Digital assets are resistant to censorship by design and give private key holders complete control over their crypto. The only caveat is that investors are solely responsible for protecting and safely storing their own funds.
The crypto community is growing at an exponential rate, with the number of users now totaling over 100 million. It’s reported that at least 14 million users are new market participants as of 2021, drawn in by the latest bull cycle excitement and eager to invest in their futures. These first-time crypto users can be easy targets for cybercriminals and scammers if they don’t follow basic online security protocols and crypto best practices.
According to recent findings from the Ciphertrace “2020 Cryptocurrency Crime and Anti-Money Laundering Report,” over $1.9 billion worth of crypto assets were stolen via hacks, scams and fraud last year. This figure is down from $4.5 billion the year before.
Among these, exit scams and decentralized finance (DeFi) hacks were highlighted as the leading causes of crypto theft. “Massive exit scams have dominated cryptocurrency crimes in the last two years. In 2019, the Ponzi scheme PlusToken netted $2.9 billion with its exit scam – 64% of the year’s major crime volume,” the report said. In 2020 was “WoToken, a similar scheme operated by some of the same people as PlusToken” that defrauded investors “out of $1.1 billion in its exit scam – 58% of 2020’s major crime volume. While major fraud volume saw a significant decrease, it still made up 73% of 2020’s crime total.”
Last year also saw a rise in sophisticated phishing attacks – fake emails used to deliver malware or dupe victims into handing over their crypto, passwords and personal information. In July 2020, Twitter was the target of such an attack, leading to a group of hackers gaining access to more than 130 high-profile accounts and using them to promote a bitcoin (BTC, +1.17%) giveaway scam. Apple, Uber, Ripple, Binance, Elon Musk, Barack Obama, Bill Gates, Kim Kardashian and even CoinDesk were among those affected.
1. Be aware of the most common crypto scams
There are three main types of scams you will undoubtedly come across when starting out in the crypto space. It’s important to learn how to spot these scams before ending up a victim and potentially losing your assets.
Fake crypto giveaways
Trading bot scams
Phishing emails
Fake crypto giveaways
Crypto giveaway scams are online posts, usually on social media, that invite users to deposit crypto to an address with the promise the sender will receive double or more back. This type of fraud has been around since the initial coin offering boom of 2017 and tends to abide by a very rigid format. This makes fake crypto giveaway scams easy to spot once you know what to look for.
Phishing emails
Phishing scams are becoming increasingly difficult to detect as malicious agents take greater care in creating seemingly real emails from legitimate companies. Many will encourage people to click on links that instantly infect the device with malware, giving the perpetrator full access to information stored on it. Other phishing emails will redirect users to imposter websites and ask them to reset their passwords, send money or reconfirm their seed words.
2. Never make a digital copy of your personal crypto details
One of the biggest mistakes both first-time and experienced crypto users make is creating digital copies of their crypto wallet passwords, seed words or backup codes.
Digital copies can be anything from:
Always enable 2-factor authentication when possible
When opening a new crypto account, it’s important to enable two-factor authentication (2FA) if the option is available on the platform. 2FA is simply a verification process that requires two or more pieces of information, usually from two different devices, to grant access to an account.Use a different password for every crypto platform you use
So you’ve enabled 2FA on all your crypto accounts, you’ve copied all your sensitive information on paper or on to metal plates and you’re now always on the lookout for potential crypto scams. This is all great, but now let’s imagine one of the websites you’ve used accidentally leaks its customers’ information including your email and password. Let’s assume you use the same email and password for all your accounts, even the ones for which you haven’t enabled 2FA. Now you have a problem.
Using different passwords for all your crypto accounts is essential for reducing the impact data breaches and leaks can have on your online security. If you have multiple accounts and can’t feasibly remember several different passwords at the same time then there is a range of free password-managing browser extensions and apps you can use that store and generate secure passwords for your platforms.