How easy is it for hackers to steal your cryptocurrency?

Learn how to protect yourself from hackers who want to steal your cryptocurrency

The cryptocurrency industry is unfortunately rife with scams and hackers looking to steal your hard-earned crypto coins.

A variety of tactics are used by hackers and their methods are improving every day.

The most common strategies adopted by scammers include financial pyramid schemes, exchanges targeting exit scams, fake web and hardware wallets, and even Ponzi schemes.

In order to better understand how hackers successfully steal your cryptocurrency, I will take an in-depth look at each method using real-life examples.

Hopefully, by understanding how hackers operate and what red flags to look out for, you’ll be better prepared to fend them off and successfully protect your coins.

In this article, I’ll discuss Ponzi schemes, financial pyramid schemes, and fake web and hardware wallets.

Ponzi schemes

According to Investopedia, Ponzi schemes (or scams) are based on fraudulent investment management services.

Investors typically contribute money to the “portfolio manager” who promises them a high return. Afterwards, when those investors want their money back, they are paid out with the incoming funds contributed by later investors.

The person organising this type of fraud is in charge of controlling the entire operation – they merely transfer funds from one client to another and forgo any real investment activities.

One of the biggest Ponzi schemes in crypto – one that currently keeps adding selling pressure to Bitcoin – is the Plus Token scam.

Plus Token” was a cryptocurrency Ponzi scheme disguised as a high-yield investment program. Platform administrators closed down the operation in June 2019 after withdrawing over $3 billion in stolen cryptocurrencies such as Bitcoin, Ethereum, and EOS.

A report by Chainalysis, a US-based blockchain analysis company, claims Plus Token was “one of the largest Ponzi schemes ever” and was potentially responsible for the 2019 downturn in BTC price.

The report claims that there are still at least 20,000 BTC and 790,000 ETH missing which could be dumped on the market at any time.

Financial pyramid schemes

A financial pyramid scheme is structured so that the initial schemer must recruit other investors who will continue to recruit other investors, and those investors will then continue to recruit additional investors, and so on.

There will be an incentive that is presented as an investment opportunity, such as the right to sell a particular product or high earnings per recruit.

Each investor pays the person who recruited them and so on. The recipient must share the proceeds with those in the higher levels of the pyramid structure.

One key difference is that pyramid schemes are harder to prove than Ponzi schemes. They are also better protected because the legal teams behind corporations are much more powerful than those protecting an individual.

Just recently in Brazil, a group called “Bitcoin Banco” (Bitcoin Bank) is alleged to have conducted a million dollar exit scam.

The group was in charge of a great deal of exchanges in the country and promised set returns to investors who traded the exchange currency, Negociecoins.

However, according to analysts, “This profit did not exist because the company needs investor money to produce order book orders.”

Fake wallets

One of the most common mistakes by junior cryptocurrency users is to fall prey to fake cryptocurrency web wallets and hardware wallets.

Since some users trust Google and other search engines to look up websites, it’s quite easy to click on the wrong website.

To avoid making this mistake, always check the website you’re accessing is the real one.

There are loads of fake URLs and GitHub repositories with the sole purpose of stealing your precious cryptocurrency.

A simple solution is to save websites you visit often, like web wallets and exchanges, into your browser favourites list.

That way, it will be near impossible to fall prey to fake URL hacks.

Conclusion

Before making any decisions about trading your cryptocurrency or investing in a new coin, make sure you complete thorough research. Keep on top of the latest news and trends as reports of scams begin to increase.

Most of all, don’t forget to apply everyday digital best practices to your activity. Cryptocurrency scams and vulnerabilities will continue to evolve as the industry grows and it’s your responsibility to stay protected.

Safe trades!

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