Bitcoin hit a new high above $20,000 on Wednesday and continues to rise. Maybe today is the day you’re finally ready to take the plunge and buy your first Bitcoin. Before you do that, here are some tips to avoid falling victim to some bitcoin scammers who will try to take advantage of those who are not yet familiar with the fanatical world of cryptocurrencies.
A careful study
The first step in this process is to create a wallet to store your Bitcoins securely. There are many bitcoin wallets on the App Store and Google Play. However, before you decide to buy a wallet, be sure to read the reviews and research them. You want to be sure that you are depositing your newly purchased Bitcoin money into a legitimate wallet that will secure the cryptocurrency and prevent it from being stolen.
You also need to decide on which exchange to buy your first bitcoin. There are many exchanges in the market with varying degrees of security. Most people need some form of authentication before they can sign up for an account, so be prepared.
When it comes to wallets and exchanges, make sure the site you visit is in good standing before you send money. A perfect website is not necessarily a sign of legitimate business. Similarly, just listing a wallet app in the app Store does not guarantee its security. Even if they are legal, the cryptocurrency world has seen exchanges and wallets hacked time and time again.
Check how long an exchange or wallet company has been around. Look for company reviews and feedback, browse sites like Reddit, and read the company’s social media history. Do a news search for the companies you’re researching, as the most reliable exchanges and brokers may have been reported by well-known media outlets.
Protect your Bitcoin keys
Bitcoin is not like your bank. There is no helpline you can call, no fraud department to help you process your transactions, and no way to stop “suspicious transactions.” "The spirit of Bitcoin is that it transcends the traditional financial system and gives ultimate control to the user.
On the one hand, this means you don’t have to pay overdraft fees or have the government access to your personal data through financial transactions. On the other hand, if you share your keys and steal Bitcoin, then no central authority can step in and protect you. In a way, this is the ultimate test of personal responsibility.
If you’re just entering the field, it’s worth embracing one of bitcoin’s core concepts – “Not your keys, not your tokens.”
The wallet generates two types of keys: private and public. The public key is used to create a public address. These are the addresses that you will share with others to receive bitcoin.
However, the private key should remain absolutely private. This is the key needed to encrypt and decrypt the wallet, and the basis for ensuring the security of Bitcoin. If you don’t control the private key to your bitcoin wallet, then you really don’t control your Bitcoin.
Do not share keys
Again, never share your private key with anyone, let alone online.
Also, when you create a wallet, you usually get a seed phrase, also known as a backup phrase or recovery phrase, which is a set of words that are generated when the wallet is created, and the system instructs you to write it down and store it in a safe place. The common reason you are asked to write them down is so that they are not stored on vulnerable computers.
This seed-phrase is used to recover bitcoin funds from the chain and, therefore, is often another target for scammers.
There’s a reason “not your keys, not your tokens.” If fraudsters get their hands on your key or seed phrase, they can empty your wallet.
So, the first step is to secure your private keys and seed phrases.
Phishing scams: Check your links
Always be on the lookout for phishing scams. Phishing attacks are a favorite of hackers and scammers. In a phishing attack, the attacker typically impersonates a service, company, or person through E-mail or other text-based communication, or by hosting a fake website. The aim is to trick victims into revealing their private keys or sending bitcoins to addresses owned by fraudsters.
These e-mails often appear to be legitimate. For example, scammers send fake emails that look like CoinDesk newsletters. Users using Ledger’s hardware wallet appear to have received an E-mail from the company encouraging them to download a security patch, but it was actually sent by fraudsters posing as company representatives.
These are just a few examples, but phishing attempts come in many forms, not just email. You may be sent links on social media by fraudsters posing as someone else. You might get a call.
Phishing scams come in many forms, but the goal is to get you to give up data or information that could breach digital security and steal your Bitcoin.
In any such unsolicited E-mail, be sure to check the address of the sender. A key clue to any phishing email is misspelling of the real address or URL. For example, in the Ledger phishing scam, the E-mail comes from a misspelled “legder.com” URL. Attackers will try to make incoming emails look as authentic as possible, so be sure to double-check them. Another trick is to hover the mouse over any link and see where it leads. For example, just because Bitcoin.org highlights a link doesn’t mean it actually goes to bitcoin.org.
A good habit to get into is to bookmark sites that you often use to access your money. Access these sites only through your bookmark address, not via email links. That way you know you’re only using legitimate urls.
No one is going to give you free bitcoin
Finally, be slow and careful. There are more sophisticated hacking and fraud techniques. I’ve talked to cryptocurrency users who’ve been scammed out of thousands of dollars by pretending to be investors in their companies, and the scammers have been running their scam for the past few months. I have seen cases where people give their private keys to “investors” so they can make a profit, only to find their wallets are slowly being emptied.
There are some bitcoin scam ads on YouTube, even though legitimate cryptocurrency shows tout cryptocurrency giveaways and pyramid schemes.
Discord and other communication channels have been sending messages promising to provide free Bitcoins to people who have set up a minimum deposit. (Plot tip: You won’t get free Bitcoin, and you’ll never get your deposit back.)
The list of creative ways fraudsters can take advantage of you is endless.
It may seem far-fetched for people to fall for this bitcoin scam, but the Twitter hackers had already made more than $140,000 worth of bitcoins, the equivalent of $320,000 in today’s money. Overall, a report by Crystal Blockchain, an analysis firm, found that since 2011, 113 security attacks and 23 fraudulent schemes resulted in the theft of cryptographic assets worth about $7.6bn.
This applies even if you think you’re too smart to be fooled. Liars come in all shapes and sizes and usually affect your own psychology.
So remember: keep your private key carefully, check every URL carefully, and if something looks too good to be true, it probably is.