Cryptocurrency investment scams

There are many types of crypto scams. Some of the most common include:

Fake websites

Scammers sometimes create fake cryptocurrency trading platforms or fake versions of official crypto wallets to trick unsuspecting victims. These fake websites usually have similar but slightly different domain names from the sites they attempt to mimic. They look very similar to legitimate sites, making it difficult to tell the difference. Fake crypto sites often operate in one of two ways:

• As phishing pages: All the details you enter, such as your crypto wallet's password and recovery phrase and other financial information, end up in the scammers' hands.

• As straightforward theft: Initially, the site may allow you to withdraw a small amount of money. As your investments seem to perform well, you might invest more money in the site. However, when you subsequently want to withdraw your money, the site either shuts down or declines the request.

Phishing scams

Crypto phishing scams often target information relating to online wallets. Scammers target crypto wallet private keys, which are required to access funds within the wallet. Their method of working is similar to other phishing attempts and related to the fake websites described above. They send an email to lure recipients to a specially created website asking them to enter private key information. Once the hackers have acquired this information, they steal the cryptocurrency in those wallets.

Pump and dump schemes

This involves a particular coin or token being hyped by fraudsters through an email blast or social media such as Twitter, Facebook, or Telegram. Not wanting to miss out, traders rush to buy the coins, driving up the price. Having succeeded in inflating the price, the scammers then sell their holdings – which causes a crash as the asset's value sharply declines. This can happen within minutes.

Fake apps

Another common way scammers trick cryptocurrency investors is through fake apps available for download through Google Play and the Apple App Store. Although these fake apps are quickly found and removed, that doesn't mean the apps aren't impacting many bottom lines. Thousands of people have downloaded fake cryptocurrency apps.

Fake celebrity endorsements

Crypto scammers sometimes pose as or claim endorsements from celebrities, businesspeople, or influencers to capture the attention of potential targets. Sometimes, this involves selling phantom cryptocurrencies that don't exist to novice investors. These scams can be sophisticated, involving glossy websites and brochures that appear to show celebrity endorsements from household names such as Elon Musk.

Giveaway scams

This is where scammers promise to match or multiply the cryptocurrency sent to them in what is known as a giveaway scam. Clever messaging from what often looks like a valid social media account can create a sense of legitimacy and spark a sense of urgency. This supposed ‘once-in-a-lifetime’ opportunity can lead people to transfer funds quickly in the hope of an instant return.

Blackmail and extortion scams

Another method scammers use is blackmail. They send emails that claim to have a record of adult websites visited by the user and threaten to expose them unless they share private keys or send cryptocurrency to the scammer.

Cloud mining scams

Cloud mining refers to companies that allow you to rent mining hardware they operate in exchange for a fixed fee and a share of the revenue you will supposedly make. In theory, this allows people to mine remotely without buying expensive mining hardware. However, many cloud mining companies are scams or, at best, ineffective – in that you end up losing money or earning less than was implied.

Fraudulent initial coin offerings (ICOs)

An initial coin offering or ICO is a way for start-up crypto companies to raise money from future users. Typically, customers are promised a discount on the new crypto coins in exchange for sending active cryptocurrencies like bitcoin or another popular cryptocurrency. Several ICOs have turned out to be fraudulent, with criminals going to elaborate lengths to deceive investors, such as renting fake offices and creating high-end marketing materials.

How to spot cryptocurrency scams

So, how to spot a crypto scam? Warning signs to look out for include:

Promises of guaranteed returns: No financial investment can guarantee future returns because investments can go down as well as up. Any crypto offering that promises you will definitely make money is a red flag.

A poor or non-existent whitepaper: Every cryptocurrency should have a whitepaper since this is one of the most critical aspects of an initial coin offering. The whitepaper should explain how the cryptocurrency has been designed and how it will work. If the whitepaper doesn’t make sense – or worse, doesn’t exist – then tread carefully.

Excessive marketing: All businesses promote themselves. But one way that crypto fraudsters attract people is by investing in heavy marketing – online advertising, paid influencers, offline promotion, and so on. This is designed to reach as many people as possible in the shortest time possible – to raise money fast. If you feel that the marketing for a crypto offering seems heavy-handed or makes extravagant claims without backing them up, pause and do further research.

Unnamed team members: With most investment businesses, it should be possible to find out who the key people behind it are. Usually, this means easy-to-find biographies of the people who run the investment plus an active presence on social media. If you can’t find out who is running a cryptocurrency, be cautious.

Free money: Whether in cash or cryptocurrency, any investment opportunity promising free money is likely to be fake.

