Risks of Holding Crypto Assets: How to be Safe?

  • January 19, 2023
  • Admin_Blockchain
Risks of Holding Crypto Assets: How to be Safe?

Crypto is a booming industry, and obviously a target for crypto scammers. Phishing scams, ponzi schemes, to pig-butchering, there are several ways scammers take benefit of the unregulated industry. 

Also Read: Hong Kong Finalising List of Digital Assets for Retail Crypto Trading

The FTX Collapse 2022 Shook the Investor Confidence

While several users believe that centralized exchanges are safer, they are rather most vulnerable to attacks. Since centralized exchanges, centralizes the user assets storage, they are a primary target for cybercriminals. If a centralized exchange so not have high-end security measures, the user assets might get stolen. 

Another possible problem with centralized exchange is the misuse of assets by the operators. Since with centralized exchanges, there is only a single point of control it leaves them vulnerable to misconduct and other types of fraud. This can lead to poor consequences for the users. 

Over the years, the Celcius, and FTX, were the huge centralized exchange platforms for the users choosing self-custody or the use of cold wallets for asset storage. The alleged fraud and risky financial business conducted by the exchange platforms have caused people to lose faith in exchanges to store their cryptocurrencies. 

When the users are themselves in charge of their cryptocurrencies, they have sole control rather than depending on third parties. However, wallets can also be dangerous and vulnerable to crypto scams. Here in this article, we will discuss the different types of crypto scams in the industry and how to avoid them. 

Also Read: Blockchain Technology in Education Industry: Advantages & Challenges

Different Types of Crypto Scams: How to Avoid it?

If you are in the crypto industry, it is important to understand the dangers of being in charge of your own digital assets, and how to secure yourself from scammers. According to Alice Boucher from Chainabuse (a community platform for fraudulent crypto transaction reporting), pig butchering is one of the most common scams the criminals aim for crypto users. 

She stated, “a pig butchering scam is when the scammers stay in touch with the customer to build a relationship and convince them to invest in fake projects. They try to take as much money possible from the victim, using social engineering tactics to get as much money possible from the crypto user.

Social engineering tactics include manipulations and intimidation tactics that destroy the real nature and tendency of human curiosity and trust. 

Cybercriminals in the crypto industry usually aim to setal assets that are held by the crypto users usually belonging to a high profile. Boucher stated that “between the months of May to August in 2022, social media account takeovers involves Discord, Twitter, and Telegram that have wreaked havoc as the scammers post malicious NFT phishing links during these attacks by compromising high profile or celebrity social media accounts.”

How the Scammers Steal Cryptocurrencies from users?

Once the attackers access a high-profile account they send out phishing messages and malicious communications to several people to trick them into giving up their login credentials, private keys, and other important information. Their main goal is to access the assets of these accounts and steal the currency.

Sometimes the victims are sent malicious links which trick them to transfer their tokens from their wallets. Sometimes, these scams involve the users using trading platforms and investing resulting in the loss of deposits with no recovery plan. Alice Boucher stated that “the number of hacks, scams, frauds, and blackmail activities are growing at an exponential rate over the years. The majority of the fake platforms end up becoming Ponzi schemes, with fake return advertisements, shares referral incentives that look like pyramid schemes, and impersonate the present popular legitimate trading platforms.

The scammers use phishing tricks to encourage the users to sign up for smart contracts that end up draining all their crypto assets without any consent. Smart contracts conduct transactions with an agreed plan between seller and buyer with a readymade code. Users often lose their tokens if there are any errors present in the code as its usually designed to conduct malicious activities. The majority of the time, the users do not know that they have lost their tokens until it’s all gone. 

How to Be Safe With Your Assets?

One of the great ways to take control of your cryptocurrencies is self-custody. However, it is also important to understand the risks and the ways to protect yourself from scammers. When you plan to protect yourself using a crypto wallet, it is important to keep the software updated and use unique passcodes. It is crucial to use hardware wallets or cold wallets to store cryptocurrencies. Since hardware wallets are physical and require you to hold a private key offline which means that a hacker requires physical access to conduct interactions with the blockchain with fewer chances of being hacked or scammed.

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