We wish we could tell you that cryptocurrency trading is a safe and profitable field. Unfortunately, the reality is quite different. There are many scammers out there who only want to steal your money, and some of them are so convincing it could be challenging to know what’s real and what’s not. This is why we’ve spent a lot of time creating this guide, which can help you avoid scams and find profitable investments.
What To Know About Cryptocurrency
Before we dive into the world of trading, let’s quickly refresh our knowledge about cryptocurrencies.
What is a Cryptocurrency?
Cryptocurrencies are digital or virtual currencies that are protected by cryptography. They use cryptography to secure transactions and to control the creation of new units. Unlike regular currencies issued by governments or private companies (like Dollars or Euros), cryptocurrencies rely on distributed ledger technology.
In other words, cryptocurrencies are a form of “digital money”. They are not backed by a central bank but rather by the processing power of the users. This means no financial authority can demand to have your money returned if you fail to deliver your goods on time.
How Do You Get Cryptocurrency?
Cryptocurrencies are created in an entirely decentralized way, using a process called “mining”.
There is no central authority that can issue or control the currencies. So how do you get cryptocurrency?
There are many ways to get cryptocurrencies: you can buy them on an exchange or mine them using a computer (as we’ll describe further). The easiest way is to buy them on an exchange.
Where and How Do You Store Cryptocurrency?
Cryptocurrencies are not physical things. There are no coins, notes, or cards to store. Instead, cryptocurrencies are stored in virtual “wallets” on your computer or your mobile device. They can also be stored on a cloud server, such as Dropbox or Google Drive.
INX cryptocurrency trading platform is a safe place for your investments. Here the safest way to store cryptocurrency is to set up a hardware wallet. These wallets are fully isolated from the network and can’t be hacked via the Internet. They can look like a USB stick or a credit card, and you can even use them to pay at a store.
How is Cryptocurrency Different From U.S. Dollars?
If you are wondering how cryptocurrency differs from U.S. dollars, the simplest answer is that they are both digital tokens. You can trade them in the same way as you trade stocks or forex currencies. So there is no difference between them in terms of their value and market performance.
However, there are some differences that you should be aware of. For example, it is generally more difficult to exchange U.S. dollars for the cryptocurrency than it is to trade cryptocurrency for U.S. dollars.
Also, buying and selling cryptocurrency on the regular financial markets requires special brokers or financial services companies that will help you convert your digital assets into real money (such as with a credit card). They can charge a fee for their service and will likely take part of your profit if you get a good trading result from them.
Paying With Cryptocurrency
Some online stores accept payments in digital currencies. Overstock, Microsoft, and Dell are just some of the major brands that have recently integrated cryptocurrency payments in their operations. You may be able to buy something with cryptocurrency at your local store soon as well.
How to Avoid Cryptocurrency Scams
The first thing you should do before you invest in any cryptocurrency is to do your own research. Many online guides can help you in this process. However, there are also some common scams that you might want to pay attention to.
The most common cryptocurrency scams today are Ponzi schemes. These are investments where the operators promise high returns, but instead, they only use your money to pay other investors.
1. Investment and Business Opportunity Scams
The biggest problem associated with cryptocurrency is that it is hard to distinguish the real opportunity from the scam. Many people will try and sell you something similar to a cryptocurrency without telling you that they are just trying to fool you.
2. Cloud Mining Scams
Online businesses offering cloud mining solutions will often try to trick you into paying them for mining cryptocurrencies. The truth is that in most cases, no actual mining is done.
3. Blackmail Emails
After you’ve bought cryptocurrency online, some of the scammers can try to blackmail you. They will send you an email saying that they have information that could help them trace your transaction. If you don’t pay them a ransom (which is usually in Bitcoin), they will tell your bank or the police about your transactions.
Cryptocurrencies are very popular today, still many people don’t know what they are exactly and how they work.
4. Social Media Scams
As many of you know, hackers can also break into your Facebook, Twitter, or other social media account and steal your information. When people are most susceptible to this type of scam, it is usually during an event like the blockchain conference. The scammers will create a fake account on social media and try and trick you with scams like Bitcoin mining. A lot of people will be asking for your personal information on a fake account.
Hackers will usually have the name of their country or city in the title in order to try and appear more legitimate. The language can also vary as well depending on the country, but it will usually be English. This scam is usually associated with fake accounts trying to leak your information and trick you into sending them cash. They usually message you on one platform and then attempt to get you to switch platforms so they can continue raising awareness of their phony account.
Claims to Avoid:
- You will mine cryptocurrency for low fees.
- You can mine cryptocurrency from only two computers.
- 95% of your hashing power is used by other users and therefore you don’t need to worry about mining.
Now, you can easily lose your money in these scams, but be extra careful if you want to invest in cryptocurrencies! These scammers tend to target new people and create fake content websites during major events like the Ethereum ICO or Bitcoin Cash hard fork.
Rules to Avoid Scams
- Keep your passwords and usernames safe. Don’t store them on your computer or mobile device.
- Investigate any investment or business opportunity that sounds too good to be true.
- Never give out your username and password to anyone.
- Read the reviews of users online before you decide to invest in a company.
Taking into account all the abovementioned, I think it is safe to say that cryptocurrencies are here to stay. More and more people are investing in them, and the market is expanding every year.
If you got scammed, there is little chance that you can get your money back. It is also very hard to find the real owner of a wallet address, which means that even if you do report the scammer, you may never see your money again.
Be careful and make sure to do your own research before you invest in a cryptocurrency. Remember that there are many scams still going on, so you need to be extra careful.
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