Safety of Crypto
How safe is crypto ?
The technologies that cryptocurrencies are built on are one of the most secure technologies in the world currently, all due to the cryptography that is being used to protect it, it is one of the most secure way to protect something, even super computers cannot decrypt the the encryptions and that shows how secure it actually is. Now that was in terms of the technology that it is built one, now holding cryptocurrencies and trading it using crypto exchange is a lot riskier in terms of being hacked, let me explain, to buy cryptocurrencies you do so by buying it of a cryptocurrency exchange where you can buy and sell your crypto, the first risk is trading risks, cryptocurrency is really volatile and you could gain a lot of money or loose a lot of money in an instant. Also there are a lot of hackers who target your accounts that have your cryptocurrency in them, they hack them and take all of your money and transfer them to their account and there is no way for you to get them back as all transactions are anonymous. Lastly and the most important one is scams, there are a lot of scams in the cryptocurrency community, and that is where most people lose money from.
But you can never be too safe with crypto, FTX , one of the largest and most trusted crypto exchanges in the world collapsed losing over 8 billion dollars in user funds (FTX: Collapsed Crypto Giant Recovers over $5bn of Assets), so anyone who was storing their funds on FTX or using it to trade lost all of their money, so if you want to enter the crypto world you must be ready to lose and do not invest what you are not ready to loose.
most common scams in crypto
Unfortunately, there are a lot of scams in the crypto community, and I will go through the most popular ones so you can know if you are getting scammed.
Rug pull scams: The idea behind this scam is an influencer with a huge following buys a couple of thousands of dollars of a small cryptocurrency without telling anyone, then using their social media, they announce that they found a new cryptocurrency that will make everyone millionaires, which is going to make their followers go buy this certain cryptocurrencies which will increase the price of this certain cryptocurrency, then this person sells all of their crypto and the price of the crypto falls, making everyone who got in lose all their money.
Phishing scams: These scams have been around for a long time, basically you get sent a link from scammers pretending to be an official website or something you trust, you click on the link and all of your information will be stolen, in this case your passwords for the crypto exchanges will be stolen and all of your money will be stolen.
Ponzi Schemes: This scam may be the worst, users lost nearly 7.8 billion dollars of theirs money from Ponzi schemes (Crypto Ponzi Schemes Cost Victims $7.8B in 2022: TRM Labs) and this shows that people need to understand what they are getting into before investing. Ponzi schemes are basically takes new investors in to pay old investors that were in before them this will work until no new investors show up making the old and new investors lose all of their money.
how to protect yourself from scams
To protect yourselves form scams you first need to know what scams are currently being utilized, by doing that you are gong to have an idea of when you are being scammed. I will provide additional tips that will help prevent you from being scammed.
1. If it is too good to be true than it most likely is, if you see someone promising you a yearly return of lets say 1000% they are probably trying to scam you out of your money so do not fall for it.
2. If a celebrity or an influencer promotes a cryptocurrency it’s most likely a scam, they will wait for you to buy so the price increases and then sell what they have and you lose all of your money.
3. If you receive any email from a person promising you money it most likely a scam, and do not click on any links that are there you will get hacked and get all of your funds stolen
4. Anyone that offers you free money is a scammer and trying to scam you, no one is going to give you free money without getting something from you in return and in this case its all of your money.
crypto and money laundering
Cryptocurrencies have been the main way for criminals to launder money, because your anonymous, no one can track what you are doing, what you are buying and how much money you have. So criminals took advantage of the privacy that cryptocurrency gives and began using it for money laundering. nearly 28 billion dollars worth of cryptocurrency was laundered in 2022, that is a 68 percent increase from 2021 (How Criminals Use Crypto Exchanges for Money Laundering). Unfortunately there is nothing much anyone can do to stop these criminals from laundering as cryptocurrency is gave them an easy pass on money laundering.
To stop these criminals the government and crypto exchanges need to work together to catch these criminals, you may be wondering how can it be done, you see those criminals in the end would want to sell those cryptocurrencies they stole into USD or other currency and the only way to do that is by using an exchange, so the crypto exchange can monitor to see which account will the money be sent to and close that account and give all the information on that person to the police so they can arrest this person.
crypto and regulations
At this point in time crypto is not regulated and has no specific laws that prevent people from buying or trading it, but the US government is against the idea of Bitcoin and is fighting against it whenever it can. Regulating crypto can be really challenging as the technology behind crypto is changing in a really fast pace making it hard for regulators to even get started on regulating crypto, but I think some kind of regulation is needed for cryptocurrency to keep it going and to achieve its full potential. Regulating crypto will not only make it safer to invest in it but also it will make people accept it more and use it more than the USD, which is cryptocurrency’s ultimate goal, to take down the US dollar and replace it with a digital decentralized currency.
Sources
“FTX: Collapsed Crypto Giant Recovers over $5bn of Assets.” BBC News, 12 Jan. 2023, www.bbc.com/news/business-64245044.
“Crypto Ponzi Schemes Cost Victims $7.8B in 2022: TRM Labs.” Www.coindesk.com, 28 June 2023, www.coindesk.com/consensus-magazine/2023/06/28/crypto-ponzi-schemes-cost-victims-78b-in-2022-trm-labs/.
“How Criminals Use Crypto Exchanges for Money Laundering.” Www.idnow.io, 12 June 2023, www.idnow.io/blog/how-criminals-leverage-crypto-money-laundering/#:~:text=How%20money%20laundering%20in%20crypto.