Ten years ago the only people who really knew about cryptocurrency were those perusing the Silk Road looking for things you could only get on the dark web. Fast forward to now and there’s a chance even your grandma has some form of crypto investments. The crypto boom has brought gold rush levels of wealth, which means it’s also brought on a whole new wave of scammers looking to get their hands in the crypto cookie jar.
Today we’ll be looking out for crypto scams and Coinbase scams, and providing ways for you to keep your digital assets safe.
Table of Contents
- What Exactly is Cryptocurrency?
- Storing Cryptocurrency
- Most Common Coinbase Scams
- Most Common Crypto Scams
What Exactly is Cryptocurrency?
At this point you’ve certainly heard of cryptocurrency, but what is it exactly? To keep it simple, cryptocurrency is a digital/virtual currency that is decentralized (not issued by any central authority), meaning it is less prone to manipulation by governments. Part of the reason it’s more protected from manipulation is the fact that it runs on blockchain technology, which essentially means every transaction is validated and nearly impossible to forge.
Who's Calling Me?
Search any phone number to learn more about the owner!
Crypto is still a growing and evolving space, with different types of tokens with different purposes. It’s worth reading into if you’re in the investment space, but for now, we’ll stick to helping you keep the crypto you have safe.
Storing Cryptocurrency
Storing crypto isn’t as simple as putting it in a bank account or in a bedroom safe. Because crypto is digital, storing it requires a secure digital space. For this, you have a couple of options:
- Crypto Exchange: This option essentially means keeping your crypto with whatever exchange you use (such as Coinbase). While Coinbase, for example, does have good security, they are still a centralized entity that could be hacked. Keeping your crypto in an exchange is convenient and simple, but puts full trust and care in the hands of another party.
- Hot Wallet: A hot wallet is basically an application that stores your crypto online. Unlike an exchange, you have sole access to your wallet, but the storage is online-based. This is better than leaving your crypto in an exchange, but it still comes with the online risk of hackers compromising your wallet.
- Cold Wallet: The safest way to store your crypto, a cold wallet is a physical storage device that keeps your crypto safe and offline while being stored. The only drawback to a cold wallet is that the devices can be more costly than online storage, and you also run the risk of losing the cold wallet, and thus losing everything on it. Still, this is the safest storage method.
Common Crypto and Coinbase Scams
When it comes to crypto scams, there are two main ways scammers generally try to get your valuable crypto. The two general goals of scammers will be to…
- Access your crypto wallet, which requires them to steal or gain access to your secure information so they can drain your crypto holdings. Or…
- Trick you into sending them your cryptocurrency directly. And, because of how crypto works, it’s nearly impossible to track down the person who received the cryptocurrency.
Most Common Coinbase Scams
Whether you store your crypto directly with Coinbase, or use one of the above storage methods, criminals often use scams involving Coinbase when attempting to steal cryptocurrency. Here are some of the most common scams to look out for.
- Phishing. This tactic is very common for all kinds of scams, and essentially aims to trick people into clicking a link they believe is associated with Coinbase. Once the potential victim clicks the link, they will often find themselves on a website that exactly mirrors Coinbase, with the important distinction that the scammers get all of the information you enter into the fake site. That means if you end up clicking one of the links and entering your login information, the scammers now potentially have access to your real account.
- Giveaway Scams. Giveaway scams often use mass social media outreach or will try to contact you on apps like WhatsApp or Signal to trick people into thinking they’ve won a Coinbase-sponsored crypto giveaway. Once they’ve made contact with you, they will either try and trick you into clicking on a phishing link, or convince you to send them a small amount of crypto to “verify” your wallet address. Either way, unless you entered a giveaway, always assume it’s a ruse. And, even if you have entered, always triple-check who you are communicating with, and NEVER send your cryptocurrency as a “verification” method.
- Dusting Attacks. Somewhat complex, dusting involves sending a tiny amount of crypto (like a speckle of dust tiny; think 0.000005 of a coin) to a bunch of different wallets. The goal of this is to get around the anonymity of trading crypto, and track down identifying information that they can then use to attempt some other form of scam. The details can get hazy, but essentially if a little bit of random crypto pops into your wallet, report it, and certainly hold off on making any transactions.
- Airdrop Campaign. Another somewhat convoluted tactic, scammers will airdrop tokens to you, and then provide complex trading instructions that aim to get you to reveal compromising information.
Other Crypto Scams
Beyond scams that are attempted via Coinbase, like the ones mentioned above, there is no shortage of other schemes that aim to steal your cryptocurrency.
- Cloud Mining. Cloud mining is essentially a crowd-sourced mining of cryptocurrency. While it isn’t always a scam, the reality is most cloud mining setups don’t have the hash rate to generate the profit they promise, and you also run the risk of them simply never sending you your promised funds.
- Rug Pulls. If you’ve ever considered helping fund something with the promise of some return or even a product, be careful if the fundraisers are asking for crypto. As discussed, crypto by nature is hard to track, so once they have the funds, they can quickly disappear without a trace.
- Investment Scams. Not exclusive to crypto, investment scams promise large and fast profits with nothing but fluff and B.S. to back it up. The only people making money quickly on investment gimmicks are the scammers taking your crypto/money.
Staying Safe From Crypto Scams
The biggest asset you can have when it comes to avoiding getting scammed is to know the types of scams these criminals are trying. When it comes to crypto, the biggest rule is to limit any information that can access your wallet to nobody but yourself. If you have a substantial amount of crypto investments, purchase and set up a cold wallet, and never, never, never, send anyone crypto unless you are 100% sure you know who you are dealing with.
While one of the main selling points of cryptocurrency is its anonymity and decentralization, many scammers lie about who they are, or pretend to be someone else. If you’re in contact with someone in the hopes of investing in crypto, use a service like Spokeo to check if who you’re talking to really is who they say they are.
Cyrus Grant is a writer from Southern California with a background in law and dispute resolution. When he isn’t writing he can be found deep-diving into the latest technology trends or simply spending time at the beach.
Sources
Coinbase – Avoiding Crypto Scams
Cointelegraph – What is a crypto dusting attack, and how do you avoid it?