Cryptocurrency or crypto is a virtual, decentralized, and encrypted currency. Some people use crypto to make purchases online and in person while some prefer to use it as an investment. One thing to note about crypto is that it's not backed by a government or bank. Crypto does not rely on banks to verify their transactions as it is decentralized. This makes crypto transactions not reversible and difficult to trace back. This part is what scammers absolutely love.
How Does It Work
Instead of relying on banks for verification, crypto uses blockchain technology. This is where every transaction is recorded on a public ledger that is freely viewable by anyone. The public ledger is also distributed among many nodes. This can make it very difficult for people to hack the ledger and steal your funds without your permission.
Safety Tips
Never send payment to anyone unless you know who it is. Even if you are sending crypto to someone you know, it is important to confirm the address is accurate as a wrong character or number will send your crypto to a stranger. If anyone demands payment from you in crypto, it is most likely a scam. These do not have the legal protections that a credit card would offer.
Scammers will also try to trick you by saying you have won a crypto contest that you didn't enter. In order to claim your "prize", you will need to provide your personal financial information. You will never receive the "prize" and the scammers will end up with your funds or identity.
Storing Virtual Money
In order to access your crypto, you have to have your set of private keys. These keys can be stored on a hot wallet or cold wallet. The hot wallet stores your private keys in software and can be quick and convenient but also introduces the risk of being hacked. A cold wallet is a hardware device that stores your private keys. These cannot be hacked unless someone has possession of your physical device.
You should always purchase your cold wallet, also known as a hardware wallet directly from the manufacturer. Scammers will often sell altered hardware wallets on eBay and Amazon. Once you purchase one of these wallets and transferred your crypto to it, the scammer will drain your account.
Your private keys are generated from a set of 12 or 24 words also known as your seed phrase. You should never share these words with anyone or store them in a digital manner as they can be hacked and your crypto funds will be stolen. You should also make sure to have a secure backup of your seed phrase. Due to the decentralized nature of crypto, if you lose your seed phrase and access to your private keys, there is no one that can help you recover your account. This means that you will lose access to your crypto.
Crypto has been making big headlines in the market and this attracts many new entrants. Many of these newcomers are easy prey and may not understand the technology or how to stay safe using this form of currency. Make sure to do your research so you don't fall victim to some of these trendy scams.
Comments