Despite the recent declines in the value of Bitcoin, with the ups and downs of many other cryptocurrencies, the world of digital currencies (the so-called cryptocurrencies) continues to interest professionals and new potential users: precisely in light of the recent peak that Bitcoin touched, the value of More than 60 thousand dollars for 1 BTC (and at the time of writing at a price of 30 thousand dollars), the activity of criminal organizations that intend to obtain huge profits through fraud and other offensive schemes has intensified.
Bitcoin Tricks: Cryptocurrency and Security
Among the major innovations that some cryptocurrencies have brought, There will also be greater transaction security, also due to the anonymity and theoretical inviolability of the blockchain. If these elements help pique the interest of early investors, in practice we now find ourselves facing a very complex scenario that must be managed.
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The most recent event to gain media coverage was the theft of $32 million in cryptocurrency by a project called DeFI100. The news was initially published on Twitter, before being published in several other small newspapers and published on Yahoo Finance, one of the most famous names in the sector.
The legitimate directors of the project tried to deny the news and were quick to deny the authenticity of what was reported. Unfortunately, as often happens in the field of finance, the damage was already done and the price of the cryptocurrency associated with the DeFI100 project has already fallen significantly.
This last and striking example should reinforce the notion that this region, however promising and high-tech, is still vulnerable to unfair practices aimed at polluting the market.
In addition to the damage to investors, the activity of crypto gangs makes the scenario even more alarming, given the high risk of falling victim to a scam.
DeFi: What is Decentralized Finance
It is useful to remember that the DeFi100 project is a practical application of the so-called decentralized finance (DeFi, Decentralized Finance, in fact), whose goal is to reduce or eliminate financial intermediation thanks to smart contracts implemented on the blockchain.
In simpler terms, decentralized finance is a financial services ecosystem that aims to reduce or eliminate middlemen in operations through the use of decentralized computer networks.
Depending on whether the process of decentralization and decentralization of the service is partial or total, we are talking about “weak” or “strong” DeFi. “Weak” DeFi uses “traditional” peer-to-peer platforms; DeFi is the “powerful” of distributed ledger technologies (distributed ledgers), including Blockchain.
In particular, in the case of “strong” DeFi, smart contracts are integrated into the blockchain, i.e. computational functions of the “if-then” type that allow automatic execution of clauses and transactions when certain conditions are met.
DeFi is also defined as a movement of open source and transparent financial services, accessible to all and independent of any central authority.
The total value of DeFi is calculated by Defipulse.com based on the value contained in smart contracts for the most popular protocols and applications: at the beginning of this year, it exceeded $23 billion.
Risks of decentralized finance
Obviously, this real influx of capital makes decentralized finance a major area of business for hackers and scammers of all kinds.
A recent report prepared by encryption Reports DeFi “Rug Pulls” Fraud and Scams to cheat It accounted for 99% of all cryptocurrency frauds in 2020. DeFi-related hacks accounted for more than 60% of the total volume of hacks and thefts in 2021, an increase of 25% from 2020.
The “rug pulls” scamIn particular, they represent a new fraud situation where fraudsters (in some cases the same cryptocurrency developers who abandon a project and escape investors’ money by removing purchase support or a liquidity pool on a decentralized exchange (DEX) from the market) actually drain liquidity from the protocol. Cryptocurrency without somehow investors being able to respond.
Hence the name of the scam which best represents the process of removing the carpet from under the feet of users by escaping with money.
Most Popular Bitcoin Scams
Also in light of this, it is clear that anonymity of transactions is one of the major ethical dilemmas. Unlike most transactions that we do every day, in the case of cryptocurrencies we not only know who we are dealing with, but we can’t even know.
As we saw above, individual investors can fall into the temptation left by the so-called “whales”. These whales are big investors who buy large amounts of one or more cryptocurrencies to increase their prices. This increase in value indirectly attracts small investors, which leads to further upside. With profits taken, whales can return to the depths and leave the little “fish” to account for losses.
But offensive conspiracies continue to develop: among the latest news we can mention the scam based on the sale of “mining schemes” and which also provides for the payment of commissions to investors who manage to engage new interested people.
Cryptocurrencies in previous schemes are also rejected as in the case of BitClub Network. This network essentially hid a Ponzi scheme that stole a total of $722 million from investors from different countries.
As in the scam declared by our compatriot, the initial cash flow is used to pay interest to the first investors, which helps to self-fuel the phenomenon until the great escape with plunder.
E-wallets and fake platforms
Among the other pests of the “crypto” world, we cannot fail to mention the existence of many fake wallets and trading platforms that can literally disappear into the air overnight (bringing with them millions of dollars from different types of investors).
Investors are joining opaque platforms because they are drawn to essentially unparalleled earnings prospects with less “modern” investment alternatives.
In some cases, the main objective of these platforms is to make their users fall victim to a fraud scheme, while in others, trading activity, stop loss or even simple take profit is limited by the application of very high commissions.
How to Defend Against Bitcoin Scams
The key word is awareness. Awareness and training are the only real antidote to such a dented landscape. From a practical point of view, we advise all people who are interested in investing in this type of financial instrument to carefully check the reliability of the platform before completing any type of transaction.
Since this is a fairly recent phenomenon, it will be impossible to find specialized cryptocurrency trading platforms that have been active for decades. Having said that, it is recommended to only subscribe to the most established and premium ones.
Awareness can also translate to prudence, in the case of fraudulent schemes (such as those of “giveaways” or giveaways) that are fed on social media. It is always better not to believe messages that promise a variable amount of cryptocurrency, than a simple registration. The information disclosed (such as an email address) can be exploited to engage in more complex crimes, for example on the basis of phishing.
The second key word, when it comes to financial matters, is due diligence. This means running your own checks, checking the reliability of information on impartial external sources, and questioning promises that sound too rosy to believe.
Let’s not let our guard down.
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