From this article, we will provide an overview of how to identify scammers and invest appropriately.
Cryptocurrency has revolutionized the world of finance by way of decentralization, transparency, and endless opportunities. With real innovations, the sector has also become a breeding ground for scams and frauds. Enticed by potential returns in the form of high returns, cutting-edge technology, and release from economic chains, investors are enticed into Ponzi schemes that vanish overnight and leave them with nothing but remorse.
With new cons popping up every day, there is a need to separate scams from genuine opportunities. With the warning signs, loss of funds will be prevented, and you will be reliable in the crypto universe. From this article, we will provide an overview of how to identify scammers and invest appropriately.
A good crypto project is transparent about giving complete and honest information about its mission, technology, and agenda. If the project lacks a whitepaper, or the papers are ambiguous and full of hyperbole, it's a giant red flag.
A whitepaper must include a well-defined project purpose, technology core, use cases, and tokenomics. Be wary if there are descriptions of overpromising, inconsistency, or ambiguity. Also, check if the project is either live and operational or selling a concept with no product in development.
Legit crypto projects are designed by real teams who have real backgrounds. Obscured founders and developers, or those with minimal information regarding their experience, generate mistrust. Scammers usually work under usernames or pseudoprofiles so they can hide their identities.
Prior to investing in a project, verify the team members. Investigate their professional background, previous projects, and social media. Any genuine team will have an online presence and sound reputation within the industry. In case the project leadership is unclear, it's best to avoid it.
100 times returns, risk-free investment, and guaranteed returns are some of the loosely used euphemisms to catch unsuspecting investors. Any investment that guarantees great returns in a very short period of time should be treated with suspicion.
The crypto market is very unstable, and there will never be a project that guarantees a profit. FOMO and hype are mechanisms spammers employ to attract investors and swindle them out of their funds. Be always ready for offers too good to be true.
A real and active community is usually a reflection of an existing project. Scam projects do not have a community or employ fake followers, bots, and sponsored advertisements to create the illusion that they have a community.
Subscribe to their social media platforms, such as Telegram, Discord, or Twitter, and observe how the team interacts with the community. Should questions about the fundamentals of the project be brushed aside or answered curtly, then it is a sign of caution. Real projects welcome openness and constructive criticism.
Security of smart contracts is important for blockchain projects. Scam projects employ poorly coded or unaudited smart contracts, which expose the investors to exploits and rug pulls.
Before investment, make sure that the smart contract of the project has been audited by a trusted security firm. There should be a report to prove vulnerability in case they were found. In the event that a project does not provide audits or won't supply security steps, it's a straightforward red flag.
Spammers also use aggressive and high-pressure marketing techniques to compel investors to act quickly. If a project is promising time-limited offers, VIP treatment, or rewards for referring other investors to entice new investors, then the project is likely to be a pyramid scheme.
Genuine projects offer sufficient time to the investors to conduct research. Avoid those projects that require you to make decisions within just a few seconds without giving ample time to do research.
Cashing out difficulties are perhaps one of the clearest warning signs of an exploitative project. Certain schemes allow deposits as a starting point and small withdrawal levels to earn trust among users but later lock out larger-sized transactions.
Prior to investment, try to withdraw your funds if possible. If a platform is taking too long to process withdrawals, adding surprise fees, or setting hard withdrawal conditions, consider it a serious red flag.
The society of the cryptocurrency is full of innovation and lies. The chance to grow rich there grows, but there are opportunities to dry out investments as well. Investigate thoroughly, don't be exaggerated, and doubly confirm that a project is genuine before investing.
By remaining vigilant and being watchful, you can protect yourself from fraud and make the crypto community transparent and reliable. Always remember that in the crypto space, information is your best defense.