What is a scam?
As mentioned above, scammers come in many different forms, from flashy press releases promising money in exchange for a “moon shot” to the more traditional phishing emails. Once you decide that you want to do business with a company or receive a product from one, it’s important to look at more than just the company name; you need to investigate who’s behind it and why they’re doing what they’re doing.
How can you tell if a crypto startup is actually legitimate?
One obvious indicator is what they’re based on. Cryptocurrencies tend to be distributed and transparent, meaning they use encryption to solve difficult transaction processes. Anyone can download an application to any operating system and participate in a blockchain network, making them largely accessible to the public. These coins are created with the help of an open-source system that aims to make them easy to trade and reduce transaction costs, making them easy to mine and transfer.
The approach to taking down websites dedicated to fraud is complicated. © Bloomberg/Getty Images/Getty Images/iStockphoto
Public and transparent transactions are also a trait of blockchain, the computer and networking technology underlying digital currencies.
Warning signs that indicate a crypto scam
Before you do anything, read through their FAQ and any material on their website. You can also go to their social media pages and their profile on a related coin. Check to see if it’s linked to a site in the other realm. On popular sites like Reddit, new ICOs typically get good reviews and a lot of subscribers. Make sure you’re not reading reviews about a scam, like one where someone says “have not found a single review that was even remotely correct!”
Another hint is that the company’s contact information looks unprofessional. Will you receive an email form the company about your refund in a letter with a PO box number, for example? You might think the scammer has the right to use a Gmail or Yahoo address, but that’s not the case.
It’s true that cryptos are a little bit off the beaten path. But there’s no shortage of blockchain companies with genuine products that are offering major breakthroughs, and bitcoin and other coins offer real value to investors. Those looking to invest in a new tech and take on cryptocurrency risks should do so only when they’re comfortable with the level of risk they’re comfortable with.