Protect Yourself from Cryptocurrency Scams: Understanding the Basics

Cryptocurrency is a form of digital or virtual currency that is secured by cryptography, making it difficult to counterfeit or manipulate. This technology is quickly becoming mainstream and is being embraced by the modern world. In the U.S., 46,000 people have reported losses of over $1 billion due to cryptocurrency scams.

Cryptocurrency relies on blockchain technology, essentially a distributed ledger monitored by several computers. It is not governed by any other body which distinguishes it from other currencies.^[0] It is also decentralized, meaning it does not have a system of banks or other traditional financial institutions that act as intermediaries to facilitate its trade.^[1]

Ethereum (ETH) is more than just a cryptocurrency.^[2] Smart contracts, which formalize the conditions of an agreement between a buyer and seller, are utilized to execute them.^[0] Smart contracts remove the necessity for third-party intermediaries such as banks or governments to uphold agreements and transact between individuals not connected.^[0]

Cryptocurrency is also changing the way businesses store and manage their finances, and blockchain technology can be used to create immutable ledgers that allow them to track all of their transactions in real time. It can also be used to create immutable records of customer data stored securely on the distributed ledger and to facilitate more transparent supply chain management for ecommerce businesses.^[3]

People in Colorado lost about $25 million to investment scams in 2021, including a couple in Parker who lost $1.2 million in a Tether scam and a 61-year-old woman in Denver who lost $1.3 million.^[4]

In order to purchase cryptocurrency, you will need a crypto wallet and a crypto buying site. Cryptocurrency is extremely volatile and unpredictable, so people need to understand the basics before investing.^[0]

By staking tokens to a validator, individuals are contributing to the security and operability of a blockchain network by enabling the validator to process transactions. Staking is important, since a proof-of-stake (PoS) blockchain network is only as secure as the number of tokens pledged to these validators.

At the time of writing, the most popular digital currencies are Bitcoin and Ethereum, both of which have a price in the thousands.^[5] However, this is likely to change over time with the rise of new cryptocurrencies and Altcoins.^[5]

Cryptocurrency is quickly becoming mainstream, and people need to understand the basics and be aware of the warning signs in order to protect themselves from fraudsters.

0. “Exploring Cryptocurrency Technology: 8 Facts to Learn About …” www.tekedia.com, 11 Feb. 2023, https://www.tekedia.com/exploring-cryptocurrency-technology-8-facts-to-learn-about/

1. “FBI: More than $1 billion lost in cryptocurrency scams as popularity …” denvergazette.com, 11 Feb. 2023, https://denvergazette.com/news/crime/fbi-more-than-1-billion-lost-in-cryptocurrency-scams-as-popularity-increases/article_5807978c-a32b-11ed-a7f4-c313b881fb62.html

2. “Cryptocurrency Market is likely to reach $12.10 billion by” www.globenewswire.com, 11 Feb. 2023, https://www.globenewswire.com/en/news-release/2023/02/07/2603472/0/en/Cryptocurrency-Market-is-likely-to-reach-12-10-billion-by-2030-Globally-at-a-CAGR-of-11-9.html

3. “The Future of Ecommerce: What Role Will Cryptocurrency Play?” www.corecommerce.com, 11 Feb. 2023, https://www.corecommerce.com/blog/cryptocurrency/

4. “Coloradans lose about $25M in cryptocurrency scams, FBI says …” insurancenewsnet.com, 11 Feb. 2023, https://insurancenewsnet.com/oarticle/coloradans-lose-about-25m-in-cryptocurrency-scams-fbi-says

5. “How to invest in Cryptocurrency UK | Money Guru” www.moneyguru.com, 11 Feb. 2023, https://www.moneyguru.com/insights/how-to-invest-in-cryptocurrency-uk