Navigating the Crypto World: Tips for Avoiding Scams

Despite the belief of many crypto enthusiasts that centralized exchanges (CEX) are more secure, history has often shown them to be rather vulnerable to attack.

Since these exchanges centralize the storage of user assets, they can be attractive targets for cybercriminals. If an exchange’s security measures are inadequate or successfully compromised, user assets can be stolen or lost.

Another risk of centralized exchanges is the potential for fraud or mismanagement by their operators. Because CEXs may have a single point of control, they may be more susceptible to insider fraud or other forms of misconduct, which may result in loss of funds or other negative consequences for CEXs. users.

Over the past year, with the collapse of major centralized cryptocurrency platforms such as FTX and Celsius, more and more users have opted to take charge of their digital assets themselves. The risky financial practices and alleged fraud committed on some of these platforms have caused many people to lose faith in them as safe places to store their cryptocurrency.

Self-custody refers to holding and managing one’s own cryptocurrency instead of entrusting it to a third party, such as an exchange. This approach gives users greater control over their assets and can potentially provide higher levels of security. However, it also comes with its own risks, especially in the form of scams.

Types of scams and how to avoid them

To better understand the potential dangers associated with self-custody and offer advice on how to protect against scams, Cointelegraph reached out to Alice Boucher of Chainabuse, a multi-chain community platform for reporting fraudulent crypto transactions.

A scam aimed at taking advantage of crypto users is called “pig butcher”.

“A pig butcher scam occurs when the scammer stays in constant contact to build a relationship with the victim and affectionately ‘fatten’ them up over time to get them invested in bogus projects,” Boucher said, adding :

“The scammer tries to drain as much money as possible from the victim, often using fake investment sites showing big fake profits and using social engineering tactics, such as intimidation, to extract more money from the victim.”

Social engineering uses psychological manipulation tactics to exploit the natural tendencies of human trust and curiosity.

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Cybercriminals in the cryptocurrency industry often aim to steal assets they hold by taking control of high-profile accounts. “Between May and August 2022, takeovers of social media accounts – involving Twitter, Discord and Telegram – took their toll. Scammers post malicious NFT phishing links in these attacks, compromising high profile social media accounts,” Boucher said.

Once these attackers gain access to a high-level account, they typically use it to send phishing messages or other types of malicious communications to large numbers of people, trying to trick them into giving up their keys. privacy, login credentials or other sensitive information.

The end goal is to gain access to own assets and steal the cryptocurrency held by the individual.

Subscribers of these high profile accounts may be tricked into clicking on malicious links that transfer all tokens out of their wallets. These scams can also be designed to get users to invest in a trading platform and often result in the victims losing their deposits with no way to recover them:

“The volume of scams, hacks, blackmail and other fraudulent activities has grown exponentially over the past few years. Most fake platforms appear to be either Ponzi schemes or payment scams with the characteristics following: they advertise fake returns, have referral incentives that look like pyramid schemes, or impersonate existing legitimate trading platforms.”

Scammers using these phishing tactics can encourage users to sign smart contracts that drain their assets without their consent. A smart contract is a self-executing contract with the terms of the agreement between buyer and seller written directly in code.

If the contract contains errors or is designed to take advantage of people, users may end up losing their tokens. For example, if it allows its creator to take possession of tokens to resell them, users risk losing cryptocurrency by signing it.

Most of the time, users don’t know they’ve lost their tokens until it’s too late.

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Self-custody can be a great way to take control of your assets, but it’s crucial to understand the risks and take steps to protect yourself from bad actors.

To protect yourself when using a self-service wallet, it’s important to follow best practices, such as keeping software up-to-date and using unique passwords. It is also crucial to use hardware wallets such as a Ledger or Trezor to store your cryptocurrency. Hardware wallets are physical devices that store your private keys offline, which means a hacker also needs physical access to engage in certain blockchain interactions, making them less likely to be compromised. pirated.