9 Deadly web3 Scams and How to Protect Yourself
Let me steal a few seconds to talk down on the web3—the various roadblocks and downsides, especially ones linked to people falling victim to scams.
Let me steal a few seconds to talk down on the web3—the various roadblocks and downsides, especially ones linked to people falling victim to scams and fraud projects. With new technology comes new challenges. The world of web3 is still new and booming, and this has made it bait for various hackers and fraud projects.
If you are conversant with the web3 space, you should have heard reports on various attacks on web3, blockchain -for instance, the exploit on nomad cross-chain bridge, and others that directly drown people's assets.
Regarding this, I present a helpful article on the 9 deadly scams and traps you can encounter in web3 and what you can do to protect yourself.
1. Scams Through Airdrops
Here, the scammers lure wallet holders through malicious airdrops(usually millions of free tokens) sent to their wallets. The wallet holder visits a token swap site and attempts a swap of the tokens–maybe for some ETH. Noticing no change, he then checks out the block explorer and a message directing him to a third-party site to claim their free tokens.
The scam is completed once the wallet holder visits the third-party site and puts in essential details that would be requested on the site.
How To Protect Yourself:
Your wallet is more prone to malicious airdrops if it is easily accessible, and literally, anyone can send you tokens or NFTs. This is not an issue because you can decide to ignore the transfers; the scam is successful only if you permit it, perhaps through carelessness.
There may be no particular remedy to receiving transactions from scam-tokens or scam-NFTs. Your account remains safe so far you don't directly interact with them and do not share your private details.
2. Flip-Coin Scam
Flip-coin is a scam that evolved from the earlier fraud of "flipping money." In a flip-coin scam, gullible traders send some quantity of coins while they are instructed to wait for the coin to get doubled. The victim waits to get back a doubled coin, only to discover that they just lost their entire money.
How To Protect Yourself:
- Avoid being greedy
- Do proper research before engaging in any cryptocurrency transactions, keeping in mind that transactions are final and non-refundable.
3. Phishing Scam
Scammers use phishing, and through impersonation, they steal private information, like login credentials and the seed phrases for crypto wallets. They reach out to traders via social media platforms and emails, posing as support personnel, token promoters, or benevolent donors. As the scammer gains access to your account, they will move all your assets into their own, leaving your account drained.
How to Protect Yourself
- Don't link your wallet to a third party without conducting a good study.
- Don't share your private keys with anyone, as doing so will give them access to your money.
- Any person who knows your recovery phrase can easily access your account, so keep the phrase a secret.
4. Rug Pull Scams
The phrase, rug pull, is just like "pulling the rug out from under someone's feet." You know how disastrous that is. Well, in the crypto world, it is the same disaster but a different concept.
Rug pull is used to describe the act of scammers launching new currency linked to a liquidity pool while watching out for buyers and sellers. As soon as enough money is in the pool, they will quickly withdraw and abscond with the entire investors' money.
source: coinfomania
5. Honeypot
Honeypot refers to a situation in which funds become trapped, and you cannot move or use them. In Honeypot, scammers add some code snippets into the smart contract, restricting the sale of coins to just their wallets. They are the only people who can sell, yet everyone else can buy.
Meanwhile, the graph keeps presenting a steep buying curve that encourages investors to buy and that the coin's worth is promising. Sadly, you realize you have been duped when you try reselling after purchase. The code entered by the scammer would not permit reselling, and the funds are trapped forever.
How To Protect Yourself from Rug Pull and Honeypot
- Never trade or engage in activities with unsure coins.
- Always check if your preferred coin is among the best listed on CoinMarketCap and other trusted platforms.
6. Pump and Dump Scam
One of the regular cryptocurrency scams is the "pump and dump." Popular influencers and token creators (with questionable characters) notice new cryptocurrencies in the Blockchain and purchase them at low costs. They hype the currency through various social media promotions to increase its demand.
As the uninformed public begins to buy the new coin, the token creators start to dump it at a high price, which then causes a spike, and the coin depreciates. Through this, the token creators make a massive profit, while the unsuspecting buyers lose lots of funds as the price crashes.
How to Protect Yourself
- Do your research about any platform, company, or currency you are planning to invest in.
- Read the documentation and know more about a coin before buying.
- Be cautious when some influencers constantly push and hype a particular coin because they may have plans and sell out once the price is high enough.
7. PancakeSwap Scam
PancakeSwap is a blockchain-based crypto exchange that works on the Binance Smart Chain for trading BEP-20 tokens. The victims of the PancakeSwap scam are mostly social media users. An unsuspecting user is usually notified through YouTube or other social media that they can buy and trade liquidity gaps on PancakeSwap.
The scammer sends a link to the user, telling him he doesn't need to be an expert or have much knowledge of smart contracts for the contract to deploy, but when the code block gets examined, it becomes obvious that the router contract link contradicts the contract.
How To Protect Yourself:
Avoid falling victim to this by staying alert and careful with links you find on various social media sites.
8. Impersonators Posing As Telegram Admins
Scammers pose as prominent influencers, business moguls, or Telegram group admins to look trustworthy. Direct messages requesting personal details, strange calls, or randomly adding people to groups are all warning indicators of scams that users must be on guard against.
How To Protect Yourself
Avoid leaving details like your phone number public, and change your Telegram privacy settings. Also, you know the actual channel admins through the Telegram channel members list. So, you can confirm anyone who says they are admins.
9. New projects
Many beginners invest in new projects believing that it is still "early", and therefore a potential big catch. Investing early in a promising idea can yield significant returns, but it can be challenging to know if a project is a true or just fraud. Sometimes, investors lose the entire money put in new projects.
How To Protect Yourself
- It is better to wait until the project has developed a solid basis before investing. Make sensible decisions because most projects today will soon be abandoned within the coming months or years due to big losses.
- Also, watch out for fake projects with fake websites and collections on various market platforms like OpenSea.
Key takeaways
"web3 decentralization is to our detriment". By that, I'm not speaking against the decentralization network; instead, I'm trying to let you understand that in the world of web3, your security is in your hands.
According to research, web3 cyber scams most commonly result from users' greed, FOMO, and ignorance, all centered on the user—rather than from technical faults in the system.
- You decide on projects to take part in, which may be fraudulent or legit.
- The private keys/wallet address is just to you, and unless you make it open, scammers cannot attack.
I have listed possible ways you should protect your assets, and I hope this helps a lot. Also read the article I wrote on the Simplified web3 Terminologies You Must Know As A Beginner
coverimage source: block-builder
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