How to protect yourself from cryptocurrency scams

Many crypto frauds are sophisticated and convincing. Here are some steps you can take to protect yourself:

Protect your wallet: To invest in cryptocurrency, you need a wallet with private keys. If a firm asks you to share your keys to participate in an investment opportunity, it’s highly likely to be a scam. Keep your wallet keys private.

Keep an eye on your wallet app: The first time you transfer money, send only a small amount to confirm the legitimacy of a crypto wallet app. If you’re updating your wallet app and you notice suspicious behavior, terminate the update, and uninstall the app.

Only invest in things you understand: If it’s not clear to you how a particular cryptocurrency works, then it’s best to pause and do further research before you decide whether to invest.

Take your time: Scammers often use high-pressure tactics to get you to invest your money quickly – for example, by promising bonuses or discounts if you participate straightaway. Take your time and carry out your own research before investing any money.

Be wary of social media adverts: Crypto scammers often use social media to promote their fraudulent schemes. They may use unauthorized images of celebrities or high-profile businesspeople to create a sense of legitimacy, or they may promise giveaways or free cash. Maintain a healthy skepticism when you see crypto opportunities promoted on social media and do your due diligence.

Ignore cold calls: If someone contacts you out of the blue to sell you a crypto investment opportunity, it’s probably a scam. Never disclose personal information or transfer money to someone who contacts you in this way.

Only download apps from official platforms: Although fake apps can end up in the Google Play Store or Apple App Store, it is safer to download apps from these platforms than elsewhere.

Do your research: The most popular cryptocurrencies are not scams. But if you haven’t heard of a particular cryptocurrency, research it – see if there is a whitepaper you can read, find out who runs it and how it operates, and look for genuine reviews and testimonials. Look for an up-to-date and credible fake cryptocurrency list to check for scams.

Is it too good to be true: Companies that promise guaranteed returns or to make you rich overnight are likely to be scams. If something seems too good to be true, tread carefully.

Finally, as with any investment opportunity, never invest money you can’t afford to lose. Even if you're not being scammed, cryptocurrency is volatile and speculative, so it's essential to understand the risks.

What to do if you fall victim to a crypto scam

Falling victim to a cryptocurrency scam can be devastating, and it's essential to act quickly if you have made a payment or disclosed personal information.

Contact your bank immediately if you have:

• Made a payment using a debit or credit card.

• Made a payment via bank transfer.

• Shared personal details about yourself.

Crypto fraudsters often sell the details they have captured to other criminals. So, it’s essential to change your usernames and passwords across the board, to prevent further damage. If you are the victim of a social media crypto scam, you can report it to the relevant social media platform. Depending on where you live, you can report frauds to the relevant body in your jurisdiction – for example, in the US, that would be the Federal Trade Commission. Other countries have their own equivalents.

Digital Currency

Digital currencies, or cryptocurrencies, are electronic tokens generated by networks of computers to replace traditional currencies. Paying for something with digital currency is not the same as paying with a credit card, debit card, PayPal or ApplePay, which all electronically access conventional currencies such as U.S. dollars, British pounds and Chinese renminbi.

The electronic tokens in digital currency have value based on the exchange of conventional currencies and commodities for the tokens through special internet exchanges, such as BitPay. These exchanges function somewhat like PayPal but are not associated with that company. Like gold, conventional currencies and commodities are valued based on national and international banking standards.

Creating Digital Currency

To make cryptocurrency, a distributed network of computers in a closed, internet-based community works through a set of complex cryptographic algorithms, and the output of the specialized programs is cryptocurrency represented by digital tokens. The tokens are only valid for trade within digital communities, and individuals and organizations can open accounts — also called wallets — in the specialized communities.

The founders of the communities limit the number of tokens the computers underpinning the transactions in the community can generate. The crowdsourcing effort to fund the community is called an Initial Coin Offering (ICO).

One of the first — and clearly the most popular — cryptocurrencies established with a set limit for production is Bitcoin. An individual known only by the pseudonym Satoshi Nakamoto established Bitcoin and the technology to generate and manage the cryptocurrency in 2008. Nakamoto limited the number of Bitcoins generated by the distributed network of computers in his exchange to 21 million. This limitation in supply ensures demand for the tokens, which subsequently increase in value.

The Value of Bitcoin

At the end of August 2017, Bitcoin had an assigned trading value of nearly $5,000 for a single Bitcoin. This far exceeded the value of gold, which was about $1,300 at the time. However, within two weeks after the digital currency's high watermark, Bitcoin value dropped to about $3,000. Anyone who invested real currency in Bitcoin in mid-August and didn't pull out of the market before the price drop lost nearly 40 percent of the investment.

