Gone are the days when crypto traders are kept in the dark. The modus operandi of online scammers engaged in crypto operations has long been deciphered. Despite all this, there are still dark minds lurking around to lure the vulnerable into their trap. So as not to be one of the victims, here are some tips and tricks to bear in mind.
Test on account of credibility
If Satoshi Nakamoto founded Bitcoin and Vitalik Buterin and his colleagues created Ethereum, indeed there is someone behind the new cryptocurrency who has drawn your interest. You have to identify the people behind the digital currency you intend to pick. It is important to know your crypto of choice by identifying its founders. Should it be a legitimate one, there would be no problem in tracking down its roots.
It is one thing to know the founders, and it is another thing to see whether they truly exist. In some cases, they might only be a product of the creative imagination of scammers. You can readily determine by accessing biographic information over the internet. Social media is also a great way to validate the active existence of the brains behind the crypto coin. However, you could never discount the probability of scammers exposing their names prior to escaping away like Ruja Ignatova.
Check if the terms are reasonable.
Of course, you can easily spot a fake when the vendor tends to oversell. It is usually done through overwhelming promotional offers that are too good to be true. Perhaps you have encountered a product that is not only cheap but also comes with other freebies in bundles. You would wonder why the vendor is selling even at a loss. There is something fishy that is worth sniffing around.
Some crypto scammers would even go to the lengths of securing paid advertisements to promote the product. It would somehow give them a stamp of legitimacy, which in truth is nothing but a mere pretension. As much as possible, do not rely on ads since these are only self-serving. You will have to dig deep by gathering more information about digital currency from respectable websites.
As a reminder, the Federal Trade Commission has come up with ways to avoid crypto scams.
Assess the business model
Like any other business, cryptocurrencies are expected to use a business model as a blueprint of their operations. Although they may have some trade secrets, they are expected to make their project open to the public. It is one way of drawing investors which would be suitable for business. As much as possible, the developer has to divulge how the system works to keep the impression.
Since crypto scams are not intended to be in the market for a long period of time, they would hardly present a solid business model. They may only share a portion of how the operations or transactions work. Nonetheless, you will have to familiarise yourself with how the business operates to spot irregularities.
See any documentation available.
Have you heard of a white paper? There is such a thing in the crypto market that informs investors of everything about cryptocurrency. It would reveal the details of the project, from the goals to the strategies to be implemented. It also has a timeline to guide its progress over a certain period. You are even more fortunate if it contains an analysis of the crypto coin’s strengths, weaknesses, opportunities, and threats.
Without a white paper, a cryptocurrency offering would be suspicious. Not all that can produce one is reliable, though. Some may even present a brilliant version of a white paper to drive away any suspicion. You will have to be very cautious in going over the document to validate its authenticity. The Chances are that it might have just been copied from a legitimate one.
Stay away from bogus cryptocurrencies by testing credibility, checking the terms, assessing the business model, and going over the documentation.