The cryptocurrency market is rapidly growing. With more than 10,000 cryptocurrencies being in use and a market size in excess of $2.9 trillion at highest the cryptocurrency industry is one of the latest and among the most profitable investment opportunities for businesses and brands.
Being investing in crypto definitely comes with its own difficulties. Fraudulent cryptos, scams and rugpulls are all but regular instances. These are just a few of the most significant risks that could result in the loss of income for investors. Therefore, companies and companies seeking to invest in this sector must be aware of these risks prior to entering the market.
As the cryptocurrency market continues to grow and expand, new methods and strategies to combat fraud in crypto are being continuously designed and improved.
This guide aims to educate readers on the fake cryptocurrency and how to stay clear of it.
In this article, we discuss:
- How does cryptocurrency work
- What are fake crypto tokens?
- How can you identify and avoid counterfeit cryptocurrencies
- What Red Points can help protect your brand from scammers using crypto
What is crypto?
The name itself suggests that cryptocurrency is basically digital currency. It functions the same way as traditional money, however, it operates it is a digital one. it is a peer-to-peer method that anyone can use to purchase or sell goods or services, and also to facilitate payments.
The term “crypto” is a reference to cryptographic, as all cryptocurrencies utilize an encryption that is cryptographic to verify that they are secure, verified, and secure transactions. It also acts as a “currency” refers to money.
In contrast to regular currency But, unlike regular money, cryptocurrency is not governed, controlled or owned under any authority central to them, i.e, they are not centralized. The cost of a crypto token is decided by the demand and supply for the cryptocurrency.
Since cryptocurrency is not guaranteed by any government agency and are not regulated by any government, they do not have legal security. Therefore, losses through trading or holding parts of a crypto currency are not able to be written off or refunded on tax forms like losses from stocks may be.
How does crypto work?
The majority of cryptocurrency transactions are based on blockchain technology. Blockchain is an ingenuous technology that removes the requirement for an intermediary from a third party between sellers and buyers. Blockchain is considered as a database in electronic form which stores information in digital form.
The goal the purpose of Blockchain is to permit digital data to be stored and distributed, yet not altered after the information has been distributed. In this way Blockchains serve as the foundation for immutable ledgers that act as a record of transactions that are not able to be altered or deleted. It is also not able to be destroyed. This is why a second term of blockchain technology would be distributed ledger technology (DLT).
Blockchain technology forms the main wire that runs through any cryptocurrency system. They play an important role in keeping track of transactions that’s secure and decentralized.
How to spot fake crypto?
Though a variety of cryptocurrencies are launched daily, there aren’t all cryptos are all created to be the same.
Unscrupulous people often make use of the anonymity and decentralization nature of the crypto market to create tokens specifically designed to drain uninformed investors of their money and then enrich themselves instead. This is a form of fraud in the cryptocurrency space called rug pull.
Rug pull is a type of scam in the fake crypto currency industry that takes place when fraudulent developers create the creation of a new cryptocurrency that is artificially inflated and then attempt to get as much value out of these tokens before removing them and leave their customers with a product that is worthless. This kind of scam is often referred to by the name of “pump and dump.”
According to the data of Chainanalysis Rug pulls drain investors of over $2.8 billion in cryptocurrency. It was the reason for more than 37 percent of all cryptocurrency scams that were committed in 2021.
Though unscrupulous investors try to entice investors with numerous methods, they do have some indicators that indicate that the possibility of one that is a rug pull.
One example is the possibility of an unsustainable high yield without a explicit, specific description of where the money may come from. Another possible sign of a rug pulling project is if the project has not been reviewed by a trusted third-party auditor of codes.
External audits of code independently is standard practice within the crypto industry. Third party code auditors comb through the source code for the program to search for any malware-related code flaw or software vulnerability that could be exploited by later developers.
Before investing, you should take the time to study new cryptos and perform thorough research, so that you don’t end up becoming a victim of fraudulent scams involving cryptocurrency.
How to avoid fake crypto
Finding and avoiding fraudulent cryptocurrency is only achievable through thorough conducting thorough research and diligence. Here are some methods to look into crypto businesses and verify that they are legitimate:
Investigate the team behind the project
The group behind a cryptocurrency is crucial in determining the success of the entire project.
The field of fake crypto currency is dominated by names. These individuals can often create or derail projects by simply including their names in the team of developers. Because of this, fraudulent creators and scammers of fake cryptocurrency frequently create fake biographies and founders.
Before investing money in crypto, conducting thorough due diligence on the individuals who will be involved in it is the most effective protection against fraud.
Be wary in the event that you cannot find information about a developer, or founder of LinkedIn or other social media websites. If profiles are available it is crucial to check if their activity is in line with the number of followers and followers they amass. Anyone with no activity in accumulating thousands of followers could be fake.
Examine the whitepaper in great detail
The whitepaper of cryptocurrency projects is the document used as the project’s base. The whitepaper should describe the background of the project, its goals as well as the strategy, goals and the estimated timeline to accomplish its goals and goals.
Whitepapers outline the main goals and goals of a project. They are able to be very informative; for example, you could find that a website with a stunning website is not the most fundamentally sound idea.
Whitepapers are an essential source, and any business that do not offer them should be avoided at all cost.
Protect your business from impersonators
For companies that have a web 3.0 presence, it’s not unusual for criminals to design fake tokens that appears to be your business’s to swindle potential investors and investors who are not aware. This could damage your image and impact the performance of your business.
To ensure your company’s security To protect your business, you may opt for an Impersonation Removal Software such as Red Points’.
What’s Next?
Rugpulls and fake cryptocurrency pose a major problem for the cryptocurrency industry in general.
In addition to resulting in a loss in revenue, but the image of businesses and brands who are impersonated by scammers can be damaged too. Red Points can help you ensure that your brand is not taken on by these bad faith actors.