Because of its status as the most popular digital currency in the world, the Bitcoin community has become a standard in its own right, much like the heralded stock exchanges of Wall Street, London and Japan. As a result, when other digital currency markets falter, the value of Bitcoin also drops. In the case of the dramatic drop in value of Bitcoin at the end of August 2017, this occurred because other cryptocurrencies lost the support of the Chinese government after proliferating at an alarming rate in China throughout 2017.

The Chinese government feared the growth of huge and convoluted pyramid schemes revolving around cryptocurrency exchanges that had their own Bitcoin-like digital tokens. As a result, the government ordered exchanges like BTCC, OKcoin and Huobi to shut down by the end of September 2017. This edict sent shivers through global cryptocurrency exchanges around the world, and fear led to Bitcoin's rapid devaluation.

Now that Bitcoin has been shown to have a level of volatility that the gold standard and conventional currencies do not experience, it's unlikely that Bitcoin will become a global currency standard anytime soon.

Bitcoin Safety

Since 2010, almost a dozen hacks of cryptocurrency exchanges have occurred. Losses range in the hundreds of millions (dollars). Relatively speaking, however, conventional banking and financial institutions have lost billions of dollars to cybercriminals during this same timeframe. Programmers and cryptocurrency communities are working hard to identify and mend the vulnerabilities in their blockchain networks. If bitcoin becomes an acceptable currency for real-world vendors, government central banks may actually find their role upstaged by sophisticated computer algorithms.

On a personal level, anyone who invests in Bitcoin should have the proper internet security in place before accessing financial information and making transactions.

Cryptojacking is a type of cybercrime that involves the unauthorized use of people's devices (computers, smartphones, tablets, or even servers) by cybercriminals to mine for cryptocurrency. Like many forms of cybercrime, the motive is profit, but unlike other threats, it is designed to stay completely hidden from the victim.

What is cryptojacking?

Cryptojacking is a threat that embeds itself within a computer or mobile device and then uses its resources to mine cryptocurrency. Cryptocurrency is digital or virtual money, which takes the form of tokens or "coins." The most well-known is Bitcoin, but there are approximately 3,000 other forms of cryptocurrency and while some cryptocurrencies have ventured into the physical world through credit cards or other projects — most remain virtual.

Cryptocurrencies use a distributed database, known as 'blockchain' to operate. The blockchain is regularly updated with information about all the transactions that took place since the last update. Each set of recent transactions is combined into a 'block' using a complex mathematical process.

To produce new blocks, cryptocurrencies rely on individuals to provide the computing power. Cryptocurrencies reward people who supply the computing power with cryptocurrency. Those who trade computing resources for currency are called "miners".

The larger cryptocurrencies use teams of miners running dedicated computer rigs to complete the necessary mathematical calculations. This activity requires a significant amount of electricity – for example, the Bitcoin network currently uses more than 73TWh of energy per year.

Cryptojackers and the future of cryptojacking

That is where cryptojacking comes in: cryptojackers are people who want the benefits of cryptocurrency mining without incurring the huge costs. By not paying for expensive mining hardware or large electricity bills, cryptojacking allows hackers to mine for cryptocurrency without the large overheads. The type of cryptocurrency primarily mined on personal computers is Monero, which appeals to cybercriminals because it is difficult to trace.

There is some debate as to whether cryptojacking is in decline or on the rise. Cryptojacking tends to rise in proportion to the value of cryptocurrencies, particularly Bitcoin and Monero. But in recent years, two factors have had a dampening effect on cryptojacking:

• Crackdowns by law enforcement.

• The shutdown of Coinhive, which was the leading site which dealt with cryptominers. Coinhive provided JavaScript code that websites could incorporate to make visitors' computers mine Monero. Coinhive's code was quickly abused: a mining script could also be injected into a website by hackers without the site owner's knowledge. The site shut down in March 2019, and with it, the number of site infections went sharply down.

The motivation behind a cryptojacking attack is simple: money. Mining cryptocurrencies can be very lucrative, but making a profit is challenging without the means to cover large costs. Cryptojacking is the criminal manifestation of cryptomining and offers an illegitimate yet effective and inexpensive way to mine valuable coins.

How does cryptojacking work?

Cybercriminals hack into devices to install cryptojacking software. The software works in the background, mining for cryptocurrencies or stealing from cryptocurrency wallets. The unsuspecting victims use their devices typically, though they may notice slower performance or lags.

