Crypto Academy / Season 3 / Week 6 - Homework Post for Professor @yohan2on - Topic: Crypto Scams and how to avoid them.

3개월 전

Hello everyone, welcome to week 6 of Crypto academy's season 3. In today's lecture, professor @yohan2on while teaching on the topic "Crypto Scams and how to avoid them" explained to us all we need to know about crypto scams and how we can avoid them. Below is my response to the assignment he gave after the class.

image

Question 1: WHAT ARE CRYPTO SCAMS? MAKE YOUR RESEARCH ON ANY CRYPTOCURRENCY SCAM.

WHAT ARE CRYPTO SCAMS

The introduction of cryptocurrency and all that is related to it can be said to be one of the best things that happened to our generation. Apart from the fact that it solved some of the problems of the centralized finance system, the crypto ecosystem has created lots of opportunities for users all over the world to earn. Some of these opportunities includes DApp development, mining, asset exchanges etc. Based on this, it is not surprising that cryptocurrency has achieved a high level of acceptance globally.

Although the crypto space was created with good intentions, some persons have discovered a way to exploit its loop holes, so as to carry out fraudulent activities in the space such as theft, scams etc.

Thus, we define Crypto Scams as those fraudulent ways some users use to obtain other user's crypto asset. Once a user falls victim to a crypto scam, he may likely lose all or some amount of the cryptocurrencies he has in his wallet.

Normally, for a person to be successfully scammed, the scammer normally targets the victim to get sensitive informations such as his wallet address, seed phrases, private keys etc. Using these, he can gain access to his wallet and steal all his assets. Another way is to lure the victim into sending his crypto assets to the scammer.

Types of Cryptocurrency Scam

There are several schemes scammers device to scam their victims, below are some of them.

1. ICO Scams:

Initial Coin Offering (ICO) is one of the ways new cryptocurrency projects are introduced to the public. It is through ICOs that these crypto projects gets more funding and popularity. During an ICO, the project developers offer the public its native token, which may not be worth so much in the beginning, but with time, it's value appreciates.

Investors like to invest in the crypto asset at this stage, and usually, they pay to obtain the projects native token using other cryptocurrencies such as ETH, BTC, LTC etc.

Scammers exploit the loophole in this by launching a fake project and then when a good number of investors have bought their token during ICOs, they move all the invested asset into another account and then close down the project.

2. Fake Websites:

This is one of the common schemes scammers use to scam their victims of their crypto asset. This scam involves using creating a fake website with a URL link and then using it to obtain the users sensitive informations such as emails and password.

These phishing sites are not real, (although they look real), rather they are designed to look exactly like the original site. If in any case the user mistakenly inputs his sensitive informations into this site, he unknowingly grants the scammer access to his wallets and in the process loss his funds.

3. Exchange Scams

This scam involves creating exchanges, and then using the exchange to defraud the victims. The scam exchange is designed to behave exactly like a true exchange, offering exchange services such as liquidity and wallet services.

The victims believes the exchange is true, therefore, the carry out their normal activity on the exchange, only to wake up one day and realize that all their crypto asset is gone and the exchange closed down.

Exchange Scams are large-scale scams. They are plotted over a long period of time, and if the scammers succeed, a large amount of cryptocurrency is lost in the process.

4. Social Engineering Scam

Social Engineering Scam involves the use of social campaigns such as ad services, sponsored ads, fake profiles, etc to announce to the public about a crypto investment opportunity. The advert is normally accompanied by fake testimonies from people who claim they have benefited from the opportunity. Using these testimonies, they lure their victim into making an "investment" scamming him in the process.

How to Avoid Crypto Scam

Some of the ways investors can avoid being victims to crypto scam includes:

a. Carry out an extensive research on a crypto project, ICO, exchanges etc, to make sure that they are legit before investing or using them.

b. Learn to use cold wallets for storing of their digital assets offline. This way, they only way their cryptocurrency can be stolen is physically.

c. Avoiding keeping all your assets in one wallet (or using one exchange). Instead, save them across multiple wallets and exchanges.

CARRY OUT A CRYPTO SCAM RESEARCH

I will be discussing the Africrypt scam.

Africrypt Scam

Africrypt Scam is one of the most recent cryptocurrency scam. This scam which led to the loss of Bitcoins worth over $3.6 Billion was carried out in South Africa by two brothers Ameer and Raees Cajee.

These brothers created a cryptocurrency investment company named Africrypt which offered people the opportunity to invest Bitcoin or South African Rand, and then recieve a certain amount of profit in return. As of the time the scam blew over, it was reported that the company's portfolio shows that over 69,000 BTC was invested by the victims into the project.

In April 2021, the brothers sent a report to their investors telling them that the company's portfolio has been hacked. They pleaded with them not to report the incident to the authorities as they are in a process of recovering the funds. Soon after the brothers sent out the report, the official website or the company Africrypt.io was taken offline. This move created suspicion among the investors, this made them to file a lawsuit against the company and the Cajee Brothers.

