In this article, you can find 10 golden tips in order to protect yourself in Cryptospace: the highly unexplored and dangerous world of cryptocurrencies.
The potential traps are numerous because the profits that some groups make by scamming newcomers in this world, are huge.
However, following the 10 golden tipsthat we have made for you, you will eliminate any possible risks!
1) You should never forget that cryptocurrencies are very volatile and risky assets.
Even the most popular cryptocurrency with the largest capitalisation , the original Bitcoin, is extremely volatile making often even double digit daily moves changing its value like +12% or -15% in just a few hours.
Take in mind that the cryptocurrency markets never close , the exchanges are open in a basis of 24 hours / 7 days per week and at this first era of cryptocurrencies with many people not knowing about them, the liquidity can be very thin, so just some news related with a specific Project can dramatically change the price of a currency in very short time.
We strongly recommend that you should never invest in cryptocurrencies any funds that you cannot afford to lose.
Their prices are reacting strongly to governments’ decisions for stricter and stricter regulations or even for plans to block their popularity.
2) Be extra cautious with the new cryptocurrencies:
After the big success of the Bitcoin, an endless wave of new cryptocurrencies has resulted to thousands of cryptocurrencies.
Only very few of them really tried to fix any flaws and weaknesses of the revolutionary Bitcoin having a sincere approach.
Unfortunately the majority of them have been proven to be scams, with only goal to make rich their founders.
We ended up with thousands of cryptocurrencies , with hundreds of them completely dead , without Communities after “scam exits”.
Usually, the newer a cryptocurrency is, the biggest the possibility for a scam.
Always check if there is action in the development history of a coin and the most important : life in its developing social media channel : most Communities and development groups are using Discord/Slack channels or Telegram for their communication. Ask to join their channel to check if there are active people caring for the project. This is far more important than a shiny advertisement about a project.
3) Community driven Projects always have a big advantage.
In addition to the previous tip, it is always better to prefer really Community driven Cryptocurrencies. We have a detailed analysis of how meaningful is the Community character for coin that you can read here.It is more than obvious that the original cryptocurrency idea would never succeed without the support of the Community. Having companies behind a Cryptocurrency is like suggesting the central bank model with just some Blockchain tech elements. This cannot be considered as a decentralised model and of course it is impossible to ever offer real transaction freedom. People around the world should understand that they have the power of option.
They can either use the gift of the original Bitcoin philosophy in order to gain their freedom by empowering a truly decentralised digital coin network or they could possibly fall victims of companies with the mask of cryptocurrency which will abuse them economically in the short or long term.
You should never forget that a company is always trying to make profit and a CEO is trying to be richer , as he is paid in order to be successful for leading her to higher profits.
This model is fine but not for a people’s digital coin based on the revolutionary blockchain idea ! A coin which should make people independent and free, without the need to trust any third party or to pay for his transactions a fee of a company’s pricelist.
Except the aforementioned , we should never forget that the possibility for a scam exit is always there for Projects that are not Community Driven , because of many factors like the ICO raised funds, the premined coins, the market manipulation by the company insiders and other which are non-existant for a really transparent Community driven Cryptocurrency Project.
4) Be extremely careful with Projects that have Initial coin offerings, premined coins or instamine period.
In many occasions , developers either gather funds by automatically allocating a big percentage to their wallets before launch (premining) or by raising their funds with an ICO (Initial Coin Offering) or they enjoy a period that they alone mine their coin before launching it publicly (instamine). After this and a few price pumping tries by hyping and announcing a fake plan or delivering just a small part of their plan , they sell their coins in high prices (as they have technically created a high demand) and they disappear. Many times they even launch another fraudulent coin planning to do the very same to their next victims just using other coin name.
This is the big shame of the “Cryptocurrency Industry”. There are many thousands of cryptocurrency Projects with the most of them being completely abandoned, building absolutely nothing, having no ideology and letting their victims with useless coins and dead networks.
Always take in your mind that by following Projects with ICO , premine and instamine strategies , the risk you are taking is huge.
5) Everything that shines is not gold:
You will see impressive ads describing endless high tech characteristics of a Project that is sellings its newly launched cryptocurrency through ICO (Initial Coin Offering) .
However you should always remember that (like we have described in the <tip 3>) this new project madness is not going to stop while there are potential victims out there and at the same time fraudulent developers who take advantage of the buyer’s ignorance.
We don’t say that there should not be evolution for cryptocurrencies. However we should never forget that the ideological base and the noble cause are the most powerful elements. Otherwise we will end up with the companies backed up banking system as one way choice. This is why the Bitcoin is the older technologically coin but enjoys by far the biggest market capitalization. Don’t let the enthusiasm inflicted by an impressive advertisement about a new coin’s feature to dominate you.
It is most possibly just a marketing trick and behind it there are people who don’t really care for the original digital coin idea and your transaction freedom, but just for their pocket to be filled with your funds.
Before joining the next shiny project, make a better research. Try to understand the motivations and the quality of the most active people around it.
6) ALWAYS BACKUP your digital coin wallet:
This is a must for all the digital coin users: The only way to secure your coins is to backup your wallet by either writing down the security phrase (usually for the mobile wallets) or by saving a file containing your private key.