Hackers have two primary ways to get a victim's device to secretly mine cryptocurrencies:

• By getting the victim to click on a malicious link in an email that loads cryptomining code on the computer

• By infecting a website or online ad with JavaScript code that auto-executes once loaded in the victim's browser

Hackers often use both methods to maximize their return. In both cases, the code places the cryptojacking script onto the device, which runs in the background as the victim works. Whichever method is used, the script runs complex mathematical problems on the victims' devices and sends the results to a server which the hacker controls.

Unlike other types of malware, cryptojacking scripts do not damage computers or victims' data. However, they do steal computer processing resources. For individual users, slower computer performance might simply be an annoyance. But cryptojacking is an issue for business because organizations with many cryptojacked systems incur real costs. For example:

• The use of help desk and IT time spent tracking down performance issues and replacing components or systems in the hope of solving the problem.

• Increased electricity costs.

Some cryptomining scripts have worming capabilities that allow them to infect other devices and servers on a network. This makes them harder to identify and remove. These scripts may also check to see if the device is already infected by competing cryptomining malware. If another cryptominer is detected, the script disables it.

In early instances of cryptomining, some web publishers sought to monetize their traffic by asking visitors' permission to mine for cryptocurrencies while on their site. They positioned it as a fair exchange: visitors would receive free content while the sites would use their computer for mining. For example, on gaming sites, users might stay on the page for some time while the JavaScript code mines for coin. Then when they leave the site, the cryptomining would end. This approach can work if sites are transparent about what they are doing. The difficulty for users is knowing whether sites are being honest or not.

Malicious versions of cryptomining – i.e. cryptojacking – don't ask for permission and keep running long after you leave the initial site. This is a technique used by owners of dubious sites or hackers who have compromised legitimate sites. Users have no idea that a site they visited has been using their computer to mine cryptocurrency. The code uses just enough system resources to remain unnoticed. Although the user thinks the visible browser windows are closed, a hidden one stays open. Often it can be a pop-under, which is sized to fit beneath the taskbar or behind the clock.

Cryptojacking can even infect Android mobile devices, using the same methods that target desktops. Some attacks occur through a Trojan hidden in a downloaded app. Or users' phones can be redirected to an infected site, which leaves a persistent pop-under. While individual phones have relatively limited processing power, when attacks occur in large numbers, they provide enough collective strength to justify the cryptojackers' efforts.

Cryptojacking attack – examples

High profile examples of cryptojacking include:

• In 2019,eight separate apps that secretly mined cryptocurrency with the resources of whoever downloaded them were ejected from the Microsoft Store. The apps supposedly came from three different developers, although it was suspected that the same individual or organization was behind them all. Potential targets could encounter the cryptojacking apps through keyword searches within the Microsoft Store, and on lists of the top free apps. When a user downloaded and launched one of the apps, they would inadvertently download cryptojacking JavaScript code. The miner would activate and start looking for Monero, using up a significant amount of the device's resources and therefore slowing it down.

• In 2018, cryptojacking code was discovered concealed within the Los Angeles Times' Homicide Report page. When visitors went to the Homicide Report page, their devices were used to mine a popular cryptocurrency called Monero. The threat was not detected for a while because the amount of computing power the script used was minimal, so many users would not be able to detect that their devices had been compromised.

• In 2018, cryptojackers targeted the operational technology network of a European water utility control system, seriously impacting the operators' ability to manage the utility plant. This was the first known instance of a cryptojacking attack against an industrial control system. Similar to the Los Angeles Times hack, the miner was generating Monero.

• In early 2018, the CoinHive miner was found to be running on YouTube Ads through Google's DoubleClick platform.

• During July and August 2018, a cryptojacking attack infected over 200,000 MikroTik routers in Brazil, injecting CoinHive code in a massive amount of web traffic.

How to detect cryptojacking

Cryptojacking detection can be difficult because the process is often hidden or made to look like a benevolent activity on your device. However, here are three signs to watch out for:

Cryptojacking detection – 3 things to look out for

1. Decreased performanceOne of the key symptoms of cryptojacking is decreased performance on your computing devices. Slower systems can be the first sign to watch out for, so be alert to your device running slowly, crashing, or exhibiting unusually poor performance. Your battery draining more quickly than usual is another potential indicator.

2. Overheating Cryptojacking is a resource-intensive process that can cause computing devices to overheat. This can lead to computer damage or shorten their lifespan. If your laptop or computer's fan is running faster than usual, this could indicate that a cryptojacking script or website is causing the device to heat up, and your fan is running to prevent melting or fire.

