- User Guide to Cryptoverse
Part I — Scams and Hacks
Scams and Hacks
While cryptocurrencies are considered the wave of the future with more and more retailers opting to accept payment in the form of bitcoin, there are also basic precautions that all users must undertake. With the rise of any new digital trend, inherent risks are part and parcel of the overall experience. Cryptocurrencies are certainly more appealing in the way that it makes traditional banking processes obsolete and bypasses many of the issues faced today by antiquated financial practices. In this guide, the various risks will be observed with recommended precautions offered. A closer look at the differences between scams and hacks will also be elaborated upon.
Hacks and scams witnessed in the Cryptoverse have seen consumers being warned of possible risks from buying, trading, or holding virtual currencies. Some of the Cryptocurrency’s common warnings that have been shared widely include:
- The high potential of losing your money if the exchange platform collapses
Money may be stolen from your digital wallet or your wallet may be hacked
What are the Basic Cautions One Should Have When Dealing with Crypto?
Cautions when dealing with crypto
Cryptocurrencies are anchored on Blockchain technology. Blockchain is a decentralized, database-like system very transparent to all the nodes in the network. Participants in the Blockchain have a consensus mechanism to agree on the manner and content to be included in the network. Blockchain is a decentralized protocol that distributes a database across a number of nodes, establishing the consensus mechanisms for past, current, and future transactions.
Bigger blockchain networks are very secure, however, some smaller blockchain networks can be hacked. Here are some basic cautions to be aware of:
- Fraud and Cybertheft
Online security remains a big issue in the crypto industry. It is increasingly getting flooded with hacks, scams, and frauds. Some exchanges have turned out fake, some exchanges are hacked. Many reports mention buyers losing their investments on fake exchanges, real exchanges getting hacked, etc
- To be aware of your country laws and regulations
All of the crypto projects are regulated according to SEC and FinSec regulations in addition to the local laws. It is very important for the users to be aware of the regulations of your own country
- Complexity to End Users
Blockchain technology is complicated, there are plenty of cold and hot wallets, some of them are getting hacked, some of the legitimately looking apps are fake. The complexity of the crypto business makes it more difficult for the end-user to master its operations and appreciate the benefits.
What are the Main Differences Between Scams and Hacks?
Scams and Hacks
While the end goal of scams and hacks are relatively the same, to separate you from your hard-earned cash, the methodologies applied to differ. Hacking and scamming are two terms you’re most likely familiar with, but you may fail to clearly tell the difference. The latter is often referred to as phishing. Both crimes harbor the intention to defraud someone or a company of its money or important information.
Hacking exploits gain of unauthorized access to information, especially on a computer system. On the other hand, scamming or phishing refers to masquerading as a trustworthy source to lure and bait a user to surrender sensitive information that is then used against them. The information is not always limited to username, password, or credit card number.
Hackers can at times rely on phishing to obtain personal information that will facilitate their break-in. The skill of hacking is what sets it apart from the rest of online frauds. Hacking can also be done for the greater good. ‘White hackers’ often spend countless hours trying to find and advice on fixing security holes before real bad guys do.
Nonetheless, hackers too keep coming up with new clever ways of gaining unauthorized access to information. Usage of email links that appear to be credible has illegally succeeded in collecting tons of personal information from unknowing persons.
A 51% attack on a blockchain implies or group of network participants trying to control more than 51% of a network’s computing power, hash rate, and mining power. The person or group in control blocks new transactions from taking place or being confirmed. Several blockchains like Bitcoin Gold (BTG), Verge (XVG), and Feathercoin (FTC) have suffered 51% attacks. 2018 was notably one of the worst years that registered such experiences.
Attackers might use the attack to reverse transactions that have already taken place in a blockchain. However, the probability of a 51% attack occurring on a Bitcoin Blockchain is rare because an attacker would need hashing or computing power superseding that of millions of other miners worldwide.
Man in the Middle Attack
The concept behind a man-in-the-middle (MITM) entails intercepting traffic from a computer and sending it to the original recipient without them sensing that the traffic has been read and potentially altered. Such an attack gives the perpetrator ability to do lots of alterations including inserting their cryptocurrency wallet to steal funds or information and to redirect a browser to a malicious website.
Public Wi-Fi networks are a common source of MITM attacks as neither the router nor a connected computer verifies its identity.
Replace-by-Fee (RBF) attacks refer to a feature that enables users to replace their original transactions by paying a higher fee. Acceptance of RBF transactions comes with a higher risk of double-spend attacks and a user changing the amount of transaction before it’s mined. RBF is a technical way of getting un-stuck, a stuck bitcoin transaction. The transaction could be stuck because the sender did not pay a high enough fee.
Do you remember one of the insidious bitcoin scams exposed by South Korean financial authorities and the local bitcoin community in 2017? A fake exchange in the name of BitKRX presented itself as part of the vibrant trading platform in the country and obtained people’s money. That’s why it’s important to stick with well-known bitcoin exchanges and forums that expose such fake news quickly.
Reliable platforms that add a new layer of protection to currency transfers could also prove essential. Kirobo Safe Transfer understands that mistakes cannot be tolerated in cryptocurrency transfers and has dependable resources to prevent unnecessary risks. Such platforms often reinforce secure transaction codes and funds retrieval capabilities.
Presentation of a new cryptocurrency as an alternative to bitcoin can be a little tricky. These are usually backed by the idea that it’s too late to cash in on bitcoin. Therefore, people rush to invest in one of the up-and-coming cryptocurrencies. The fraudsters behind My Big Coin took millions of dollars from customers before its shut down.
These are investment frauds in which money is taken from new investors to pay previous investors. Ponzi scheme organizers often lure new investors with the potential to generate high returns with little or no risk. Apart from using the collection to pay those who invested earlier, such fraudulent investors may keep some for themselves.
BitClub Network utilized this technique for years before the three main men behind it were arrested in 2019. By then, the cryptocurrency fraud scheme had reached $722 million.
How to Avoid Cryptocurrency Fraud
The dramatic increase in prices of cryptocurrencies has seen hackers and scammers actively targeting potential investors. To avoid losing your original investment, it’s important to understand the most common cryptocurrency scams and hacks.
Here are 4 tips to help you invest in cryptocurrency safely.
- Know how to recognize any suspicious activity to protect yourself from criminals.
Always research and learn about cryptocurrency exchanges before investing a single dollar. You could read reviews or talk with investors more experienced in the field.
When you buy a Crypto, you have to store it on an exchange or in a cold or hot wallet. Each of these has its own benefits, technical requirements, and security. Investigate the storage choices of your digital currency.
Any good investment strategy requires diversification. Don’t just put your money in any coin. There are other competitive options to help you spread your investment around other currencies.
- Date of publication:
- Mon, 05/03/2021 - 06:20
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