Fraud prevention in crypto 101 – Today, one of the most frequently asked questions in the crypto community may be: “are cryptocurrencies safe?” Safety is essential for every person. In the 21st century, with the development of technology and the Internet, there are a lot of identity thefts, hacks, scams, and so on, and not every kind of fraud is shown in the evening news.
Crypto purchases can be one of the most significant decisions in life and can be very profitable if the investor is thorough about fraud prevention. However, the most popular and earliest crypto coins were launched more than ten years ago, but the crypto and bitcoin boom began just a couple of years ago. The peak was in 2017 when the Bitcoin price exceeded 20 000 dollars, and a lot of people who never believed in bitcoin before were purchasing BTC. You can check this out here. The price of bitcoin was gradually declining, but the media and newspapers were still writing about bitcoin, so we can say that it was a win situation for bitcoin. However, the more popular bitcoin became, the more people were asking, “is bitcoin safe?”, “is bitcoin legitimate”?
All cryptocurrencies are volatile. Some are a lot volatile, while others possess low volatility; even bitcoin is volatile, so that makes people doubt the reliability of crypto investments. At the same time, there have been massive hacks and a lot of scam organizations going viral in the media, and people once again doubted the safety of crypto. From big investors to small investors who want to invest only $1000 in bitcoin, people can’t believe what to believe: the media or the crypto experts from various crypto companies. To really answer the previous question, one needs to understand fraud prevention methods and technologies to estimate how safe crypto is.
Is it safe to buy crypto?
Even when we talk about fiat money, such as USD or euros, there is no such thing as a completely safe investment. Some investments are safer, and others have many risks for the investors, but investment means there is some risk. However, because crypto coins and tokens are highly volatile, that involves more risks. In other words, when you invest in cryptocurrencies such as Bitcoin, Ethereum, or Tether, then there can be significant losses or a great deal of profit. It depends on luck, one’s knowledge of the market, and fraud prevention. Most traders understand that purchasing and trading cryptos involve many risks, and they are responsible for their method of investing and their own losses.
New cryptocurrencies appear every day, but they have different technologies, and blockchain systems, and are created differently. So, suppose you’re a crypto newbie and want to buy cryptocurrency. In that case, you should make a careful and thorough background check before making the final decision to invest, such as reading this article about fraud prevention. Also, it is better if you check the following:
Who is the founder of cryptocurrency?
What exchanges are the cryptocurrencies traded on?
Is the crypto exchange you chose safe?
What are the screening processes?
These are the least you should check and analyze before spending your savings on crypto.
So, we discussed earlier that cryptocurrency investment is quite risky. Moreover, cryptocurrency is vulnerable to hacks and cybercrimes. The more crypto is becoming widespread and mainstream; the more likely hackers will try to attack it. Unfortunately, recently there were a few cryptocurrency high-profile cyber-attacks; thus, coin owners couldn’t return their crypto.
The most probable hacks places are public exchanges and wallets, which are often targeted by scammers. According to studies, cyberattacks targeting exchanges and wallets are 30% of all the frauds involving cryptocurrencies. Many people unluckily lost their crypto coins because they chose the wrong crypto exchanges. So these scams could have been prevented. Here’s a little tip: the best method to store your cryptocurrency safely on a ‘cold-storage device’, which means offline.
How to protect yourself from fraudulent actions?
The need for protecting yourself from crypto fraud is to secure your identity and prevent identity theft. So before starting to invest in bitcoin, you should be worried about its safety. Bitcoin is very secure, but some fraudsters are trying to ruin bitcoin’s perfect reputation. What is identity theft? Identity theft is when someone pretends to be you online after phishing your passwords and hacking your PC or notebook. Here are some helpful tips to prevent yourself cryptocurrency identity theft.
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Protect your bitcoin private security keys.
What is a private key in cryptocurrency? It is usually a long number you should save or write down. The private key allows anyone who has it to access your coins, so it’s easy to name it one of the most important elements of your funds’ safety. Here comes the use of bitcoin wallets. They store your private keys and connect to all crypto addresses that have been generated for your bitcoin wallet. So, when you open a crypto wallet, this number, which is usually 256-bit long, is randomly given to you.
You need to treat your private keys as if they were your hard-earned money. You can choose one of the two options: store your key on your computer or print it on paper. Always remember that the person who has your bitcoin private key can spend your bitcoin in the way they like. Even if you have saved your key on your PC, it is recommended to have an offline backup of your private key.
Believe it or not, but some people lose their private keys to fraudsters. They can contact you through email or phone or try to have access to your personal computer. So it is vital to keep your computer, iPads, and smartphones safe and have up-to-date antivirus software. It is also even better to store your key only offline or maybe keep it on a USB drive. To be twice as careful, you can put your private key on a piece of paper in a safe deposit box.
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Your priority is to keep all your passwords secure
A lot of people generally use online services to store their cryptocurrencies. To access those cryptocurrencies and do something with them, you need passwords. The easiest way for fraudsters to have access to those online services is to get into your email. Using your email account, they can reset your password to the online services where you keep your coins. It is actually very simple to prevent this kind of troublesome situation: always use two-factor authentication for your email addresses and the online services you store your crypto. Moreover, never use one and the same password for all your accounts.
Regulation of cryptocurrency
At the beginning of the cryptocurrency industry, it was mainly unregulated. However, within a few years, KYC became a must for official crypto companies. KYC stands for know-your-customer, and it involves the identification and verification of clients by crypto companies. This is a commonly used term by banks, government organizations, and crypto markets. KYC had been applied to cryptocurrency businesses to prevent money laundering by using cryptocurrencies. KYC has lots of benefits, and it fights cybercrimes. Most reputable crypto exchanges have KYC processes and verify their customers before opening an account.
Additionally, crypto and blockchain projects are regulated by the GDPR (European Union’s General Data Protection Regulation). For example, Indacoin, London-based world’s pioneer fiat-to-crypto exchange services, is compliant with KYC and GDPR and always improving its anti-fraud technologies and developing new strategies. Indacoin has been operating since 2014 and is the leading fraud-prevention exchange.
Conclusion
To sum up, crypto companies and their clients pay a lot more attention to fraud prevention in the last few years than a decade ago. Crypto exchanges and wallets are undergoing many regulatory changes and implementing new anti-scam technologies. However, people still doubt the security of their crypto assets. To make sure that your crypto coins are kept safe and secure, you must:
- Protect your private key at all costs;
- Save your private key offline if that’s possible;
- Choose crypto exchanges that are regulated by KYC and AML procedures.
Even when it comes to fiat money, there is always a risk of loss and fraud, so don’t be afraid of investing in crypto. By carefully deciding on your actions and transactions, your cryptocurrency will be pretty much safe.