3. **Central Processing Unit (CPU) usage:**If you see an increase in CPU usage when you are on a website with little or no media content, it could be a sign that cryptojacking scripts might be running. A good cryptojacking test is to check the central processing unit (CPU) usage of your device using the Activity Monitor or Task Manager. However, bear in mind that processes might be hiding themselves or masking as something legitimate to hinder you from stopping the abuse. Also, when your computer is running at maximum capacity, it will run very slowly, and therefore can be harder to troubleshoot.

How to protect yourself against cryptojacking

Use a good cybersecurity program:

A comprehensive cybersecurity program such as Kaspersky Total Security will help to detect threats across the board and can provide cryptojacking malware protection. As with all other malware precautions, it is much better to install security before you become a victim. It is also good practice to install the latest software updates and patches for your operating system and all applications — especially those concerning web browsers.

Be alert to the latest cryptojacking trends:

Cybercriminals are constantly modifying code and coming up with new delivery methods to embed updated scripts onto your computer system. Being proactive and staying on top of the latest cybersecurity threats can help you detect cryptojacking on your network and devices and avoid other types of cybersecurity threats.

Use browser extensions designed to block cryptojacking:

Cryptojacking scripts are often deployed in web browsers. You can use specialized browser extensions to block cryptojackers across the web, such as minerBlock, No Coin, and Anti Miner. They install as extensions in some popular browsers.

Use ad blockers:

Since cryptojacking scripts are often delivered through online ads, installing an ad blocker can be an effective means of stopping them. Using an ad blocker like Ad Blocker Plus can both detect and block malicious cryptojacking code.

Disable JavaScript:

When browsing online, disabling JavaScript can prevent cryptojacking code from infecting your computer. However, although that interrupts the drive-by cryptojacking, this could also block you from using functions that you need.

Block pages known to deliver cryptojacking scripts:

To prevent cryptojacking while visiting websites, make sure each site you visit is on a carefully vetted whitelist. You can also blacklist sites known for cryptojacking, but this may still leave your device or network exposed to new cryptojacking pages.

Cryptojacking might seem like a relatively harmless crime since the only thing 'stolen' is the power of the victim's computer. But the use of computing power for this criminal purpose is done without the knowledge or consent of the victim, for the benefit of criminals who are illicitly creating currency. We recommend following good cybersecurity practices to minimize the risks and to install trusted cybersecurity or internet security onto all of your devices.

Kaspersky Internet Security received two AV-TEST awards for the best performance & protection for an internet security product in 2021. In all tests Kaspersky Internet Security showed outstanding performance and protection against cyberthreats.

Cryptocurrency investment scams

There are many types of crypto scams. Some of the most common include:

Fake websites

Scammers sometimes create fake cryptocurrency trading platforms or fake versions of official crypto wallets to trick unsuspecting victims. These fake websites usually have similar but slightly different domain names from the sites they attempt to mimic. They look very similar to legitimate sites, making it difficult to tell the difference. Fake crypto sites often operate in one of two ways:

• As phishing pages: All the details you enter, such as your crypto wallet's password and recovery phrase and other financial information, end up in the scammers' hands.

• As straightforward theft: Initially, the site may allow you to withdraw a small amount of money. As your investments seem to perform well, you might invest more money in the site. However, when you subsequently want to withdraw your money, the site either shuts down or declines the request.

Phishing scams

Crypto phishing scams often target information relating to online wallets. Scammers target crypto wallet private keys, which are required to access funds within the wallet. Their method of working is similar to other phishing attempts and related to the fake websites described above. They send an email to lure recipients to a specially created website asking them to enter private key information. Once the hackers have acquired this information, they steal the cryptocurrency in those wallets.

Pump and dump schemes

This involves a particular coin or token being hyped by fraudsters through an email blast or social media such as Twitter, Facebook, or Telegram. Not wanting to miss out, traders rush to buy the coins, driving up the price. Having succeeded in inflating the price, the scammers then sell their holdings – which causes a crash as the asset's value sharply declines. This can happen within minutes.

Fake apps

Another common way scammers trick cryptocurrency investors is through fake apps available for download through Google Play and the Apple App Store. Although these fake apps are quickly found and removed, that doesn't mean the apps aren't impacting many bottom lines. Thousands of people have downloaded fake cryptocurrency apps.

Fake celebrity endorsements

Crypto scammers sometimes pose as or claim endorsements from celebrities, businesspeople, or influencers to capture the attention of potential targets. Sometimes, this involves selling phantom cryptocurrencies that don't exist to novice investors. These scams can be sophisticated, involving glossy websites and brochures that appear to show celebrity endorsements from household names such as Elon Musk.

