- Stolen Private Key
Bitcoin can be seen as a product of a messaging network. Bitcoin has no physical state; instead, it exists in the form of software. To possess the bitcoin balance on a particular public address, one needs to have control over the corresponding private key. Most of the current wallet service providers take total control of users’ private keys with only a few exceptions that allow users to download them. Other websites, for example, bitaddress.org, allows users to create their own public and private keys, and print them on a piece of paper to control their digital asset balances on these addresses.
Regardless how you manage digital assets, please note that “one only controls the assets if one possesses the private key. Please be advised to generate private and public keys only when you are certain the occasion is secure and private. In the meantime, please avoid to use the wallets given out by others (including your friends and relatives). The reasons include the possibilities that they may have a copy of the corresponding private keys. As one funds more and more digital assets into the given wallets, the malicious actors can take over the ownerships of those digital assets anytime. Such act is considered as theft in the world of digital assets; therefore, we seriously suggest our users to be aware of these situations.
One of the most profitable activities in cybercrime—ransomware. Ransomware is nothing new, but the distributed payment network like bitcoin makes a welcoming tool to adopt among the malicious hackers.
Ransomware, by definition, is a software that encrypt all or parts of your files in order to gain the ransom in exchange for file decryptions.
Usually hackers aim for enterprises or organizations that cannot afford to lose clients in order to boost the success rate.
Nevertheless, anyone can become a victim of ransomware as their software has quite a few weakenesses due to lack of knowledge on encryption technologies. Therefore, please avoid downloading suspicious files while making backup copies for your critical documents to establish a comprehensive anti-virus procedure.
- Fake Wallet
This has become a rare type of fraud, but still has obtained victims’ digital assets illegally. The fake wallet apps disguise themselves as legitimate apps by passing through the verification process to enter App Store or other platforms with logos and trademarks from the real wallet apps.
To avoid loss of digital assets, users should only download wallets from trusted sources after familiarizing themselves with the product names. If there is sense of uncertainty, you can always post questions on Reddit or Bitcointalk to acquire the correct information.
- Bitcoin Internet Phishing
Internet phishing is a method to extract sensitive information from victims. Social engineers aim to extract hot digital asset wallet related information. Typically they send emails from domains similar to the officials ones.
- Ponzi Scheme
Bitcoin and other cryptocurrencies are filled with Ponzi scheme. New raised capital are distributed to the previous rounds of investors, and so on until the cycle eventually cannot be sustained.
This type of fraud appears in different forms that promising to hand back superior return. The two most popular methods that claim to offer appealing return are the so-called “cloud mining” website and websites profit from “algorithm trading”.
To avoid the loss of funds, one should keep away from websites that claim to offer unrealistic return, and avoid investing on websites you have never heard of.
- Fake Cyptocurrencies
OneCoin is a classic example for fake cryptocurrencies. They manage to fool their investors in believing they have bought a successful cryptocurrency, but in fact, there isn’t such a blockchain network.
Fake cryptocurrencies appear in the form of educational sessions and loyalty program that offer promotional campaign with coins to be doubled. Although it sounds ludicrous, many people still bet majority of their assets on these fake cryptocurrencies. If you’re looking to invest in cryptocurrencies, please think twice when you see the statement that says price will be doubled on a regular basis. A helpful way to identify whether a cryptocurrency is fake is to look it up on CryptoCompare or Coinmarketcap.
- Fraudulent ICO
ICO is a popular method for crowdfunding activities on blockchain. Some projects initiate ICO in exchange for bitcoin, ether or other cryptocurrencies.
The scammers will market their ICO campaigns with fancy trademarks, websites and made-up teams.
Typically, this sort of “companies” can easily gain access to a huge sum of bitcoins or ethers without any prototypes but vision. For example, DeClouds claimed they created a type of cryptocurrency that is backed by precious metals, which caused investors’ loss of 300 bitcoins in total.
- Internet Hacks
Many people use Facebook group or messaging apps to transact cryptocurrencies instead of a legitimate intermediary.
This type of hack happens when a hacker gains access to the seller's bank account number, and instruct the seller to send the coins to the hacker's address as opposed to the buyer. This often results in complicated legal process.
To avoid this type of scam, please transact the digital assets through trusted intermediaries.
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