With over $1 billion lost to crypto scams since 2021, it’s becoming apparent that the increased popularity of digital tokens has increased the number of cryptocurrency scams.

With any emerging market, malicious individuals will always try to take advantage. With so much press coverage and social media buzz surrounding blockchain technology and cryptocurrencies, unscrupulous individuals have exploited people’s trust — creating fictitious opportunities to defraud unsuspecting members of the public.

Let’s look at some common cryptocurrency scams you should know and how to protect yourself.

Airdrop Scams

One popular scam is the fake airdrop scam. Here scammers may use posters or links for advertising free airdrop events within your community.

If a user scans the code, goes to the website, and approves to receive an airdrop token, scammers can essentially steal the user’s assets.

Users mysteriously receiving airdrop tokens is another way these scams are presented. First, users receive a notification they have received airdropped tokens.

Then, when they check their transaction records, they receive a link telling them they can exchange the airdrop tokens for other tokens.

If users follow the link, their wallet funds are maliciously approved, causing the loss of assets.

Many scammers have even name-dropped Gamestarter, Dark Frontiers, and other well-established platforms to dupe unwitting victims, so it’s crucial to remain vigilant.

Here’s how to avoid fake airdrop scams

1. No legitimate project will ever request your private keys. If you participate in any airdrop and are asked to provide your private keys — whether to ensure you’re a human or a bot — don’t! Once you give them up, scammers may hack into your account and steal your funds.
2. Don’t send any form of payment to any airdrops you come across — even for ‘fees.’ If you make any payments, the scammers will take your funds and disappear.
3. Avoid announcements from airdrops not linked to official channels, especially if someone posted the information from a brand new account.
4. Legitimate crypto airdrops make it easy for anyone to withdraw the free tokens. You usually should remove the tokens before participating in an airdrop — if the process isn’t straightforward, don’t participate.

Scams on social networks and messaging groups

It’s important also to mention Telegram — and the role this messaging app is playing in driving the proliferation of crypto scams.

Scammers are active in Telegram groups impersonating company employees or influencers to steal personal information from users. These activities are frequent on Telegram, but more instances are being reported on Twitter and Reddit.

How to protect yourself from social network impostors

1. Scammers can create almost identical URLs and websites to trick people. Be careful when clicking on every link or ad you see. Always go to the original website directly to find any promotions or giveaways.
2. Customize your privacy and security settings to your contacts only to avoid being added to fake Telegram groups.
3. Genuine crypto airdrops are not advertised via email, and people are usually victims of phishing emails because the messages appear legitimate. Don’t click on any link sent to your email to receive an airdrop, especially if you have not signed up for the project with that email before.
4. Do not give your seed phrase or password to any customer support staff who message you privately seeking such information to assist.

Rug Pull and Honeypot Scams

In this type of scam, developer(s) lure investors to a new cryptocurrency venture and then pull the rug from under the buyers’ feet by withdrawing the funds and abandoning the project before completion, leaving investors with a useless token.

Like the rug pull scam, a honeypot scam is another scam most often perpetrated by the project or token creators.

When you buy into a coin, scammers manipulate a piece of code in the smart contract to give only their wallet’s sale permissions. So everyone else can purchase, but only the creators can make a sale.

And because the momentum is high, investors are encouraged to keep making purchases, which drives the token’s value. Unfortunately, you only realize the con when you attempt to sell, and the scammers trick you into purchasing coins you can’t sell, and the funds are trapped.

How to safeguard yourself from Honeypot and Rug pull scams

1. Scrutinize the project roadmap. Look at the project’s roadmap and ensure it has the right goals and strategies for creating long-term value for the project. If the roadmap appears dubious or unrealistic, it may indicate a suspicious project.
2. Scammers typically invent ambitious roadmaps to excite the community to participate.
   It’s also crucial to do diligent research on the development team by looking at their socials. If the team is qualified, negative criticism, good references, etc.? Also, check the community to see if there are too many bots or poor engagement.
3. Liquidity is another determinant. A project with low liquidity may have difficulty converting its token into cash or another asset. Look at the project’s trading volumes to see if there is sufficient liquidity. A high volume of trades indicates many users are exchanging the currency or token, which is a positive indicator of liquidity. However, low volumes and a small community of buyers might indicate low liquidity and hence a scam.

Staying positive

The cryptocurrency market is full of risks for new investors. Newcomers need to be aware of the many traps set by scam artists looking to take advantage of their ignorance and willingness to invest.

These tips help you identify red flags when researching a potential investment opportunity. Still, always perform extensive research before putting money into anything that sounds too good to be true.