What is a scam?
Scammers tend to take a genuine idea and change the rules in the process of acquiring new capital. In 2015, I met Ray Blanchard, the creator of ripple. Ripple is a cryptocurrency for remittances. Imagine if PayPal and Western Union were one company, but they could send money around the world instantly and cheaply. People send $50,000 per day in remittances, and ripple would make it possible to send $1000 internationally for under a single penny. Because ripple is used only for remittances, its utility is not nearly as enormous as that of other cryptocurrencies. But that doesn’t mean there aren’t scammers in the mix: there are. Here’s how you can spot scammers in the crypto space.
Common Bitcoin Scams
Here’s a few of the most common bitcoin scams you need to watch out for:
Cryptocurrency providers often advertise that you can earn 10 to 15 percent per month by referring new members. However, this is often just the start of the offer. These services also promise a variety of additional benefits, such as free coins, bounties and even a free logo. The catch is that you’ll have to fork over a considerable sum of money to receive these perks. In addition, some vendors offer false advertising.
Last year, Bitrated had millions of users, but in 2018 the site went dark, leaving many users who had lost money to the scam. In the meantime, the scammers behind Bitrated continued to prey on unsuspecting users.
How to Avoid Bitcoin Scams
Avoid the scam if you don’t know what you’re doing.
Assuming that just because an online crypto company wants to raise venture capital for an industry-disrupting project, it must be legitimate, is usually a bad move. “If a business says it wants to get involved in Bitcoin, it’s likely to be a scam,” says McBride. “First, Bitcoin is a very small industry; there’s probably only three or four companies that have more than 10 million dollars in sales, and there’s many more that have less than 1 million in revenue.”
Bitcoin startups usually have a plan to sell their products or services in the future, but no physical products. Just because a company is ostensibly building a new digital currency doesn’t mean that they are trustworthy.
Do your due diligence on ICOs.
Cryptocurrency seems like an easy and lucrative investment, but some investment scams are actually extremely popular and their appearance in cryptocurrency makes you vulnerable to them. Be vigilant when considering an investment opportunity and always ask questions and get the facts. Knowledge is power. Use your knowledge to make smart investment decisions.