Started in 2008, Bitcoin is the first and best-known cryptocurrency of the more than 4,000 cryptocurrencies in existence today.
Bitcoin is a decentralized currency, meaning that it does not rely on centralized institutions, like banks, to move money from one place to another. Instead, money can be transferred directly from person to person using technology to manage and verify the transactions.
Bitcoin was initially designed to provide an electronic payment system where every transaction can be verified. While this is true, cryptocurrencies are widely used by scammers because of two key things, they don’t require disclosure of any personal information, and you can't reverse transactions.
Other major cryptocurrencies include:
Be very wary of anyone asking you to pay using Bitcoin or any other cryptocurrency. Some of the most common Bitcoin scams to look out for include:
Scammers contact you claiming they have access to sensitive information about you or files they've stolen from your computer. They demand payment in Bitcoin, or they will release the information on social media.
These work in the same way as many other phishing scams that try to get access to critical information about you. Scammers send an email containing links to a fake website designed to get you to enter the access key to your Bitcoin digital wallet. With this information, scammers can steal your Bitcoin.
Social media has proved to be a great way to distribute fake information and solicit your Bitcoin. There have been several incidents where high-profile individuals' and companies' accounts were hacked, with messages being sent about a giveaway they're hosting.
To participate in the giveaway, you must send a specified amount of Bitcoin to an address to "verify" your wallet. Once sent, there is nothing that you can do to get it back, and there was never a giveaway to being with.
Websites that look just like legitimate bitcoin exchange sites are set up by scammers to steal your money. These fake exchange sites will usually try to convince you to invest money using the site by giving you free coins or promising huge returns.
Similar to Initial Public Offerings (IPO), where companies issue shares to raise capital, an Initial Coin Offering (ICO) is set up to raise money for a project on the internet using cryptocurrency. Unlike an IPO, you are not investing in a recognized company, and the market is unregulated, so you are not protected if the platform is hacked or turns out to be a scam.
Scammers will set up a fake ICO, then when they are finished fundraising, they disappear, taking your money.
Scammers target social media users with posts promising huge profits investing in cryptocurrency. They convince you to make a small initial investment and, after a month, tell you you've made a profit.
They continue to encourage you to reinvest (and invest more bitcoin) and again tell you you've made a profit. What you don’t know is that they are paying you with other investors' money rather than profits, and when the whole thing collapses, the scammers disappear with your money.
A healthy dose of skepticism is the best approach to beating Bitcoin scams. If the promises made sound too good to be true, the chances are that it is a scam.
It's important to stay wary of Bitcoin scams and to proceed with caution whenever you transfer bitcoin to someone, as you cannot reverse transactions, even if you were scammed.
You will need to provide:
There are also other steps you can take to try and retrieve your stolen bitcoin, such as:
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