Avoiding the most common scams in crypto
Worried about losing your digital assets to the increasing number of bad actors in the web3 space? Learn about the common schemes of scammers in crypto so you can spot and avoid them immediately.
Topics you should read before diving into this course:
At the end of the course, you will be able to answer the following questions:
What are the most common scams in Web3?
What can I do to avoid these scams?
Most common web3 scams#Copy URL to this article section
Most people dive into the world of crypto for financial reasons, whether that be to invest or to scam people. It can be quite intimidating for those who are starting out, especially since web3 is still a fairly uncharted territory. This also means that they are especially vulnerable to scams and fraud schemes.
If you are a beginner in the crypto space, this article will help you learn ways you can be scammed and give you tips to prevent it from happening.
Scammers and Fraudsters#Copy URL to this article section
Here are some ways scammers can trick you: :
1. Direct messages. This can happen when you allow strangers to connect with you through messaging platforms such as Discord and Telegram. Scammers would sometimes impersonate personalities or accounts to gain your trust.
Scammers pretending to be Merit Circle and sending messages with a suspicious link
2. Phishing sites. These are sites that imitate an official website by changing some characters (e.g. “4” instead of “A”) to lure people into encoding their login credentials.
Phishing sites obtain your account credentials by pretending to be official sites
3. Malwares. This scheme is rampant on the internet, especially when you download files from unsafe sources (also known as “online pirating”). Once a malware invades your device, all your data is at risk of being stolen and/or manipulated. This is why your seed phrase should never be stored in a device that has access to the internet.
Malwares invading your devices through files from unsafe sources can put your information at risk.
4. Airdrops. Scammers may attempt to gain your trust or infiltrate your account by sending you malicious airdrops of unfamiliar projects.
Investment Scams#Copy URL to this article section
Hacking your devices through suspicious links and sites isn’t the only way scammers can steal your assets. When you invest or buy tokens, you are also at risk from them.
Here are some investment scams and how they work:
1. Pump-and-dump. This happens when a group of people holding a large percentage of a token fabricate an increase in its value to tempt people into buying. Once the token is at its peak price (“Pump”), they sell theirs all at once to make a steep drop in the token’s value (“dump”).
2. Rug Pull. To earn people’s trust, crypto project developers usually “lock” their liquidity pool (i.e. LP, or the vault where people deposit their assets in order to form a market). This is to show participants that they would not be able to steal the tokens since they can’t cash them out or exchange them. A rug pull happens when developers don’t actually lock their LP, then later on run with its contents. This is dangerous because when the LP is drained, the tokens from the rug-pulled project lose their value.
3. Ponzi Schemes. This is likely to happen when a token’s only demand and utility comes from being purchased by new investors. When people eventually stop buying it, the value of the token drops, leaving people who invested late with worthless tokens.
4. Wash Trading. This is the result when a group of people buy tokens/NFTs from one another at a higher price to artificially induce a value increase. To illustrate, an NFT listed at 1 ETH will be bought by someone from the same group, or even the same person, at a higher price. By doing this, retail investors get tricked into thinking it has a high value.
Tips to avoid common web3 scams#Copy URL to this article section
You can minimize the risk of falling to any of these schemes by being informed. Here are some ways to avoid getting scammed:
Bookmark websites you frequently visit
Change your privacy settings on messaging platforms
Download from legitimate websites
Think before you click
Invest in a hardware wallet
Do your own research
Bookmark websites you will need to frequently visit#Copy URL to this article section
Bookmarking the official websites of platforms you frequently use isn’t only convenient but can also help you avoid phishing sites. Double check the URL of your crypto wallet and other cryptocurrency-related sites and pages you need and save them on the browser of your devices.
Saving Binance's official website as a bookmark in your device's browser
Change your privacy settings on messaging platforms#Copy URL to this article section
Being a part of an online community can provide you with good support as a beginner. However, not everyone you meet on the internet will have good intentions, especially when it comes to assets.
You may block the chances of being targeted by bots and bad actors (i.e. people who pretend to be personalities/moderators to get your information or send phishing links) by disabling direct messages from non-friends on your account. Most web3 projects and communities are on Discord and Telegram, but it would be safer to do this to all messaging apps you use for crypto.
Discord allows you to only give messaging access to people you are connected with
Only download from legitimate and trusted websites#Copy URL to this article section
Downloading from safe websites does not only keep your crypto assets safe. This also prevents malware from infecting your device/s and compromising your personal information.
Computers detect malwares from your files.
Think before you click#Copy URL to this article section
Scammers also use cheap tricks: disguising as a raffle draw you have won, saying that you were whitelisted for a secret minting period, and even putting ads on social media like Facebook about free NFT assets and token giveaways.
Remember that a huge portion of crypto scams happen once you click a hacker’s link. If it is too good to be true, it is probably a scam! Be smart and play it safe.
If possible, invest in a hardware wallet#Copy URL to this article section
Because the assets inside a hardware wallet cannot be accessed without the device itself, it adds an extra layer of security. You can also take your assets offline with this, so getting one would be efficient if you plan to hold tokens for a long time.
Hardware wallets, like Ledger, provide more protection for your assets
Do your own research!#Copy URL to this article section
The best layer of security you can provide your assets is being informed. Read and ask questions in credible forums. Stay up to date with web3 events as much as you can, and always weigh the pros and cons before investing in a project.
There is no way to fully avoid being targeted by these scams, but the responsibility of keeping your assets safe starts with you. Learn more about securing your assets here.
Cryptocurrency allows you to take ownership of your assets in your own hands, and this comes with responsibility. Learn about keeping your digital assets safe.
Learn about Two-Factor Authentication (2FA) as an additional layer of security for your digital assets.
Two-Factor Authentication can help prevent your accounts from being compromised. Here is a quick guide on how to set up your Google Authenticator for an additional layer of security.