There are hundreds of different cryptocurrencies available on the market today, and new ones are being created all the time. With so many options available, it can be tough to know which ones are legit and which ones are scams.
Fortunately, there are a few ways you can tell the difference between a scam and a legit cryptocurrency. In this article, we’ll go over four of the most common indicators that a cryptocurrency might be a scam.
If you’re thinking about investing in a new cryptocurrency, be sure to do your research and make sure it checks off all of these boxes before you buy-in.
1. The team behind the cryptocurrency is anonymous
A cryptocurrency scam is a type of fraud. They use the hype around cryptocurrencies and blockchain to generate more interest in their cryptocurrency in order to mislead investors.
You can tell if a cryptocurrency is legit or not by looking at the team behind it. If the team is anonymous, you should be suspicious because they could be hiding something.
While it is not an easy feat to track down the team behind the cryptocurrency, there are certain ways that you can identify whether or not a cryptocurrency is a scam.
The first way in which you can identify if a cryptocurrency is a scam is by looking at the “white paper” and seeing if they are offering anything in return. By checking out their white paper, you can tell if they are offering an actual service or product. If they are offering nothing but the coin, then it’s likely that it’s a scam.
Secondly, you can tell if it’s a scam by looking at how much money was raised through their ICO and/or initial coin offer. If they raise millions of dollars for projects with no clear goals or direction, then this could be indicative of fraud and/or scam.
There’s no way to know the team behind the cryptocurrency. There have been many stories of scams in this space so it is best to stay on the safe side and avoid investing in any form of cryptocurrencies.
2. The cryptocurrency has no website or whitepaper
A cryptocurrency is a digital asset designed to work as a medium of exchange. It is a form of online currency that operates independently of any centralised bank, and uses cryptography and blockchain technology to control its creation and management. Cryptocurrencies are often built on blockchain related software.
The advantages of cryptocurrencies are greater security, privacy, enhanced reliability due to the absence or diminishment of third-party validation, convenience in use (fast transactions), elimination of frauds and scams such as chargebacks, higher transaction speed (in most cases), cheaper prices for end users (less fees).
The cryptocurrency does not have a website and the whitepaper is very brief. This is a red flag that indicates that it could be a scam.
You should be cautious of transactions with cryptocurrencies because they are unregulated, but you can find safety in using established cryptocurrencies such as Bitcoin and Ethereum.
3. The cryptocurrency has red flags in its code
A cryptocurrency is a peer-to-peer electronic cash system that transfers money through the internet using bots such as Bitcoin Era. The idea of cryptocurrency actually began in 1995, when Wei Dai published a description of an “anonymous, distributed electronic cash system”.
The cryptocurrency market is still developing, so there are many scams in this space. Even though cryptocurrencies have gotten popular and have started to be accepted as a form of payment by more and more companies, there are still red flags that need to be looked out for if you want to invest your money in them.
One of the biggest red flags is how the company behaves. If they are not transparent with their own currency, it is probably because they are trying to hide something.
Another red flag you may see on Reddit or other forums about a coin is there’s no information about who built it or what the purpose of it was supposed to be in the first place.
If you do happen to find information on who built a coin, look them up online to see if they have any background as a developer, and then see if any other coins that person has created.
4. The cryptocurrency is pre-mined
Involvement in cryptocurrency is generally associated with enormous risk. It is important to note that not all currencies are scams and there are many legal, legitimate and beneficial cryptocurrencies which offer a huge potential for investors. You need to be aware of the risks you are taking and make sure they match your investment objectives before investing in any cryptocurrency.
Pre-mining is a tactic that has been used by many fraudulent ICOs in the past. In such cases, the company starts mining long before releasing the currency so they have an unfair advantage over other miners with more powerful mining equipment who join in later on. Pre-mining also makes it easier to control prices as this practice allows companies to eliminate competitors by manipulating coin exchange rates at will since they can easily mine new coins or buy them from other traders.
Final Thoughts:
We’ve all been there before – browsing through crypto forums in search of the next big thing, only to be met with shady users who are eager to take your hard-earned money. In a nutshell, legit cryptocurrencies are backed by their own blockchain technology, which is a permanent database or ledger of transactions that cannot be altered or manipulated.