This way you, are able to recover your wallet and the funds of your addresses again after a data loss in your hard disk drive , a loss of your mobile device or other scenarios. Imagine that your funds are somewhere in the universe and your private key is the exact coordinates of the planet with your funds. Without the key, it would be completely impossible to access your funds again.
7) NEVER share your private keys
You have to keep your private keys in a safe place. You should never share them in possible social media messages or phishing emails and you should never enter them in 3rd part applications that you don’t trust. The private keys should be used only in the digital coin’s original applications in order to restore your wallet and track your funds in the blockchain. Furthermore, you should be extremely careful about the way you choose to store your private keys. There are many different scenarios , each one with different advantages and disadvantages.
8) AVOID the various scams that ask you to send funds for any reasons
There are endless scams in the world of cryptocurrencies. An easy way to save yourself is to follow this rule: Never send any funds to addresses for any other reason than paying for something that you really wish to have (a product or a service or tipping/donating). The most often scam is a fake “competition” that is asking to the potential participants to send a “small” sum (for example 0.1 ETH or 0.05 BTC) to a specific address in order to get a much larger one (for example 1 ETH or 0.5 BTC) afterwards back to their addresses. Of course the victims are losing their funds and usually they make the mistake because there are numerous fake posts under the competition , made by fake accounts , with people thanking , who claim that they have received their prizes.
Another way is asking the victim to help them to make a Bitcoin (or other digital coin’s) withdrawal in a specific (scammy) exchange, promising that he will get a big percentage as reward. They then ask the victim to create a btc address in the specific exchange, they send for example 0.90 BTC to the victim’s newly made exchange address. When the victim tries to make the withdrawal, the fake exchange , which is operated by the same fraudulent group that does all this trick, is sending a msg that withdrawals under for example 1BTC are not allowed. This way the victim is sending 0.1 BTC more in his exchange address believing that he will be able to proceed with the withdrawal of the whole sum, only to find out that he has lost both the 0.9 and the 0.1 BTC.
There are virtually endless scenarios with different aspects as fraudulent groups are implementing new ideas everyday. The only sure thing is that the user of digital coins should NEVER send any funds to any address for any reason except than buying a product / service or tipping/donating. This way , the user can be completely safe. A real competition would never ask you to pay for anything. It would only ask to leave your address in order to receive your prize or to do a small legitime task like participating in a trivia or leaving a comment or sharing a post and leave your address.
9) Don’t trade coins with unknown people , choose an exchange carefully
In the world of cryptocurrencies, the right way to buy a digital coin is by using a trustworthy exchange. Like you would never trust a stranger as a tourist , to exchange your money to another currency, you should never trust strangers in the internet in order to send them a type of digital coins for getting another. This is why exchanges are out there. Yet again, there are many exchanges : some of them with good fame and some with very bad fame. You should always make a small investigation trying to figure out if an exchange is trustworthy before using it.
We must always have in mind that a digital currency is simply a medium, so the fact that a well known digital coin is accepted by an exchange, doesn’t necessarily means that this exchange is trustworthy (and vice versa). Let’s give an example with the fiat (printed) currencies: the dollar or the euro are well-known and reputable currencies that are accepted in exchanges or banks with very bad reputation. At the same time, there are minor and weaker currencies than the dollar and the euro, which are accepted in reputable exchanges and banks around the world.
In the world of cryptocurrencies, the individual should always investigate before using an exchange for digital coins, exactly like he does with his printed money. Of course, the cryptocurrencies are a much younger asset so a higher attention might be needed. However, there are many ways to check the credibility of a cryptocurrency exchange and you can access our relevant article offering tips about it.
10) Never use an exchange to store your digital coins and turn 2FA ON!
Exchanges should be used only for selling a coin and buying another. You should never use an exchange address for the storage of your digital coins. In reality , you should even always minimize the time that your funds are in an exchange’s addresses. Something that most people forget is that all the addresses which are used in a cryptocurrency exchange are under the ultimate control of the respective exchange. The owner of their private keys is not the client. It is the exchange.
This fact simply means that under certain circumstance, you can possibly lose your funds and of course the exchange is the one who control these funds in the end. Of course you can prove that these coins have been sent to your exchange’s address for further usage, however there are many scenarios with the users regretting for letting their funds for so long in an exchange address. Many exchanges have suddenly closed without any warning , either because of bankruptcy or because of a planned exit scam, binding all their client’s funds. In other cases , some exchanges have been attacked by hackers and the funds of their clients have been completely lost. At last but not least, letting your coins in an exchange during an important network’s upgrade or a hard fork could lead to negative results with the user being unable to claim extra coins that could be obtained if he had his funds in a normal wallet address.
For all these reasons , the users of cryptocurrencies should always avoid storing their digital coins in any exchange. In addition they should minimize the duration of the usage of any exchange addresses.
At last but not least, you should never consider that the 2FA (two factors authentication) is just another “boring” parameter. It is a really important thing and you should always turn it ON , because ONLY this way you can really protect your exchange account from hackers. Hopefully the most exchanges are now requiring this extra factor to be turned on by their clients in order to withdraw their funds.