Market volatility is not the only concern that crypto investors must deal with. Rather, another major issue they must manage is the possible chances of their coins being stolen. Ever since the concept of Bitcoin Exchange has become famous, many scammers have gotten active. There are numerous ways to con the crypto traders and strip them of their coins. According to the latest news, it is possible that an overnight theft of around 326 million dollars on the Ethereum coins by scammers made the blockchain bridge a risky phenomenon for future investors.
The time when the crypto thefts got very prominent and rose relatively high was that of the pandemic. When most scammers found the vulnerabilities of the crypto ecosystem and exploited them to their advantage. The crypto scams that were there once in a while augmented, and every other investor became susceptible to them in one way or the other.
The types of fraud
When it comes to digital currency, there are two kinds of criminal activities that are currently gaining fame. These include scams and direct theft. The coins can be stolen from you directly, or someone can trick you out in some way or the other and take all your investment away from you. According to the statistics, a total of 3.2 billion dollars were stolen from the investors only in the year 2021.
This was a record against the previous year when the thefts were somewhere five-fold less than this value. As more people are adopting cryptocurrency as a major form of investment, crypto crime is also turning into a huge enterprise.
What makes it easier for criminals to commit crypto fraud is the combination of two major features of the crypto ecosystem. The whole network of crypto is decentralized and works on the Defi system. Alongside this, the market vulnerability and huge changes in the value of cryptos keep the investors uncertain about the future.
These two factors combine and make the whole scamming process a very lucrative opportunity for the scammers.
Exchange crypto thefts
A huge chunk of crypto owners gets the currency from an exchange. Even if you have bought multiple cryptos and managed them through the bitcoin trading software, there are great chances that you must have obtained them through an exchange. For that matter, there is a need to open an account with the exchange and deposit the fiat currency to it. Once the currency is deposited, it is then converted into the kind of crypto you wish to have.
This crypto is then kept in the custodial wallet, which is associated with your account. However, the private keys are in the possession and control of the exchange. This means that on behalf of the consumer, the exchange keeps the cryptos and manages them through the keys.
However, contrary to the banks, crypto exchanges don’t keep all the cryptos in their hot wallets. Rather, they keep only as much as required for regular customer transactions. To keep the security top-notch, the rest of the coins are kept in cold wallets, which are not connected to the internet.
There is no financial claims scheme, however, and the consumer can’t ‘claim’ anything the way he does with a bank. Even if the exchange busts, there is no guarantee of the crypto deposits being safe and secure.
At the same time, if the exchange fails to owe some commercial reason, there are great chances that the consumers may end up with huge losses. A similar case happened some time back in Australia, where an exchange failed and couldn’t facilitate the consumers. Eventually, they were left bankrupt!
Crypto Scams At Rage
The most common crypto scams that you must have heard of in recent times are email phishing, investment scams, and romance scams. Until and unless you are not very critical of each segment of the conversation you make with the person offering you a deal, you may end up losing all your investment. Hence, there is a great need to ensure that whatever step you take in your crypto deals, you have to think about it from every angle to be on the safer side.