Depending on one’s knowledge of cryptocurrency, thoughts of either revolutionary technology or fraudulent activity come to mind. Those in the latter group are scared to invest in this industry because they are intimidated. Do you fall into this group? Well, don’t worry anymore. We’ll show you how to avoid crypto fraud with one, simple trick.
HOW TO AVOID CRYPTO FRAUD: WHAT IS IT?
Before diving into the solutions, let’s look at one popular method of crypto fraud. “Nesting scams” are popping up everywhere despite increased government regulation cracking down. A nesting scam uses a fake token that they claim is built on top of a highly reputable platform like Ethereum, EOS or Tron.
Usually, there is very little information given but enough information to trick some excited investors. Once these investors buy in, the scammers will create a large number of fake transactions on the network simply by trading their own crypto back and forth. All this fake traffic increases transaction volume and you start to see this fake token rise up on the rankings of the protocol it’s built on. When investors see this rise, they start to buy in due to fear of missing out. This is just one example but it could have all been avoided due to one trick.
HOW TO AVOID CRYPTO FRAUD: DUE DILIGENCE
All of the aforementioned trouble could have been avoided with some simple due diligence. Crypto fraud is actually decreasing due to more people getting familiar with the technology but it’s still not enough. As the majority of the world is still in the dark regarding blockchain technology, we need to get out the word regarding due diligence. Take the extra five minutes to research every project you want to invest in. Research the team, talk to them on Telegram and follow up on their whitepaper. If you do this, a scam is easy to spot miles away.
HOW TO AVOID CRYPTO FRAUD: INVEST IN TRANSPARENCY
Transparency is another key to avoiding a scam. The more transparent a startup is, the less likely they are to be fraudulent. You’ll notice already this year that the projects that are thriving most are those that are open and honest with their operations. To see good examples of transparent startups, follow crypto lending platform YouHodler, Ethereum or OmiseGo. They are all prime examples of what a legitimate startup should behave like. They give constant updates regarding their projects, easy to reach via Telegram or email, and have clear roadmaps for users to follow. As long as you do your research and support honest projects, then you will survive this industry.