The Ultimate Guide to Protecting Yourself in the Crypto Space

Sudarshan M

@Sum

The year 2008 was the year that the world saw one of the biggest financial disasters since the Great Depression. The Housing market crash slowly but exponentially resulted in a domino effect that took down some of the game’s most significant financial giants. It resulted in the loss of trillions of dollars and economic turmoil for millions of families.

All of that turmoil and financial loss could’ve been averted. Likewise, poverty and job loss could’ve been avoided if there had been more transparency from the people running the game.

Banks and Governments, but mostly the people who control the market, engineered the crash. If it weren’t for their greed and manipulation of the people in power, there wouldn’t have been a crash at all.

And that’s why October of 2008 was a crucial one. The month when an anonymous member of a closed online mailing list came up with a novel idea that would change the face of finance forever.

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In October 2008, Satoshi Nakamoto, an anonymous member of the CyberPunk group, came up with Bitcoin: a P2P e-Cash system. Bitcoin, built on the invention of Blockchain technology, was a mechanism to “decentralize cash” as we know it. The idea of distributing trust and building transparency so that there was no central point of failure was something people had been exploring for several decades. But in that 8-page paper, Satoshi made it seem entirely possible and novel.

It has been about 14 years since Bitcoin was released. It has been 14 years since people worldwide started to realize the importance of a mechanism built by the people and works for the people. So it’s been 14 years, but there are decades or even centuries to go.

The Importance of Being Vigilant

In the 14 years of its existence, Bitcoin and the eventual “cryptocurrency” market laid the foundation for has shown great potential. But then, as in any industry involving power and value, people will try to steal it. Also, the fact that the cryptocurrency industry is highly under-regulated doesn’t help with security and protection. Scams, Ponzi schemes, and quick money promises are seen everywhere among people who are still new to technology.

Within the cryptocurrency market, scams often denote dubious startups, fake initial coin offerings (ICOs), Ponzi schemes, or the dark market. The scammers play on the ignorance and greed of prospective victims to push them into the scam. Since scams are globally prevalent, the area of cryptocurrency and blockchain is no different.

When a particular project seems to lack any practical usefulness and the business idea behind it is suspicious, more often than not, it is a scam. The newfound complexity and unfamiliarity of the sector is a ripe area for all types of scrupulous activities. Therefore, as one considers knowing about and investing in different projects in the cryptocurrency ecosystem, one must be aware of the possibility of losing one’s investments.

Scams – What Can Go Wrong

Scamming is the elaborate process of taking advantage of uninformed individuals or organizations and using their ignorance to get away with their money. Scamming has always been prevalent anywhere money or wealth is involved.

Scams are widespread in the crypto market as well. Through the years, there has been quite a long list of scamming techniques in the crypto market. As the area is developing and, unfortunately, quite complex, it is easy for the few to overwhelm the many by making false promises. All scamming techniques are unique, trying to steal money from innocent investors looking to make a quick buck. The following list is some of the market’s most prevalent and well-known scamming techniques.

• Wallet Hacks

Although it is pretty challenging to do so, cryptocurrency wallets can be hacked if the attackers find an internal way. By internal practices, we mean finding out the password of your phone, cloning your device, getting to know your backup phrase, and so on. Wallet hacks are not that common as they are usually stored offline and carry heavy encryption. If a wallet is hacked, it is generally due to the wallet makers’ negligence, as has happened in the past.

• Fake Social Media Influencers

Sometimes, many influencers and celebrities on social media platforms like Instagram, Facebook, etc., get involved in promoting projects that pay them to do so. Unfortunately, the promoters usually have no idea what they are trying to promote. Celebrities like 50Cent, DJ Khalid, and a dozen others have been known to promote crypto projects and ICO that most probably looked like scams or fraudulent schemes.

• Cryptojacking

In a sense, cryptojacking is a way for cybercriminals to make free money with minimal effort. Cybercriminals can hijack someone else’s machine with just a few lines of code. This leaves the victim bearing the cost of the computations and electricity necessary to mine cryptocurrency. The criminals get away with the tokens.

• Telegram Scams

One of the more common scams these days is the Telegram scam groups and chatbots. People are led to join groups or influencers on telegram that promise to make money for their customers. They make fancy displays showing you their crypto balance, snapshots of their trades, and reviews from past customers, which are usually fake. Later, when a person is convinced and sends them funds, they close up the show and change their credentials, looking for another victim.

• Dusting Attacks

As the name says, a Dusting attack is made by mass sending, or ‘dusting,’ small amounts of cryptocurrency to hundreds or thousands of wallets. Scammers realized that cryptocurrency users do not pay much attention to these tiny amounts showing up in their wallets, and since then started using this to their advantage. Using the small amount, hackers take note of the wallet ID they send to. After dusting multiple addresses, the next step of a dusting attack involves a combined analysis of those various addresses to identify which ones belong to the same wallet.

