outlets for information on particular developers, and consider it a red flag if you can’t turn up anything that looks substantial.
Even if you do manage to find a founder or dev member’s profile, it helps to peruse their account for signs of suspicious activity. If a cryptocurrency project’s account rarely posts or interacts with their audience despite having thousands of followers, this may be a sign that the profile page isn’t being run by a real person. Additionally, a good percentage of the profile page’s followers may actually be bot or dummy accounts made to inflate the page’s follower count.
Verify Any Endorsements
Because big names carry so much weight in the digital currency sphere, it’s also common for scammers to attach the names of celebrities and other influential personalities to illicit projects without prior approval. Some highly techy cybercriminals have even managed to engineer fake videos and other promotional materials featuring these prominent people in an attempt to mislead novice investors.
The vigilance you exercise when identifying fraudulent developers will also serve you well against this highly deceptive tactic. Take all endorsements of new crypto projects with a grain of salt, and verify the involvement of all named personalities. In many cases, making the extra effort to dig a little deeper should help you efficiently weed out bogus endorsements.
Double-check All URLs
The vast majority of online scams involve tricking users into clicking dummy links or visiting unsecured websites. A URL that begins with “http://” rather than “https://,” for example, lacks encryption protections and is guaranteed to be unsafe. If a lock icon doesn’t appear next to the URL on your address bar, that’s another immediate sign that you’re on an unsecured website.
A swindler might also falsify the URL of a seemingly reputable site in a phishing email by changing just a character or two. Some examples of this include replacing a lowercase L with a 1 or an uppercase O with a 0.
These changes can be difficult to spot if you’re not careful, so take a moment to read web addresses all the way through and think before you click. You can also hover your cursor over any links in a message or email to check the destination URL without actually clicking on it.
Staying safe in online spaces requires you to be vigilant and proactive about verifying any information you come across, and the cryptocurrency scene is no exception. While it might be more time-consuming to approach crypto with this much caution, doing so will surely save you a lot of grief in the long run.