What To Know About Cryptocurrency
What is cryptocurrency?
Cryptocurrency is a type of digital currency that exists only electronically. It can be bought using your phone, computer, or a cryptocurrency ATM. While Bitcoin and Ether are well-known cryptocurrencies, there are many others available, with new ones constantly being created.
How do people use cryptocurrency?
People use cryptocurrency for various reasons. Some prefer it for quick payments and to avoid transaction fees charged by traditional banks. Others see it as an investment, hoping that the value will increase over time.
How do you get cryptocurrency?
There are several ways to acquire cryptocurrency. You can buy it through an exchange, an app, a website, or a cryptocurrency ATM. Another method is through “mining,” a complex process that involves solving highly complicated math puzzles using advanced computer equipment.
Where and how do you store cryptocurrency?
Cryptocurrency is stored in a digital wallet, which can be online, on your computer, or on an external hard drive. Your digital wallet has a unique wallet address, usually a long string of numbers and letters. It’s important to note that if something happens to your wallet or your cryptocurrency funds – whether it’s due to a hacked platform or a lost password – there is no guarantee of recovery.
How is cryptocurrency different from U.S. Dollars?
Cryptocurrency differs from traditional currencies like U.S. dollars in several ways. First, cryptocurrency accounts are not backed by a government, and the funds held in those accounts are not insured like those deposited in FDIC-insured bank accounts. Second, the value of cryptocurrency can change rapidly and significantly. Cryptocurrencies tend to be more volatile than traditional investments like stocks and bonds, meaning their value can fluctuate dramatically within short periods.
Paying With Cryptocurrency?
Paying with cryptocurrency differs from using credit cards or other traditional payment methods in several ways.
- Cryptocurrency payments do not come with legal protections. Credit cards and debit cards offer legal protections if something goes wrong. However, cryptocurrencies generally do not provide such safeguards.
- Cryptocurrency payments typically are not reversible. Once you make a payment with cryptocurrency, you can usually only get your money back if the recipient willingly sends it back. Therefore, it’s crucial to research and trust the seller before making any cryptocurrency transactions.
- Some transaction information is public. While cryptocurrency transactions are often portrayed as anonymous, they are typically recorded on a public ledger called a “blockchain.” These ledgers contain information about the transaction amount, as well as the sender’s and recipient’s wallet addresses. Depending on the blockchain, it may be possible to use this information to identify the people involved in a specific transaction.
How To Avoid Cryptocurrency Scams
Scammers are continually devising new methods to steal money using cryptocurrency. To protect yourself from falling victim to crypto cons, here are some essential things to know:
- Only scammers demand payment in cryptocurrency. Legitimate businesses do not require you to send cryptocurrency in advance, whether it’s for purchasing something or protecting your money.
- Only scammers guarantee profits or big returns. Be wary of anyone who promises quick and easy money in the crypto markets.
- Never mix online dating and investment advice. If someone you meet on a dating site or app offers to show you how to invest in crypto or asks you to send them cryptocurrency, it’s likely a scam.
Cryptocurrency-related scams come in various forms. Investment scams, where scammers promise significant returns with little risk, are prevalent. Scammers may also impersonate businesses, government agencies, or even romantic interests to deceive people into sending them money.
To spot crypto-related scams, be aware of the following:
- Investment scams: Scammers posing as investment managers may promise to grow your money if you buy cryptocurrency and transfer it to their online account. However, these promises are often fake, and you’ll find it challenging to withdraw your funds or pay high fees.
- Fake celebrity endorsements: Scammers may pretend to be celebrities who can multiply any cryptocurrency you send them. However, authentic celebrities do not contact individuals through social media for such purposes.
- Online “love interests”: If someone you meet online asks you to send them money or cryptocurrency to help you invest, it’s a scam. Genuine relationships do not involve financial exploitation.
- Guaranteed profits: Scammers may promise significant returns with guaranteed profitability in a short period. However, cryptocurrency investments are inherently risky, and such guarantees are false.
- Free money promises: Scammers may lure victims with promises of free cash or cryptocurrency. Remember that free money promises are always fake.
- Claims without details or explanations: Honest investment opportunities provide clear information about how the investment works. If someone cannot explain the process or avoids providing details, it’s likely a scam.
Before investing in cryptocurrency, conduct thorough research on the company or individual involved, using keywords like “review,” “scam,” or “complaint.” Look for established media coverage and seek out other people’s experiences.
Scammers also impersonate well-known companies, government agencies, and even list fake jobs online. They may use various tactics, such as fraudulent crypto coins or tokens, to deceive individuals into buying and sending cryptocurrency.
To avoid falling for these scams:
- Understand that legitimate businesses and government agencies will never ask for money or demand cryptocurrency as payment.
- Be cautious of unexpected messages or phone calls asking for payment or personal information.
- Avoid paying fees to secure a job. Any legitimate job opportunity will not require upfront payment in cryptocurrency.
If you receive an email or physical mail threatening to expose compromising information about you unless you pay in cryptocurrency, do not comply. Report the incident to the FBI immediately.
How To Report Cryptocurrency Scams
If you encounter fraud or suspicious activity related to cryptocurrency, report it to the following authorities:
- Federal Trade Commission (FTC): Visit ReportFraud.ftc.gov to file a complaint.
- Commodity Futures Trading Commission (CFTC): File a complaint at CFTC.gov/complaint.
- U.S. Securities and Exchange Commission (SEC): Submit your complaint at sec.gov/tcr.
- Internet Crime Complaint Center (IC3): File a complaint at ic3.gov/Home/FileComplaint.
- Contact the relevant cryptocurrency exchange company where you sent the money to report the incident.
Remember, staying informed and cautious is key to protecting yourself from cryptocurrency scams.