Giveaway scams

This is where scammers promise to match or multiply the cryptocurrency sent to them in what is known as a giveaway scam. Clever messaging from what often looks like a valid social media account can create a sense of legitimacy and spark a sense of urgency. This supposed ‘once-in-a-lifetime’ opportunity can lead people to transfer funds quickly in the hope of an instant return.

Blackmail and extortion scams

Another method scammers use is blackmail. They send emails that claim to have a record of adult websites visited by the user and threaten to expose them unless they share private keys or send cryptocurrency to the scammer.

Cloud mining scams

Cloud mining refers to companies that allow you to rent mining hardware they operate in exchange for a fixed fee and a share of the revenue you will supposedly make. In theory, this allows people to mine remotely without buying expensive mining hardware. However, many cloud mining companies are scams or, at best, ineffective – in that you end up losing money or earning less than was implied.

Fraudulent initial coin offerings (ICOs)

An initial coin offering or ICO is a way for start-up crypto companies to raise money from future users. Typically, customers are promised a discount on the new crypto coins in exchange for sending active cryptocurrencies like bitcoin or another popular cryptocurrency. Several ICOs have turned out to be fraudulent, with criminals going to elaborate lengths to deceive investors, such as renting fake offices and creating high-end marketing materials.

How to spot cryptocurrency scams

So, how to spot a crypto scam? Warning signs to look out for include:

Promises of guaranteed returns: No financial investment can guarantee future returns because investments can go down as well as up. Any crypto offering that promises you will definitely make money is a red flag.

A poor or non-existent whitepaper: Every cryptocurrency should have a whitepaper since this is one of the most critical aspects of an initial coin offering. The whitepaper should explain how the cryptocurrency has been designed and how it will work. If the whitepaper doesn’t make sense – or worse, doesn’t exist – then tread carefully.

Excessive marketing: All businesses promote themselves. But one way that crypto fraudsters attract people is by investing in heavy marketing – online advertising, paid influencers, offline promotion, and so on. This is designed to reach as many people as possible in the shortest time possible – to raise money fast. If you feel that the marketing for a crypto offering seems heavy-handed or makes extravagant claims without backing them up, pause and do further research.

Unnamed team members: With most investment businesses, it should be possible to find out who the key people behind it are. Usually, this means easy-to-find biographies of the people who run the investment plus an active presence on social media. If you can’t find out who is running a cryptocurrency, be cautious.

Free money: Whether in cash or cryptocurrency, any investment opportunity promising free money is likely to be fake.

How to protect yourself from cryptocurrency scams

Many crypto frauds are sophisticated and convincing. Here are some steps you can take to protect yourself:

Protect your wallet: To invest in cryptocurrency, you need a wallet with private keys. If a firm asks you to share your keys to participate in an investment opportunity, it’s highly likely to be a scam. Keep your wallet keys private.

Keep an eye on your wallet app: The first time you transfer money, send only a small amount to confirm the legitimacy of a crypto wallet app. If you’re updating your wallet app and you notice suspicious behavior, terminate the update, and uninstall the app.

Only invest in things you understand: If it’s not clear to you how a particular cryptocurrency works, then it’s best to pause and do further research before you decide whether to invest.

Take your time: Scammers often use high-pressure tactics to get you to invest your money quickly – for example, by promising bonuses or discounts if you participate straightaway. Take your time and carry out your own research before investing any money.

Be wary of social media adverts: Crypto scammers often use social media to promote their fraudulent schemes. They may use unauthorized images of celebrities or high-profile businesspeople to create a sense of legitimacy, or they may promise giveaways or free cash. Maintain a healthy skepticism when you see crypto opportunities promoted on social media and do your due diligence.

Ignore cold calls: If someone contacts you out of the blue to sell you a crypto investment opportunity, it’s probably a scam. Never disclose personal information or transfer money to someone who contacts you in this way.

Only download apps from official platforms: Although fake apps can end up in the Google Play Store or Apple App Store, it is safer to download apps from these platforms than elsewhere.

Do your research: The most popular cryptocurrencies are not scams. But if you haven’t heard of a particular cryptocurrency, research it – see if there is a whitepaper you can read, find out who runs it and how it operates, and look for genuine reviews and testimonials. Look for an up-to-date and credible fake cryptocurrency list to check for scams.

Is it too good to be true: Companies that promise guaranteed returns or to make you rich overnight are likely to be scams. If something seems too good to be true, tread carefully.

Finally, as with any investment opportunity, never invest money you can’t afford to lose. Even if you're not being scammed, cryptocurrency is volatile and speculative, so it's essential to understand the risks.

