- Most scammers go to the extent of even forging a whole crypto exchange platform. This is all to trick you into investing in a coin that never existed
- Knowing the difference between a potential profit-making investment and a scam is more accessible than most people portray it
- Crypto scams occur more often than most people would like to acknowledge, but they are less and less likely to succeed
Web3 has revolutionized the Internet over the past few years; it has birthed great ideas and made a lot that seemed impossible possible. Ranging from developing digital assets that have value to NFTs and even the crypto space.
All these are platforms that innovative individuals have used to pave the way to crypto, web3 and blockchain success. From Individuals like Vitalik Buterin, creator of Ethereum to Changpeng Zhao, the CEO of Binance, the leading crypto exchange platform, they took the next step in Web3 and blockchain to give substance to their visions.
These individuals are a few innovators who sought to improve the crypto market. In addition to providing a suitable platform where other crypto traders, miners and developers can thrive. Since many crypto traders aim to achieve greatness, others have decided to exploit their zeal through crypto scams.
Is a crypto scam as back as a crypto hack?
Those within the crypto space have either heard of or experienced a crypto hack which is essentially an outside source bypassing blockchain security to gain access to access digital assets illegally. This is quite different from what a crypto scam is and entails.
Instead of analyzing and breaking into the security system, crypto scams aim at the crypto traders to trick them into willingly giving up their digital assets. This is usually a less damaging approach but hurtful.
Most scammers go to the extent of even forging a whole crypto exchange platform. This is all to trick you into investing in a coin that never existed. In some instances, even legitimate crypto exchange platforms deliberately scam their users. This is accomplished through fake promises of rewards, privileges or even additional features.
Below are some major crypto scams that have occurred within the crypto market. Keep in mind this is just a means to educate a crypto trader about the mistakes made by others in past events, not scare them away from using digital assets.
OneCoin is the biggest scam in the crypto space.
In 2014, Dr Ruja Ignatova created the crypto exchange platform, OneCoin. This exchange platform mainly incorporated a variety of altcoins that caught the eyes of many crypto traders.
It gained popularity to the point that it was deemed the ‘Bitcoin Killer’, but OneCoin was neither a cryptocurrency nor an exchange platform but rather a multi-level marketing scheme.Its primary feature was to educate its users through courses and ‘packages financially’. These packages were categorized based on the investment amount of each user. This ranged from $100 to $100,000, and with each package, OneCoin rewarded the users with tokens that were ‘mined’.
Despite this statement, OneCoin was never recorded nor created on the blockchain network; instead, it was running on SQL programming, which rendered the whole network insecure. This meant that anyone could easily alter it. This raised flags all world, and by 2017 OneCoin had 3 million members who all thought were members of the crypto market.
When authorities took notice of the scheme, Ignatova vanished with $4 billion of the investor’s Cash in her virtual pocket.
In 2017, Thodex, a Turkish crypto exchange platform, launched.
It gained popularity within its country and worldwide, gaining almost 100,000 investors making transactions daily. During the bitcoin high, when all the digital assets associated with bitcoin went for $62,000 per coin, the exchange platform shut down abruptly.
Initially, the crypto trader didn’t consider it a crypto scam since its founder Faruk Faith stated that it had to run maintenance to accommodate all the transactions conducted during the period.
The site instantly shut down after five days despite its announcement. This raised significant concerns and what raised more suspicions is the fact that Faruk fled Turkey. He left with over $ 2 billion from almost all of his investors, and it became clear that the whole concept of Thodex was a crypto scam.
Despite not being a crypto exchange platform, Evolved Apes scam its investors and users on an NFT basis. The company had made arrangements to introduce a new Street Fighter-style game where Apes were used instead of your cool looking Martial artist.
The central concept behind this venture was to enable the Apes to earn rewards. After developing the base NFT design of all Apes, 10000 in number, multiple investors began pouring in. After just one week, the digital assets earned up to $2.7 million in the crypto project. Many were enthusiastic about the developments, but then the lead developer Evil Ape rained the account, took down all social media accounts and vanished.
This was similar to a crypto scam commonly known as a rug pull. A rug pull occurs when a developer presents a concept of a cryptocurrency project to attract investors. Once the funds to build the project are acquired, the developer pulls out, leaving investors with just the idea.
How to know the difference
The fundamental aspect of all three crypto scams above is that not all crypto traders know which flags to look for. Knowing the difference between a potential profit-making investment and a scam is more accessible than most people portray it. The first thing one should always find out before investing in a digital asset is its market cap. Most natural or good crypto coins or projects often have a significant market cap.
The second key is to read the white paper. Every legitimate cryptocurrency or exchange platform has a development process. Most processes are documented and publicly published as a white paper. It generally described the different protocols and blockchains, outlined the formulas, and explained how the entire network would function.
Third and Franky most noticeable are hearing the term “Free” or “Airdrop”. Everyone likes free stuff; hence crypto scams thrive on this concept.
When an exchange platform generally announces the release of a drop based on the donations or investments made by a crypto trader, it should raise some alarm. The crypto market doesn’t offer free things; hence receiving something free is very unlikely. Always be wary of any digital asset provided freely.
Crypto scams occur more often than most people would like to acknowledge, but they are less and less likely to succeed. By using the above facts, you are more likely to avoid such scams, but being extra careful does not hurt. No one likes losing their digital asses, so better not risk it by placing them on questionable crypto exchange platforms.