• Fake ICOs

With the introduction of the ICO or Initial Coin Offering Concept and the constant updates in the Ethereum Ecosystem, scamming has never been easier. ICO scams might be the most difficult to pinpoint as they mostly look like normal ones. The projects carry a fancy website, a broad and unfeasible whitepaper, and promise to solve many problems. Newcomers to the market are easily swayed away by the beautiful and aesthetic presentation of the fake project and readily send money to them in the hopes of exponential return. The developers run away with the money as soon as the time limit is over. According to specific estimates, around 1/3rd of all ICOs in 2017 were fake. One of the major drawbacks is that it does not help that most investors do not have direct contact with the developers behind the project.

• Fake Airdrops

The concept of an airdrop is simple. It involves a business “dropping” negligible amounts of free crypto en-mass to individual wallets. Benefitting from an airdrop usually involves registering through a google form, a Telegram bot, or directly on a project’s website. In a dump airdrop, the developers’ goal is to generate short-term buzz about a token so that people will be eager to buy it when it hits exchanges. Another scamming technique is using airdrops to trail the accounts. By sending an airdrop, one’s account comes into the limelight. After that, standard dusting attack techniques can be used.

How to Protect Yourself

Most scammers are just like wolves in the wild. They will not go after something that will force them to expend much time and energy. Instead, they will go after the weakest links simply because that’s the easiest way and requires the least effort. To ensure you are not the lone victim, go out of your way to ensure your online security is rigid and secure.

Safeguard Your Devices

Use Antivirus

Much of the malpractice that goes on also involves unknown malware that enters your system or mobile. Hackers use malicious code to corrupt your system and gain control over it. For example, some hackers in 2017 hid pieces of code inside an innocent-looking application that mined Monero and other cryptocurrencies by using the hacked computing power. We recommend using a trusted anti-virus that periodically checks and removes malicious applications and code from your system.

Do Not Download Unknown Applications

It goes without saying that to ensure no viruses and malicious applications enter your system, do not download applications from platforms that do not seem trustworthy. It is enticing and cost-saving to download “free” applications. But note that if the application turns out to be something it shouldn’t be, you’ll lose more than the amount you could have spent on the correct application.

Use VPN

Using a VPN while browsing through sensitive information is highly beneficial. When you use a VPN, all your traffic becomes encrypted. As a result, neither the ISP nor nearby coffee shop neighbors can get a single clue about your online activities. A VPN also contributes to your security. As your traffic is encrypted, WIFI hackers can’t hijack your session cookies or steal your plain-text passwords. Although a VPN is not the complete security solution for your coins, it is an essential protection component.

Use Trusted and Offline Wallets

Another important way to ensure your cryptos stay safe is by making sure the wallets you store in our secure and trusted. As the saying goes in the community, “Not your keys, not your crypto,” ensuring that you have direct ownership of your funds is essential. Ensure the wallets you use to give you immediate ownership of your funds. Storing large amounts on your exchange or third-party application is not a good idea as it puts your funds at risk if the exchange or third party is hacked.

Choosing the Right Exchange

When choosing a cryptocurrency exchange, it is essential to balance several considerations. Exchanges are different ways of building security precautions, regulating users, building their network, and building a user experience. Also, it is essential to choose an exchange that meets all the buyers’ needs. One cannot select a compatible exchange right away. So it is recommended that one makes accounts in various exchanges and experiments with all of them before settling on a particular exchange or exchanges.

It is essential to balance several different considerations. Exchanges are other ways of building security precautions, regulating users, building their network, and building a user experience.

Right now, there are more than 500+ established exchanges worldwide. It cannot be easy to pinpoint the proper exchange in all the hassles and complexities. Make sure to settle upon an exchange with the best track record that aligns with your principles. Some are comfortable with centralized exchanges because they are easy to use, while some prefer decentralized ones, as they provide maximum security.

DEX – Decentralized Exchange

A decentralized exchange (DEX) is a cryptocurrency exchange that operates decentralized, i.e., without a central authority. Decentralized exchanges allow peer-to-peer trading of cryptocurrencies. In a traditional centralized exchange, the platform ensures that each buyer is matched with a seller on a first-come-first-serve basis. Centralized exchanges provide efficiency in exchange for privacy. On a decentralized exchange, one can rest assured that privacy is maintained as they control their funds and data. However, they sometimes give up much of the efficiency and liquidity that most centralized exchanges boast.

