Cryptocurrency is a virtual form of currency backed by blockchain technology with no centralised authority. Bitcoin, the first cryptocurrency issued, enjoys wide usage among investors and currently has the largest market capitalisation than others. Nowadays, Bitcoin is not the only cryptocurrency existing. There are lots of others, even more popular, among which Litecoin, Dogecoin, Dash, Etherium and others.
As a result of its decentralised structure, cryptocurrency enjoys a particularly pleasing appeal to many investors and industries like online gambling. As such, casinos like no wagering casino UK have started using cryptocurrencies among the first. These casinos give players the opportunity to use bonuses without the wagering requirements, and after winning, the user can choose a useful method to withdraw his money. Cryptocurrency is always an option for UK players as this is how they can get their money faster and avoid any additional fees to the bank system.
But while cryptocurrencies are useful for a variety of purposes, they equally have some downsides too. For instance, Rugpulls, Pump and Dump schemes are common risks associated with using cryptocurrency as the technology remains increasingly risky to use. Further, you will read about all the recommendations about how to decrease your risks.
Top 3 Major Risks of Using Cryptocurrency
It is very important to take care of your own security, no matter what you do on the internet. Trading or making any other deals with cryptocurrency is not an exception. Moreover, as this currency works without the regulation of the bank system, it may be quite dangerous to skip the rules of making the transactions safe. In this article, we’ll highlight security concerns with having to use cryptocurrencies while providing a guide on how you can protect your account from potential cybersecurity breaches.
Crypto’s biggest advantage for investors equally doubles as its troubling Achilles Heel. Daily, cryptocurrencies experience fluctuating prices, and unlike fiat currencies, it makes them useless for short-term reasons. Although this works best for sole long-term investment purposes, it is practically redundant as a functional means of exchanging value. Cryptocurrencies are volatile for several reasons:
- Newness. Cryptocurrencies are relatively new assets. Bitcoin is the first cryptocurrency and was launched in 2009. This contrasts with fiat currencies like the Dollar, Euros, and Pounds with several years of existence and a reputation of trust and reliability. However, cryptocurrency is still somewhat seen as a bubble of some sort and has not received wide consensus worldwide.
- External Events. Although fiat currencies are vulnerable to externalities, crypto is increasingly more vulnerable. Most times, perceived rumours about a struggling coin are enough to send the crypto world into a hailstorm, consequently affecting the market and sending prices to shivers. A typical example is the current implosion of bitcoin, which plunged to record new lows following an increase in Fed’s rates.
- Herd Mentality. The majority of people investing in cryptocurrency do so out of panic. They are often naïve and act based on impulse and the fear of not missing out (FOMO). As a result, their trading decisions are largely mimicry, that is, selling when other people sell and buying when others buy – further causing increased volatility.
Rugpull is a cryptocurrency scam where an initially anticipated project becomes valueless with investors carting away people’s funds. This happens when developers create a new crypto project, raise the prices, and then abandon it while leaving investors with a valueless project. The three different types of Rugpulls are:
- Liquidity Stealing. Liquidity stealing is when token creators withdraw the coins in a liquidity pool. A liquidity pool is a smart contract that locks to ensure liquidity in a decentralised exchange. By withdrawing all the tokens locked, the coins’ value inevitably plummets, driving it to zero as investors inherit a worthless coin.
- Limiting Sell Orders. This is a malicious way of defrauding investors by using closed-source programming codes. Developers often do this by programming codes only self-accessible. Afterwards, they wait for investors to buy the token with paired currencies. Then, once there’s a positive price movement, they dump their positions while investors’ assets plummet.
- Dumping. Dumping refers to a large share of crypto sold by developers, which affects a coin’s supply as its prices plunge. Dumping is often a result of a heightened promotion on social media platforms. This cryptocurrency scam is popularly regarded as the “Pump and Dump” scheme.
Bitcoin Investment Schemes
Bitcoin investment schemes are pretty popular in the crypto space. It works by dishonest scammers cloning as experts investment managers, claiming to have grand portfolios in millions of dollars. They then persuade people to follow their blueprint also to succeed. They often request an upfront fee and subsequently request personal information like personal identification information while gaining access to their cryptocurrency. Another popular trick is manipulating people via fake celebrity endorsements. This happens by scammers taking real photos of celebrities to make it seem like the celebrity endorses the investment, thereby swinging scores of people into investing. But, of course, in reality, it is a hoax investment.
7 Safety Tips To Prevent Crypto Fraud
Nowadays, cryptocurrency is considered to be the one that provides an additional level of security to the user, though frauds may still happen. Are you wondering how to prevent Crypto fraud? Below are the top best seven ways to prevent you from Crypto fraud.
The first tip is to understand what Bitcoins are. As previously noted, many people impulsively lurch into buying cryptos with no prior knowledge of what the technology is, what it aims to solve, and how it practically works. Unlike fiat currencies, Bitcoin requires in-depth understanding. It is decentralised, which means it is neither governed by the central bank nor a country. Additionally, Bitcoin is intangible. That is, it is not printed on paper as it solely relies on algorithms and cryptography. Furthermore, cryptocurrencies operate within a technology known as the blockchain, which is open-source and immutable. It is like a public ledger recording all transactions made. Literally, the knowledge repository of cryptocurrency is almost inexhaustible. As such, you need to have a firm grasp of the technology to start using it.
Choose An Appropriate Crypto Wallet
Perhaps the most crucial hack to note is to have a safe, secure and accessible wallet. Your wallet needs will differ depending on how frequent you plan to use cryptocurrency and where you want to use the virtual currency. Typically, there are ultra-accessible and ultra-secure wallets. The easier its accessibility is, the more vulnerable you’re to theft and hacks. However, you can use a dual wallet structure. That is, using an offline and online wallet.
The table below explores the various types of crypto wallets available for use when trading cryptocurrencies. As advised earlier in this article, it is safer to use multiple types of crypto wallets to prevent yourself from possible cyberattacks.
|Types of Crypto Wallets||Details|
|Online Exchange Wallets||The Online Exchange wallet is the most basic and least secure wallet. It is simple to use but risky as a sole wallet choice.|
|Online Third-Party Wallets||One of the most convenient third-party wallets is hosted on a third-party site, and if there’s a case of theft on the exchange, your wallet remains unaffected. However, since your passwords and keys are still stored on the site, you’re susceptible to theft, making them risky.|
|Hardware Wallets||Hardware wallets remain the safest option. Nevertheless, they are not as convenient and easily accessible. To use hardware, you’ll need to connect the computer via a USB drive. Unlike previous wallets, hardware wallets provide utmost security since your details are not open for external access|
VPN, otherwise regarded as a virtual protection network, is a security protocol that helps hide your information when surfing the internet. It technically masks your identity and other user-sensitive details, such as your location.
However, while VPN considerably protects you and your details, you must be careful when using this network, especially when you trade cryptocurrencies. Usually, not all VPNs are safe. Some can be self-sabotaging, stealing your information and indirectly exposing you to even higher risks.
Cryptocurrencies are relatively new assets. Starting in 2009, Bitcoin, the first cryptocurrency, was introduced, and its offshoots spread quickly. Of course, cryptocurrencies have been hailed for the nobility in their objectives, but their implementation is still increasingly challenging. They are highly volatile, making them useless as a functional currency. Still, industries like gambling have readily embraced this technology as a medium of payment. However, it is largely fancied because of its anonymity and encrypted nature. But, with cryptocurrencies, the theft risks even loom larger. It is a free pass for scammers to perpetuate frauds indiscriminately without regulation. Nevertheless, you can start using crypto assets without fear by taking the succinct guides we have provided.