Protecting Your Digital Assets
The parabolic growth of cryptocurrency, and subsequent trading, has resulted in mass adoption by masses looking to make some money off of the growth. It’s by no means unheard of for a specific cryptocurrency asset to rise over 5,000% in one year, if 2017 is the reference, and the subsequent hype from the media inspired a mass influx of new investors via FOMO, or fear of missing out. There are some key differences between the cryptocurrency realm of early 2017 and 2018; most notably, the massive influx of “newbs” that don’t have the experience that veteran cryptocurrency traders and investors have. Unfortunately, these new folks in the cryptocurrency realm are prime targets for malicious users with equivalent levels of greed.
While worldwide sentiment has varied, and often has changed in extremes comparable only to the volatility of cryptocurrency itself, one may look to the US Government perspective on cryptocurrency regulation for justification to educate yourself, DYOR (do your own research,) and protect your investments. The US government is currently implementing a “do no harm” approach to the cryptocurrency realm, and while regulation is being considered, cryptocurrency is still currently a widely unregulated market, with any regulation taking place in the future. In essence, the burden is on the cryptocurrency investor to protect themselves: the government will often not be able to help you.
The realm of ICOs, or initial coin offerings, is the most likely to become regulated. For the uninitiated, an ICO is a method in which blockchain startups seek initial funding in exchange for tokens usable in their future service offering. 2018 is slated to be the year of the ICO, and it seems that many of the unsavory characters that prey on new cryptocurrency investors have taken note of this. The same company behind the recent largest exit scam in cryptocurrency history, Bitconnect, is currently running their ICO for Bitconnectx. Anyone that has been in cryptocurrency for more than a few months can see the red flags being more prevalent in quantity than the USSR: a lack of a transparent team (not even names, let alone LinkedIn profiles,) no MVP (minimum viable product,) and laughably vague details about what the Bitconnectx platform will even do. However, to new cryptocurrency investors, they “knew” Bitconnect was a well-known name, so it had to be successful, right?
Wrong. As many veteran cryptocurrency enthusiasts have called the collapse of Bitconnect (as well as similar so-called “lending platforms” such as DavorCoin,) it’s almost a unanimous agreement that Bitconnectx is nothing more than a cashgrab ICO. 2018 has seen even more legitimate-seeming projects, with (at least relative to Bitconnectx) believable use-cases exit scam, some with some choice words on their website after their notorious exit. Unfortunately, due to the anonymity of most cryptocurrencies (as well as the sketchy legality of ICO investment overall, which some citizens deliberately ignore,) government intervention is impossible at best, or undesirable at worst in almost every circumstance. It is the sentiment of many in the crypto realm that government regulation is undesirable, and little pity is taken on individuals that are scammed by seemingly obvious schemes.
Legitimate projects with mass adoption and high user count, such as exchanges with particularly high trade volume (and, subsequently, larger wallets to target,) are often targeted. Scammers and hackers have began to increase their devious efforts with fake Binance links, which look extremely similar in design and even URL to authentic Binance URLs. Cryptocurrency users that are not paying attention will log in to Binance via these fake sites, surrendering their login details to the scammers. Two-factor authentification, or 2FA, will not protect cryptocurrency users, as the scammers are receiving the same code and login in real-time, often emptying a cryptocurrency wallet within mere minutes.
Scammers often convert the hijacked cryptocurrency assets into highly anonymous cryptocurrency assets such as Monero, and are able to walk away from the situation with minimal risk of prosecution for their crime. Many exchanges only require KYC (know your client) for high levels of investment, and Binance is one of these exchanges, which is why it is targeted by these scammers. An exchange such as Coinbase is less likely to be a candidate for account hijacking since every account on that exchange requires some level of KYC.
The best advice for newcomers into the cryptocurrency space? Slow down. The cryptocurrency boom isn’t going to vanish overnight, and this should be (despite media hype) viewed as a longer-term game. All too often, the hype and FOMO results in newcomers overlooking critical learning objectives to both make smart investments and protect those very investments. Bottom line, if you started investing in cryptocurrency in late 2017, and you can’t recite the difference between a public or private key, don’t know what 2FA is, don’t know acronyms such as DYOR (do your own research,) or know what a whitepaper is- your losses are your own fault, and even the government will not take pity on you.