@ croxroadnews
2024-11-20 12:12:12
Since the beginning of 2021, Bitcoin and other cryptocurrencies have been all the rage, and a record number of investors are beginning to get caught up in the excitement of the market. And although the opponents do raise a lot of fascinating points about the sustainability of cryptocurrencies in the long run, it cannot be denied that some people have amassed enormous fortunes via the use of cryptocurrencies. However, one of the aspects of crypto investing that has been largely ignored is the risk associated with owning crypto investments. This is not the risk of experiencing a loss of capital, which has received a lot of attention, but rather the risk of falling victim to a scam, being tricked, or having your investment stolen entirely. In this article, we'll look at some of the biggest cyber risks that come with investing in cryptocurrencies.
**Crypto Theft**
Cryptocurrency is not a physical good in the same way that a dollar note is. Only in the realm of simulation does it exist. Just like your online bank account, it is susceptible to theft in a variety of different ways due to the nature of the situation. Even though the chances of a single person being a victim of cryptocurrency theft are low, the rate at which the crime is happening overall is alarmingly high.
According to Crystal Blockchain Analytics, between January 2011 and December 2021, security breaches resulted in the theft of $3.18 billion, while hacking of DeFi networks resulted in the theft of $1.76 billion. Cryptocurrency assets that are stored in crypto wallets are, for the most part, protected from theft. They can be accessed in no other way than via the use of private keys, which are only known to the owner. These "keys" are made up of long sequences of letters and numbers, very much like passwords. But hackers have creative methods of breaking into your private wallet, and this is true regardless of the sort of password mechanism you choose. The following are some of the more typical ones:
**Phishing**
There are many different variations of phishing scams. The creation of websites that are substantially similar in appearance to websites that you are already acquainted with in the hopes that you will click on them is a typical tactic used by hackers. For instance, if you check your cryptocurrency account on a fictitious website such as "cryptocurrencyholdings.com," hackers may develop a website that looks quite similar to the real one but lacks the "s." This website would be called "cryptocurrencyholding.com." Other manifestations of this assault take the shape of fraudulent Google advertising designed to seem like genuine cryptocurrency wallet websites. If you aren't careful, you might end up entering your cryptographic credentials or any other crucial information on the website belonging to the hacker.
Suppose you get a message from a website that seems to be genuine, requesting you to change your login credentials or password for security concerns. In that case, this is an example of phishing, which is another widespread kind of online fraud. If you click on the link, you will be sent to the website of a hacker, where they will be able to steal your information and access your cryptocurrency.
**SIM Swapping**
Two-factor authentication, often known as 2FA, is a method that businesses use to attempt to improve their cybersecurity by asking users to reply to a notice that has been sent to either their phone or their email in the event that their account is accessed. Conversely, clever hackers may circumvent this security by either cloning your SIM card or phoning your phone carrier and persuading them to switch your number to their SIM card. Both of these methods are described below. After that, they will be able to get into your cryptocurrency account and "confirm" that the login is legitimate by using the two-factor authentication app on their own phone, rather than yours.
**Crypto Scams**
Scams using cryptocurrency have caused customers to lose much more money than traditional thefts of cryptocurrency. According to statistics provided by Crystal Blockchain Analytics, the total amount of money lost as a result of fraudulent cryptocurrency transactions between January 2011 and December 2021 is estimated to be a staggering $7.21 billion. Read up on some of the most common techniques that con artists try to trick people out of their cryptocurrencies so they may steal them from them. This can help you avoid falling victim to fraudsters.
**Pump and Dump**
The swindle known as "pump and dump" did not originate in the cryptocurrency era. In point of fact, this strategy ranks up there with some of the earliest examples of attempts to manipulate the stock market. Simply said, an "authority," who may be a talking head, a group of message board leaders, or an influential member of the cryptocurrency community, will speak up for a new coin as "the next big thing." When news gets out, it generates its own momentum, and when additional investors buy into the cryptocurrency, the price climbs even more quickly. Once it has reached a considerable gain, the initial touts will dump their cryptocurrency, which will drive the price down and put a stop to the euphoria. However, small investors will be left holding the bag.
**Rug Pull**
The "rug pull" is a close relative of the "pump and dump" plan, and the two con jobs have a number of similarities in common. Scammers drive up the price of a cryptocurrency in either scenario until it is time to pay out, leaving the investors holding the bag. On the other hand, the rug pull involves the creation of a cryptocurrency with the sole intention of cheating investors. Once the real cryptocurrency is traded in for the scam cryptocurrency, the authors of the scam cryptocurrency remove all the liquidity, and the value of the coin often sinks to zero. According to Chainalysis, the overall value of rug pulls will reach $2.8 billion in 2021, representing a huge increase from 2017. This accounted for 37% of the total money generated by scams in 2021, a significant increase from just 1% in 2020.
**Scamming Yourself: Forgetting Your Private Key**
If you forget your private key, you run the risk of losing access to your cryptocurrency assets, which is likely one of the most unpleasant ways to do so. Suppose you lose your private key to your digital cryptocurrency wallet. In that case, it will be impossible for you to access any of your cryptocurrency assets since these wallets are decentralized and not connected to any one bank. The majority of wallets lock permanently after a predetermined number of failed login attempts, preventing you from ever regaining access to your bitcoin.
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*DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.*