What to do if you fall victim to a crypto scam

Falling victim to a cryptocurrency scam can be devastating, and it's essential to act quickly if you have made a payment or disclosed personal information.

Contact your bank immediately if you have:

• Made a payment using a debit or credit card.

• Made a payment via bank transfer.

• Shared personal details about yourself.

Crypto fraudsters often sell the details they have captured to other criminals. So, it’s essential to change your usernames and passwords across the board, to prevent further damage. If you are the victim of a social media crypto scam, you can report it to the relevant social media platform. Depending on where you live, you can report frauds to the relevant body in your jurisdiction – for example, in the US, that would be the Federal Trade Commission. Other countries have their own equivalents.

NFT meaning and definition

NFT stands for ‘non-fungible token’. Non-fungible means that something is unique and can’t be replaced. By contrast, physical money and cryptocurrencies are fungible, which means they can be traded or exchanged for one another. Every NFT contains a digital signature which makes each one unique. NFTs are digital assets and could be photos, videos, audio files, or another digital format. NFT examples include artwork, comic books, sports collectibles, trading cards, games and more.

How do NFTs work?

Non-fungible tokens or NTFs are cryptographic assets which sit on a blockchain – that is, a distributed public ledger that records transactions. Each NFT contains unique identification codes that distinguish them from each other. This data makes it easy to transfer tokens between owners and to verify ownership.

NFTs hold a value which is set by the market – i.e., supply and demand – and they can be bought and sold in the same way that physical assets can. NFTs are digital representations of assets – and can also represent real-world items such as artwork and real estate. Tokenizing real-world tangible assets in this way is considered by some users to make buying, selling and trading them more efficient, as well as potentially reducing the likelihood of fraud.

How do you buy NFTs?

The NFT market is considered high risk, and its volatile highs and lows can deter even experienced investors. If you are thinking of buying NFTs, it’s important to have a clear understanding of the process. Let’s look at the steps involved:

Open a crypto exchange account

The first step is to open an account on a crypto platform or crypto exchange. A crypto exchange is an online platform where you can buy and sell different types of cryptocurrencies. To buy NFTs, you need to create an account with your chosen platform. Different platforms offer different services, so it’s worth researching them to find out which suits you best in terms of features, fees, and ongoing support.

Open a crypto wallet

A crypto wallet stores the keys that grant access to your digital assets. Users are given a unique seed phrase – also called a recovery phrase – to access their wallet. It’s essential to keep your seed phrase safe – without it, you lose access to your wallet.

Wallets can either be hosted on an exchange or may operate independently. If they operate independently, then you retain responsibility for your wallet and private keys. If your digital wallet is hosted by an exchange, the exchange acts as an intermediary for crypto transfer. The company holds your private keys and is responsible for keeping your assets safe.

Alternatively, if you want to buy and sell NFTs without third-party involvement, you need a wallet tied directly to the blockchain. This allows currency to be transferred directly between people using the public key. The two types of wallet available are called ‘hot’ or ‘cold’:

Hot wallets are:

• Software, web-based wallets

• Available as a desktop or mobile app, in-browser extension or both

• More vulnerable to cyber attacks than cold wallets

Cold wallets are:

• Hardware wallets, physical devices not connected to the internet

• Considered more secure

• However, at greater risk of loss and have no backup available if you lose your seed phrase

Whichever crypto wallet you select should ideally be compatible with the Ethereum blockchain, since that is the network on which most NFTs are sold, and Ether (ETH, Etherium), which is the cryptocurrency native to Ethereum blockchain.

Transfer Ethereum into a crypto wallet

Once you have selected an NFT exchange and bought ETH, you then need to transfer it to a wallet. This process will vary depending on the exchange through which you buy ETH, the wallet you use, and the marketplace on which you plan to trade NFTs.

Buy NFTs

Once your wallet is connected and funded, you can start buying NFTs. When you buy an NFT, you gain ownership in the sense that it becomes your property. However, the NFT holder doesn’t have other rights to the work – such as the right to adapt or reproduce it – unless that is part of the direct agreement between the buyer and creator. Different marketplaces may place varying restrictions on the NFT you purchased.

What is an NFT marketplace?

The NFT landscape is evolving, but typically, most NFT marketplaces fall into one of these three categories:

• Open marketplace – Anyone can sell, buy or mint NFTs. Minting refers to the process of uniquely publishing your token on the blockchain to make it buyable. Open marketplaces typically mint NFTs for you, though creators can also mint their own works.

