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Tips to avoid Bitcoin scams

Bitcoin is a new and innovative technology. Many of the world's brightest minds are working to build an infrastructure with which Bitcoin will improve the lives of many through convenience and security by providing solutions to real world problems in the finance industry.

Unfortunately, there are also many scam artists out there who are looking for creative ways to steal your Bitcoin. In this article, we will give you a few simple tips to avoid falling prey to these scams.

The ponzi or pyramid scheme is popular in the Bitcoin space at the moment and is defined as follows:

"A fraudulent investing scam promising high rates of return and little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop." - Investopedia

Skepticism is your best defense

It is important to note that Bitcoin transactions are irreversible and therefore, once you've sent your Bitcoin to somebody, you cannot reverse the transaction. Look for indicators of legitimacy before sending your Bitcoin to anybody. If the website or service provider has no contact details whatsoever listed on the site, it is not a definite indicator of fraudulent intentions but it is a red flag.

Time limits

When it comes to fraudulent activity, criminals will usually attempt to convince you to act quickly to avoid missing big profits or high returns.

Pay in advance

Not all services providers are fraudulent. One thing that is true of every scam however is that the victim is required to provide money up front, often before receiving any real details of the service or returns or identifying information of the person or company to which the money is being sent.

Promises of quick profits

Because Bitcoin is a rather new technology and many users are not familiar with all its technical intricacies, scam artists will try to convince you that unbelievably large returns on investment are possible in a very short period. Although Bitcoin and other cryptocurrencies are highly volatile and speculation can result in extraordinarily big gains (and losses), sending your Bitcoin to an anonymous third party who claims to have discovered a "loophole in faucets" or a "small but significantly exploitable security flaw" is never advised.

Common sense

If it sounds too good to be true, it probably is.

Do not be hesitant to ask questions

A helpful tip to discover the reputation of a website or somebody who wrote you an email is to do a Google search for the URL or sender. Often, you'll find posts from others who have used the same service stating whether they experienced any difficulties. From these opinions, you will be able to draw a more accurate conclusion.

Scam artists will often try to convince you that their methods of generating a return for you are "a secret", or obscure or too technical to explain. They will often use very technical language or, in fact, very poor language in an attempt to dissuade their victims from enquiring into the details of the operation. This ties in very well with the "time limits" mentioned above and together, these form a creative method to convince you to part with your wealth.

Please be skeptical and prudent with your money. Although Luno cannot vouch for nor comment on the legitimacy of any other Bitcoin service, we always do appreciate being notified by our customers in the unfortunate event of a scam being discovered.

If you have any information regarding a Bitcoin related scam, please contact us.

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