How To Identify Fake Cryptocurrency?

What Are the Main Causes of Scam in the Cryptocurrency Industry?

Every year, new and promising coins are created on the digital  financial market. Many products contribute to the industry. But there are scam coins crypto blockchain projects created by fraudsters and crypto investing for beginners can be problematic.

Separate cryptocurrency startups are created with the aim of collecting money from users and closing. This category includes new HYIP platforms that promise high income, but quickly stop withdrawing funds. Often startups have a promising idea, but do not compete in the market with Bitcoin and other cryptos. Some of them stop their activities due to external factors, others make money on the deception of gullible investors.

There are different causes of crypto scams: 

The ICO project did not plan to pay money. A new product is created solely for profit and is closed as soon as the number of investors drops.

Privacy problems. Third parties have gained access to the project. This is the most common type of scam. But sometimes the creators report hacking of the resource and theft of funds in order to hide violations in the work. 

Problems with payment systems. The startup justifies the lack of money by the default of partners.

Account blocking. Experienced investors who are experts quickly recognize fraud and file complaints with regulatory authorities. The regulator conducts an audit, the results of which block the company's accounts. 

Technical problems. Failures in the operation of the site, hosting or security systems can lead to the fact that users will lose access to the resource and to their money.

If investors are no longer interested in a project, its owners suffer losses. Then the developers decide to close the site. If it is proven that the theft of depositors' cash is intentional, the platform can be considered a scam.

How to Identify a Cryptocurrency Scam?

How to identify fake cryptocurrency? In the past few years, the number of  schemes in the fake cryptocurrency list has increased. 

A simple scheme – it is moving extremely aggressively in order to find investors as quickly as possible.

Scam of medium complexity – contains a detailed description of the conditions and development plan, the history of creation, information about the developers and other data.

Long-term scam resources can be difficult to recognize. They withdraw money while there is a large influx of new investors, have capitalization growth and offer interesting investment plans.

Experienced investors analyze offers before taking part in them. Fake crypto coins scam can be identified by several common features:

Frequent failures in the site (meaning that the creators do not plan to invest in the development of the project).

Technical support does not answer customer questions.

Problems with withdrawing money.

Changes in working conditions (the project increases profitability and actively buys advertising).

A large number of negative reviews.

Decrease in traffic.

It is also worth analyzing the idea of the project. If the resource promises high income, but does not provide information about the source of the money, it is most likely a scam.

What Are the Main Types of Cryptocurrency Scam? 

Financial Pyramid

How to identify fake cryptocurrency? Fraudsters use a large number of ways to deceive customers. The most famous scheme was invented by Charles Ponzi:

The company accepts money from investors, undertaking to return them after a certain time with a profit. Developers find the next investors whose assets pay interest to the first clients.To fulfill its obligations to investors, the company attracts new participants.

The organizers disappear with the clients' money as soon as the project starts to run at a loss.

Mobile Applications

Along with the usual mining on computers, there is another type that works on portable devices. However, not all users participate in the mining of cryptocurrencies of their own free will. Attackers create mobile applications with a miner. The product is sold on official platforms or other resources. Individual applications offer mining on remote servers. Users buy a product, but receive a program that only beautifully visualizes the mining of coins.


What is cryptojacking? The old ways of defrauding investors also do not lose their relevance. One of the most famous is cryptocurrency phishing. Fraudsters on behalf of companies send a letter to the victim’s email address, which may contain an interesting offer, a notification about a large transfer, an account login notification, and other attention-grabbing information.

The user follows a link to a fake exchange or wallet site; in terms of functions and design, it usually does not differ from the official one. The client is prompted to enter account information that the attackers will receive. An unsuspecting user will lose access to the personal account, or assets will be withdrawn from his account.

Fake Crypto Coins 

New cryptocurrency technologies are incomprehensible to ordinary people. This is used by fake crypto coins creators. Rising prices for cryptocurrencies and the attention of investors attract scammers. Another way to deceive users is a hype project. This is a pyramid in which each new participant provides the income of the previous one. The working time of the site depends on the activity of contributors. As soon as the project starts to make a loss, it will be closed. You can earn in HYIP only at the start. But if the site does not arouse interest among users, even the first investors will lose money. 

Fake Exchanges

This type of crypto scam consists in the fact that scammers create a site-double of a crypto-exchange/crypto-wallet with a slightly distorted name, a replaced letter or a slightly different color rendition and buy advertising in search engines so that their site is highlighted first in search results.

An unsuspecting crypto investor follows a link to a fake and enters his data to enter his personal account. After that, the login, password and other information are in the clutches of scammers. Now they can safely withdraw all funds from a real crypto wallet/exchange. This includes, among other things, fake mobile applications that you are going to download from the AppStore/PlayMarket.Therefore, you need not to credit blindly and to carefully read everything and check where you are going to enter your personal data.

Buying Crypto From Hand to Hand 

P2P is a scheme when you transfer money to another person from cards/different types of crypto wallets when buying a crypto, and in return they transfer the required amount of digital coins to you. It is better to use reliable platforms for the exchange, where the organizers of the platform act as guarantors. That is, if the other participant in the transaction does not transfer money within the allotted time, the site will be obliged to reimburse everything. But buying cryptocurrency on third-party sites, for example, via Telegram channels, is definitely not worth it.

Requirement to Pass Verification

The essence of the scam: you once registered on a crypto-exchange/in a crypto wallet, where you did not need to go through identification (that is, confirm your identity), and then a letter allegedly from the developers of the site arrives with a requirement to verify: otherwise, the profile with your assets will be blocked or all your transactions will be refunded. 

Personal data is required mainly only on some large crypto exchanges, where even at the registration stage it is necessary to confirm your identity. So it is better to send such letters to spam.

How to Secure Your Funds

How to identify fake cryptocurrency? Fraudsters use a variety of methods to deceive customers, from the promise of large incomes to the distribution of essentially fake crypto coins. If the offer is too attractive, then most likely it is a cryptocurrency scam. A few tips to help protect your investment:

Ignore suspicious emails and messages on social networks. Any user's account can be hacked. Check site names before entering account information. Fraudsters often use applications that change the official site to a fake one.

Analyze coins credibility, check it for signs of fraud.

Attackers also distribute software  that can disable the computer and compromise the user. 

Seed-phrase is a special password consisting of 12, 18 or 24 words that must be entered in order to restore access to your crypto wallet. It's like a secret question from your personal account on social networks. Never tell anyone this password. You definitely shouldn't leave your seed phrase anywhere: in social networks, in cloud storage, and on other easily hacked resources. Be vigilant.The wallet/exchange/exchanger does not have the right to require you to enter a seed phrase. As soon as this password falls into the hands of attackers, you can set a timer for two minutes: it is during this time that all your crypto coins will evaporate in the digital space.


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Maxim Katrich
Crypto enthusiast, editor of BitOnfeed, expert on the NFT industry.
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