As a beginner in the the crypto world, there’s a lot to take in. Just five months ago I set up a MetaMask wallet and used a decentralised exchange (DEX) for the first time. With the help of some more experienced friends, I deposited some ETH to my wallet and dived right in.
However not everyone has a helping hand and it’s a complicated landscape to a beginner. The majority of people entering the market will most likely be unaware of how you can easily fall prey to a number of scams in the space, so I’m going to write up some of the common scams, and how to avoid them.
Also a key thing to remember about all blockchain technology is all transactions are recorded and publicly visible. This means if you find yourself in a situation where you don’t know what happened to your coins, whether you’ve been targeted by a scam, or made a mistake in transferring your tokens, there will be a record which can be analysed. This may help you recover any lost funds.
1. Look after your Private Keys
Whenever you set up a new wallet you will receive the Public Key and the Private Key, or potentially another security measure such as a Keystore File. The Private Key can restore your wallet to another location giving a potential scammer access to your account. Scammers will take advantage of your lack of knowledge as a beginner and try to manipulate you into giving up this information.
Your Public Key is the address of your wallet and this one is safe to share. The similarity in their names can lead to confusion so be very careful about which information you share with others.
There are a lot of big influencers in the crypto space. Scammers will impersonate them and interact with you to try and lure you in.
As a general rule of thumb, anyone who contacts you directly over Twitter, YouTube or a Messaging App is most likely not trustworthy. Especially if they appear as a noteworthy influencer. Check URL’s and account handles carefully and never send any personal or account information.
3. Scammers sending you tokens or fake accounts
A common scam is to deposit either a token to your wallet, or send you the seed phrase/private key to another account. Be extremely cautious interacting with anything you don’t recognise, especially if it appears too good to be true. In the crypto world it 100% will be.
A similar method to steal your tokens is when you ‘authorise’ an application to spend tokens from a wallet such as MetaMask. Always read the description in your wallet if you are ‘signing’ a transaction and be very careful about which websites you do this on.
4. Phishing on fake websites
Scammers will create a website which looks identical to the real thing, but the domain will be very slightly different and this is something that can easily missed. Alternatively websites can be created which appear to represent a crypto project but are just a scam. For example when a new token is due to be released, scammers can set up a website all about the drop and even pay to advertise it on Google making it appear at the top of the search listings.
Unsuspecting investors can easily end up on these fake websites and end up sending funds to an address where you will hear nothing back. This is a great reason to use InCrypto Hub to navigate to official project websites. Otherwise check CoinGecko or CoinMarketCap to find official token information and social media accounts.
5. Rug Pulls and Manipulation
There are a number of warning signs with young projects with low liquidity, low market caps, anonymous teams and a low distribution of tokens. New tokens will be launched into the market designed to attract investors, only for the team to steal investor funds or crash the price by selling a large proportion of the supply.
These projects can appear very convincing at first and even be hyped up by the community as people get excited about being early investors. Be sure to spend some time researching the project to form your own opinion and always be cautious as some projects come with a much, much higher risk of losing everything.