Is Cryptocurrency Craze The Modern Gold Rush?

There have been several trends in recent years that have caught the eye such as cryptocurrency. The excitement of jumping into the next big digital currency to make money is reminiscent of the Gold Rush in 1849, when more than 380,000 gold diggers traveled to California to earn their fortune. Although the two markets are different because cryptocurrency investors can mine their fortunes from the comfort of their homes, there are similarities in that they both create a hotbed of criminal activity.

Gold and cryptocurrency are proving to be an irresistible lure for fraudsters looking to exploit the money of disgruntled investors. The market at 19at century is full of “fool’s gold”, while crypto today is also plagued by scam offers, exchanges, phishing campaigns and “pump and dump” scams. In 2021, fraudsters around the world even won a record £ 10.5 billion in stolen cryptocurrency.

Knowing the techniques used by cyber bandits to commit cryptocurrency fraud is essential for investors to avoid falling into an empty gold mine.

Jump on the crypto bandwagon

In crypto, investors often get caught up in the hype and skip the basics. Some invest hundreds of thousands of pounds in a currency without really understanding how it works, how their wallet works, for what the private keys are and who actually controls their account. We’re all used to how traditional banks work, and while there are some similarities, crypto is certainly different.

In cryptocurrency, each wallet has its own unique private key that can be used to transfer coins – similar to a person’s signature function. However, not all wallets are created equal, especially from a security standpoint. For many, if your private key is lost or stolen, access to your cryptocurrency can be permanently lost because whoever controls the private key is in all power and can spend and transfer money digitally. Understanding these basics is of course important, but crypto investors should also be aware of the fraud threats they face. With that in mind, here are three of the scams that cybercriminals favor:

1. Initial Fraudulent Coin Offering

Cryptocurrency projects have initial coin offerings (ICOs) that generate hype with the launch of a new coin. However, scammers can build a fake ICO that promises investors huge rewards, with very little money or effort. For example, the SQUID coin was an ICO scam that capitalized on the popular Netflix series Squid Game to gain publicity, earning creators over £ 2.3 million.

The fake ICO creators promise massive returns but holding a large portion of the coins in their own wallets, sit back and watch people exchange physical silver for their money. As the coin gains traction, the owners of a fraudulent ICO can sell all their coins at once and lose-known as a “rug pull”.

2. Pump and dump cryptocurrency scams

Pump and dump scams are seen by cybercriminals pulling the rug once enough money has been invested, causing an immediate market crash. A group of merchants, such as the founders or collaborators of a coin, will promote a coin, using photoshop photos, false testimonials, and false representations to artificially increase its price. When the price rises enough to reach its peak, scammers sell their shares at once, leaving buyers with useless money.

Similar to the dot-com bubble, it can be tempting to move on to the next hot thing, but it’s important to understand exactly what altcoin you’re buying and why.

3. Cryptocurrency exchanges are operated

Exchanges are another method exploited by scammer. Binance, the world’s largest crypto exchange, processes £ 58 billion worth of cryptocurrency every day, so it’s clear why exchanges are massive targets for criminal activity because of the amount of wealth they hold. Users are advised not to keep their cryptocurrency on an exchange-especially if it is a large amount-because they do not own the rights to control it. However, many ignore this advice.

Billions of pounds worth of cryptocurrency and thousands of user logins have been stolen from exchanges through brand abuse, malicious mobile apps, phishing scams and brute force attacks. Organized crime networks will use these methods to steal credentials and private keys. When a private key is stolen, the funds are transferred to the fraudster’s wallet, leaving the buyer with no coins.

Finding a Solution to Unregulated Cryptocurrency

While cryptocurrency is currently unregulated, the industry is taking steps to prevent fraud. Exchanges are investing in network security and stepping up their efforts to identify brand impersonation. Due to the wealth held in exchanges, tracking messages, manually reporting fake accounts and sending withdrawal requests is an almost impossible task. However, advances in artificial intelligence and machine learning mean that exchanges can now not only detect fraud, but also completely eliminate it before it reaches consumers.

Users can also take steps to protect themselves. First of all, it’s important to keep your private key and login credentials to yourself, even if someone may seem credible. It is also important to prepare before any investment, from researching coins to avoiding anything that seems too good to be true or using online forums to get different opinions before buying money. To protect against phishing, users can take simple steps such as installing anti-virus software and not handling large amounts of money in an exchange.

Find a gold mine or leave empty -handed?

With rising prices, unprecedented growth, and buzz to invest, it’s clear why many are comparing the crypto craze to the gold rush. Today, the crypto boom has opened the door to financial opportunities for coin buyers and scammers. With crypto bandits coming from all angles, the industry must support and protect consumers from malicious attacks. These crypto investors must also be careful, research, and take adequate measures to protect their assets-or they could end up with nothing but “fool’s gold.”

About the Author: Mark Crichton is the Chief Product Officer at Outseer – the California -based fintech on a mission to free the world from transactional fraud. He has more than 20 years of experience in architecture, deployment, development and strategic consulting in the field of global IT security and payment security solutions.

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