• Closed marketplace –Artists must apply to join and the marketplace usually undertakes the minting processes. Selling and trading are more restricted.

• Proprietary marketplace – A marketplace which sells NFTs trademarked or copyrighted by the company operating it.

Some NFT traders create accounts on and subscribe to a variety of marketplaces so they can receive announcements about new NFT drops. Information about new NFTs is also shared on platforms such as Discord and Twitter, as well as more specialized investing platforms like Rarity Sniper and Rarity Tools. When highly anticipated NFTs are released, investors tend to act quickly.

Most marketplaces offer step-by-step guides which help users understand how to use them. Once you have created a marketplace account, you should connect your wallet to the marketplace. Some marketplaces allow you to set up a new wallet from within the website, or they use their own proprietary wallet. Using a marketplace’s proprietary wallet might come with discounts or a reduction in the additional fees incurred by using external wallets.

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Examples of NFT marketplaces

There are dozens of NFT marketplaces. Examples include:

OpenSea

One of the largest NFT marketplaces, OpenSea, offers NFTs in a number of areas – art, music, fashion, sports, games, and collectibles. The site also offers various learning resources for users.

NBA Top Shot

An NFT marketplace where sports fans can trade basketball video clips. NBA Top Shot has a large community of followers, and contests and challenges provide a social aspect.

Nifty Gateway

Nifty Gateway offers collections from well-known multi- and mixed-media, video, fine art and animation artists. The site is aimed at buyers whose goal is to collect or trade art with long term value.

Rarible

An Ethereum-based platform that facilitates the creation, sale, and purchase of ownership rights to digital works of art via NFTs.

NFT scams

NFTs scams are not uncommon. some of the main ones to watch out for include:

• Phishing scams – Deceptive links and pop-ups promoting new NFT projects and drops on social media.

• Catfishing – Fake marketplace websites, social media accounts, and celebrity impersonators advertising NFT drops and collections.

• Counterfeit NFTs – Scammers selling other people’s work as if it is their own original work.

• Pump-and-dump schemes – Scammers building hype around an NFT so it sells at a high price – but then quickly cashing out, leaving investors with worthless assets.

• Free mint scams – Scammers use high pressure tactics to lure users to participate in a deceptive mint. But instead of receiving a new mint, the victim instead inadvertently signs away the rights to control their wallet.

To avoid falling victim to an NFT scam:

• Observe essential cybersecurity practices, such as strong passwords and two-factor authentication.

• While storing your crypto on exchanges is convenient, it is safer to store it in a cold wallet – i.e., a hardware device where keys and assets are stored offline.

• Before investing significant sums in NFTs, carry out an initial transaction with a small amount of money first to make sure everything is working as it should.

• Ignore spam, such as DMs or odd NFTs that strangers send to your wallet, which can have malicious contracts attached.

• Before you buy NFTs, research how to keep both your information and cryptocurrency safe. Read online guides, reviews and testimonials to understand the market and the risks involved.

You can read our full article on NFT scams and how to avoid them here.

FAQs about NFTs

What does NFT stand for?

NFT stands for non-fungible token. Non-fungible is an economic term which refers to things that are not interchangeable with other items because they have unique properties.

What is an example of an NFT?

NFTs began in the digital art world, but you can now buy many different types of NFTs, including music, sports highlights, video games, fashion, trading cards, event tickets, memes, domain names, and more. Famously, Twitter founder and CEO Jack Dorsey’s first tweet was sold as an NFT in 2021 – although subsequent media reports suggested this didn’t turn out to be a good investment for the person who bought it.

Are NFTs cryptocurrency?

NFTs and cryptocurrencies share some similarities but also have important differences. The main difference is that cryptocurrencies are fungible and NFTs – as their name suggests – are non-fungible. What this means is that one Bitcoin (for example) equals another Bitcoin, but one NFT doesn’t equal another NFT. Each NFT asset is unique and its value is determined by market forces.

What are NFTs used for?

NFTs are tokens used to represent ownership of unique items. NFTs allow their creators to tokenize things like art, collectibles, or even real estate. They are secured by the Ethereum blockchain and can only have one official owner at a time. No one can change the record of ownership or copy/paste a new NFT into existence.

What is NFT digital art and how does NFT art work?

NFT art refers to digital assets which are collectible, unique and non-transferable. Once NFT art is created, it is tokenized or minted on the cryptocurrency service called blockchain. Blockchain is a digital transaction system which records information in a way that is difficult to hack or scam. This makes it useful for tracking copyright ownership and maintaining records of creation – hence why it has become popular in the digital art world.