When a lawsuit was filed against the Cajee Brothers, their first reaction was to hire an attorney. The attorney later announced in June 2021 that he was no longer their legal counselor.

Report says that the Cajee brothers fled South Africa to United Arab Emirates (UAE) in December 2020. Since their last report, none of the investors have seen nor heard from the brothers, neither have they been able to deduce where and how the brothers laundered the money.

Read Article

image

Question 2: TO WHAT EXTENT HAVE CRYPTO SCAMS AFFECTED THE CRYPTO SPACE?

Crypto has really affected the cryptp system is a very bad way. It has created doubts in the mind of people, discouraging them from adopting cryptocurrency as means of payment in their business or organization. Let me highlight some of the negative impact of crypto scam.

1. Crypto Ban and Restrictions

Due to the several fraudulent acts by scammers on their victims, countries like China placed a ban on activities involving the mining and use of cryptocurrencies. It's with noting that before the ban, China had one of the largest Bitcoin mining pools. This was why the crypto space was greatly affected by the ban.

2. Limitation of Use Cases

Although the number of cryptocurrency users increases daily, most businesses, companies and industries are yet to start accepting it as a means of payment for the services they render. The reason why most of these companies don't want to do so is because of the fear of falling into a cryptocurrency scam.

3. Imposed Regulation

In a bid to control crypto scams, we have seen organizations and governments place bans on cryptocurrency. I believe that the more cryptocurrency scam increases, a point will reach when the government in a bid to prevent future scams will impose a regulation on the use of cryptocurrency. If that ever happens, the crypto space will lose its decentralized nature.

4. Contradiction of Purpose

Cryptocurrency was set up as a safer and better alternative for the centralized finance system. With all that has happened, we can that crypto Scam negates the the primary goal for which the blockchain and cryptocurrency was introduced.

image

Question 3: WILL REGULATIONS IN CRYPTO ADD VALUE TO THE CRYPTO SPACE?

Well, I think that regulating cryptocurrency will affect the crypto space both positively and negatively. For instance, regulating the cryptocurrency space will help to reduce the number of crypto scams, but the crypto space will no longer be decentralized. Below are some of the Positive and Negative impacts regulations will have on the crypto Space.

Advantages of Regulation

1. Regulations will reduce the number of crypto scams:-

When regulations are placed on the use of cryptocurrency, it will serve as a way of ensuring that an investor won't lose his funds after investing it, or depositing it in an exchange. Also, before a crypto project company can launch their native token through ICO, regulations will evaluate to ensure that the project is legit.

2. Increase Level of Trust and Adoption of Cryptocurrency.

Application of regulations in the crypto space will go a long way in increasing the level of confidence of crypto investors, because this time, they are assured they won't lose their investment to scams. In addition to this, when companies realise that the rate of crypto scam have been greatly reduced, they will be more willing to accept it as a means of payment.

3. Price Stability

Through regulations, the volatile nature of most cryptocurrencies can be greatly controlled.

Disadvantages of Regulation

1. The blockchain will no longer be Decentralized

The major reason why cryptocurrency was introduced was to solve the problem centralized finance posed as a result of its centralized (regulated) nature. If regulations are imposed on cryptocurrency, the crypto space will not longer be decentralized.

2. No more Anonymity

Addition of regulations to the crypto space will greatly affect the privacy and the anonymity the users of cryptocurrency enjoy today.

3. Reduction in the Volatility of Cryptotrading

It is the volatile nature of cryptocurrency that makes its trade profitable. If regulations are applied to the crypto space, it will make cryptocurrency more stable and therefore reduce the volatile nature of the market.

image

CONCLUSION

There is actually no way to completely eliminate crypto scams, because scammers will keep devising new means of carrying our their fraudulent acts. Although imposing regulations on the crypto space will reduce it considerably, on the long run we will notice that it is not actually a good idea.

The best way to control scam is on personal level. You can prevent a scammer from trying to scam someone, but you can be careful not to fall for his tricks. Every crypto user can avoid failing victims of scammers by being very careful, carrying out extensive research before investing and also making sure that he/she doesn't give out his personal information online.

Thank you professor @yohan2on for this lesson.

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
STEEMKR.COM IS SPONSORED BY
ADVERTISEMENT
Sort Order:  trending

***Respected first thank you very much for taking interest in SteemitCryptoAcademy
Season 3 | intermediate course class week ***

CriteriaCalculation out of 2remarks
Presentation/quality1.7thank you very much for taking participate in intermediate class course
Originality2/2
Compliance with Topic1.6
Clarity of Language1.6
Quality of Analysis1.7
Grand total8.6looking good

thank you very much for taking interest in this class