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Avoiding Crypto Scams

Updated: May 19, 2020

The most common cause of crypto hacks/scams is simply to steal cryptocurrency through various methods/types of hacking attacks. The main type of attack is called “Dusting.” Here, hackers send “dust,” which is an extremely small amount of cryptocurrency, to various wallet addresses. The hackers then analyze the transactions in order to figure out which addresses belong to the same wallet. Next, the hackers then link the wallets to their owners. From here, it’s up to the hacker's preferred method of obtaining information from the owners, commonly through phishing scams or extortion threats. Regarding the Dusting attacks, users can protect themselves by being wary of very low amounts of cryptocurrency in their wallets – and any amount that they cannot verify as their own transaction. By not making any transfers of these low amounts, called “dust,” they can prevent the transactions from being analyzed and marked by hackers. Another method is for users to utilize “cold storage” wallet options that can only be accessed when the user takes them online. This is one of the best ways to protect your cryptocurrency funds as you are in total control of when the funds are made available – connecting your cold storage media to an online system (such as plugging to your computer) on when you are ready to complete a transaction.

Possibly, the best way for users to mitigate their risk of any scam is to be as careful as possible with the information they put out onto the internet. It is highly recommended that all users of any system adopt the latest information security protocols and be very careful and vigilant with their information and with whom they share that information – namely passcodes and wallet information. This way, in the event that a user is hacked, the hackers will not have enough information that could cause serious damage to the victim. Another effective way to mitigate the risk of becoming a victim of crypto scams is to be educated on the issue and potential ways that hackers and scammers are attacking victims. While there are many well-known “red-flags” that users can easily catch, hackers and scammers are becoming smarter with how they attack and scam would-be victims. However, continuously following and being up to date with information security protocols, users can prevent scams and allow users to detect any signs of new and more sophisticated scams.

Companies can protect their customers and mitigate the risk of hacking by adopting the latest information security protocols regarding higher-end systems – those that companies would most likely have. This means that companies have to protect their users’ data and ask for the least amount of data from their users as possible. By securing users’ data with the latest protocols and working with cybersecurity firms, or having an in-house division, ensures that companies are always up to date with the latest types of hacking attacks and moving their users’ data around to prevent it from ever falling into the wrong hands. By having as little data as possible regarding its users, the company is protecting its users from losing enough information that can be useful to a hacker or scammer. The most common mistake I have seen crypto-companies make when it comes to security is to keep their users’ data in a centralized location protected by private keys that are improperly managed. Unfortunately, this has resulted in those keys being accessed by hackers and the exchange then loses the protection of their users and even wallet keys essentially giving the hackers access to the cryptocurrency in those wallets.

An ounce of prevention is worth a pound of cure is so true in this case!

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