Digital currencies such as Bitcoin and Ethereum have wide use and application. The fact that many people have started adopting them has attracted malicious players such as fraudsters. These cybercriminals have caused the industry a lot in terms of lost funds. That's not all. The negative publicity attributable to cryptocurrency scams is responsible for the loss of interest by many investors. It is also responsible for the reluctance by some institutional investors to support the cryptocurrency ecosystem or invest in the coin market.
According to a report by the Bitcoin Magazine website, $3.25 billion was lost to fraudsters in 2018. It is not certain how these figures were calculated but what is obvious is that billions are lost annually to scams since Bitcoin and other cryptocurrencies were made popular by ICOs and other fundraising schemes for startups.
What is Phishing Attack?
In this article, we shall look at some of the hazards associated with holding cryptocurrencies and how to avoid losing your coins to scams, especially Bitcoin phishing scams that are prevalent in the cryptosphere. The main danger of cryptocurrency phishing lies in the fact that the fraudsters gain access to the wallet and can practically steal all the coins in their victim's wallet.
Here are the most popular cryptocurrency scams that could cause you losses.
- Third Party Activated Wallet Scam
There is a common saying in the crypto community that whoever controls your private keys controls your funds. Some fraudsters take advantage of the ignorance of this fact to deceive new entrants to the cryptosphere. This scam involves promising people who know nothing about cryptocurrency wallets that the fraudsters would open a wallet with the victim's own email. They may even be told to change their password after gaining access to the wallet. Down the line, the victims may start using the wallet oblivious that the recovery seeds are with the fraudster who easily have their cryptocurrencies stolen. Bitcoin wallet phishing is more widespread than reported.
- Clipper Malware Scam
This is a sophisticated phishing scams that takes advantage of the window between the copying of the destination address and pasting it to change the address to the fraudster's own address. This is a classic Bitcoin address phishing. What has been seen is that this clipper malware changes the address the sender wants to send the coin to theirs. When the coin is sent, it goes to the fraudster's wallet. This is why it is imperative to crosscheck your destination address before sending. This malware can be developed for other coins such as ethereum and litecoin.
- Private Key Phishing Strategies
There are several strategies employed by coin thieves to gain access to wallets. The most effective is getting the private keys of targeted wallets. Some techniques they use are these:
- Scam Airdrops and Giveaways
Legitimate cryptocurrency projects use airdrops to create awareness of their tokens or coins. Malicious players also use airdrops to steal private keys of the uninformed. They accomplish this through codes that prompt participants to export the private keys of their wallets. Knowledgeable participants obviously wouldn't.
- Phishing with Fake ICOs
There are many scam ICOs that have the intention of stealing the funds of the investors after they willingly purchase the token. There are more dating crooks that launch ICOs with the purpose of stealing the private keys of participants by asking them to export them to receive the token. The effect of exposing private keys to fraudsters is loss of funds.
- URL Alteration Scam
There is a phishing scam in which legitimate sites are cloned by fraudsters who point similar URLs to the cloned site. These fraudulent individuals could clone an exchange or online wallet site. Users of the site may be deceived and actually log in with their original credentials which would be stolen by the owners of the site and used to steal their funds. This is why it is important to cross-check the URL of the site you're dealing with, especially if it's associated with your crypto assets.
- Phishing Email Baits
One of the most common ways scam phishing links are spread is through emails. Fraudsters send these emails with phishing links and when they are clicked, the victims are taken to sites where keylogger scripts are used to steal passwords or private keys.
- Fake Wallet Apps
You would expect that every app you access at the play store is genuine but this is not always true. Fraudsters sometimes build fake apps without detection and pass them off as the genuine one. They may even add positive reviews to deceive people. Just as with phishing sites, fake apps could be used to steal funds. This is why you must cross-check the app you download to make sure it is the real one from the team behind the blockchain project.
How To Protect Your Funds
There are several precautionary measures that can be taken to protect yourself from phishing scams.
- Use Wallets for Small Funds
You don't carry all your money around in a wallet. Wallets are meant for small funds that can be carried around in practice. Keep the bulk of your funds in cold storage. Avoid depending on your exchange account for storage of your coins.
- Stick With Official Popular Wallets
Avoid obscure wallets. They could have malware in them.
- Avoid Clicking On Links
Random links from unknown and untrusted sources should not be clicked. Sometimes they can install viruses or worms that can compromise your private keys.
- Avoid Random Downloads
Even when downloading from trustee sites, cross-check URLs and check review before doing that. This is important precautionary measure to avoid phishing attacks.
Protect Your Address with A Mixing Service
One of the best precautionary measures you can take regarding safeguarding your digital currencies is using a Mixing Service. They can help protect your private key by keeping your address anonymous. You don't need to expose your address while making transactions so you also prevent hackers from tracking your crypto savings.
Blending services are used by experienced cryptocurrency enthusiasts to keep their identities private and protect their funds from unwanted attention, especially malicious ones.