CEX – Centralized Exchange

For investors looking to enter the cryptocurrency space, a centralized exchange is still the most common means of doing so. Although many cryptocurrency exchange platforms are currently available, it is evident that most follow the standard model and protocol that offers a limited and frustrating trading experience to traders who would love to get more out of exchanges. The main essence of a centralized exchange is that it is the intermediary between user traders’ two roles (taker and maker). As a result, centralized exchanges currently form the cryptocurrency ecosystem’s backbone by bringing most, if not all, of the traction.

You can visit our complete guide here to learn more about cryptocurrency exchanges, their classification, and more.

Securely Store Your Crypto

Hardware Wallets

A Hardware wallet is a physical, electronic device designed to protect an individual’s cryptocurrency funds by securing their private keys. The idea behind hardware wallets is to separate private keys from online storage methods, such as computers or smartphones, which are more susceptible to hackers’ compromise. Storing your private keys offline prevents this, as hackers would have to physically steal your hardware wallet to access a user’s private keys.

The Ledger Series hardware wallets, i.e., Nano S or Nano X, are among the most popular and versatile hardware wallets out there. The Ledger wallets’ best feature is that they are immensely more secure and trustworthy than online or Hot wallets.

Include 2FA Protection

2FA or 2-factor authentication is the process of externally depending on several devices or platforms to confirm a request. 2FA has been generally used by people trying to log in to sensitive websites, trying to withdraw large funds, and so on. All users are encouraged to use 2FA mechanisms such as password + OTP protection, password + email identification, etc. Remember that the greater the barriers to entry, the safer the information stored. For a detailed guide to securely storing cryptocurrencies, check here.

Get Your Resources Right

Read Whitepaper

Blockchain and cryptocurrency are technologies that involve multiple streams of knowledge to function. Some of them, but are not limited to, include Economics, Network Theory, Cryptography, Distributed Computing, and Game Theory. As a result, a new market has developed to help people understand the technology: the Market for Educators. Many educators have summarized their thoughts into simple books that can help you understand concepts easily.

Reading the white paper of any project before investing is also immensely important. A whitepaper’s abstract is there to give you a quick overview of the project and lure you in to read the entire paper to learn more about the project and its cryptocurrency. The whitepaper contains valuable information, such as the problem/issue the company is looking to solve. They also talk about the product/service concept, the utility of the tokens, the go-to-market strategy, and the timeline for implementation.

• Check Multiple sources

It will be easier for you to learn and understand cryptocurrency if you have someone to work with. When you come across a lucrative investment, website, application, or anything else, it is considered good practice to consult various online and offline sources. By consulting several platforms and individuals, one can gain confidence about the validity of the product or service being looked at. Most hackers take advantage of misusing the trust of users who come onto fancy-looking sites and plant malicious code or applications in devices without the user’s knowledge.

• Stay Away from Quick Money Schemes

Quick money schemes are the primary reason scams in the crypto community are constantly hitting the news. People who design scams always prey upon those with the slightest knowledge of space. Take the example of the PlusToken fraud or the OneCoin scam. They all targeted individuals who wanted to make money quickly and with no risk. And then they ended up losing all of it. Make sure that if it seems too lucrative and promises too many things than usual, it is almost always a scam. If you stumble upon any, report it to make others aware.

• Stay Wary of Phishing Scams

Phishing scams are websites that are a copy of the original sites. Unbeknownst, users are rarely able to find the difference as ultimately become a part of the plot without knowing they are. Before buying any particular cryptocurrency or any asset in general, we urge the reader to do brief research into it. It is common for cryptocurrencies to turn out as scams, leading the buyer to lose their initial funds. DYOR or Do Your Own Research Principle must always be followed.

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Investing Techniques

Have Fixed Investing Strategies

When it comes to traditional financial assets like Stocks, Bonds, Debt Instruments, etc., the market has developed dozens of strategies to make the best buck out of one’s investment. Although still nascent, investors and traders have a lot they can carry over into the crypto market. Yes, it is volatile, but having an investment strategy will act as a safety net. It is like having an instruction booklet guiding you through the investment process. Setting up your investment strategy is like buying a new car. Before looking at the different models, one must figure out what style suits them best. And just like cars, there are many styles to choose from when creating an investment strategy.

DYOR

The First Rule of trading cryptocurrencies or any asset that always matters is to DO YOUR OWN RESEARCH (DYOR). Avoid falling over other people’s opinions and form the habit of making informed decisions. The best advice one could give is thorough and DYOR – Do Your Own Research. That’s the best possible strategy when deciding on the exchange of your choice.

Risk Management

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Finding out the investor’s risk preference is more important than any other component. If an investor’s risk preference is low and does not wish to enter a market with unstable returns, the crypto market is what they are looking for. The market returns are unpredictable, to say the least, and not for the light-hearted. However, although the risk is high, the potential reward of exponential increase is also.