The Real World of Crypto - 🔥"Ferrari's & Parties" or "Scams & Rug pulls"- Must Read
Everyone is looking to get-rich-quick but Crypto is like a jungle out there. The reason for the high return is that you need to battle Scams, Volatility, RugPulls, Hacks to come out the winner.
🚨Disclaimer: This is not investment advice. I am not an investment advisor. This information is meant to be for educational purposes - DYOR(Do Your Own Research).
So how is the world of crypto like?
Money & Flashy life - Thats What people feel crypto about…
Lots of quick money, flashy life, luxury cars, parties in exotic locations, and lots of fun. While this may be true for some of the early adopters of crypto this is far from how the world of crypto feels like if you are just starting off. For many of the early adopters of crypto who have made their wealth, they are in wealth conservation mode.
For the newcomers, it’s a whole different story..
What Crypto Really feels like to a Newbie!! Dangers all around you, barely able to keep your head above water
The Movie Max Fury Road captures the essence of how it really feels like. The crypto industry is a wild west environment where anything goes. There is so much positivity and disruptive potential around every corner, but when there is promise and profits, there are also scammers and nefarious crooks waiting to steal from others. Crypto having little to no regulation, existing solely online in an all-digital world, and existing outside of the normal realm of society, has attracted even more criminals to the asset class, who appear as scammers, hackers, ransomware issuers, attackers, and more.
In this article, let’s dig further into the darker side of crypto. To balance it out don’t always want to focus on the glamour and amazing side of this world
How should you visualize the world of crypto?
Let me explain this with some analogies. If you are a Game of Thrones die-hard you will like this and if not hopefully it will still serve the purpose of the explanation.
Outpost 1 (Winterfell castle) the CRYPTO EXCHANGE
When you first decide to enter this magical world - the first step is to take your fiat currency (USD, EUR, SGD) from your Bank account or Credit card and head over to a crypto Exchange (Binance, Coninbase, Gemini).
Picture below of the Winterfell Castle from Game of Thrones
You must now choose your castle carefully before you move your money there.
Is the exchange large enough, regulated, reputed, secure etc. Hopefully, if you do your research and make the right choice - this castle should feel very similar to the experience you have with your current financial services provider. They would have large walls, guards, security, people to help, etc. They would guard you against the attack of the hordes from outside the walls (picture of that later). If you have any issues customer support would help you out (even if some of them take a few days to months to respond)
The key thing you have to worry about here is
Volatility of the market - it is a roller coaster
Choosing bad crypto to invest in (most do some pre-screening before they include the tokens, so it should be ok)
Leverage - don’t take on too much leverage or you risk loosing it all
The Real World of Crypto Outside the wall
What!! is there something I can do with my Tokens other than buy them and leave them on the exchange?
Of course, the answer is yes. The real nature of crypto is to take your token out in a decentralized wallet (like metamask, phantom etc) and go to platforms that offer various services (Buy/Sell NFTs, Staking, Yield Farming, IDOs etc)
Now, this might seem scary for many of you and that is fine. Best not to extend yourself to an area that you don’t feel comfortable venturing into.
For those that do decide to “Venture out” from the safety of the exchange - do tread with caution
So let’s assume you are the adventurous type that has decided to go out. How would you do it?
You would need to have a decentralized wallet, which allows you to transfer tokens (BTC, ETH, SOL) from your Exchange to a “Self managed” wallet. Typically this wallet has a seed phrase that is set up when you make your account.
DO NOT LOSE THE SEED PHRASE- if you lose it, you will NEVER be able to log back in and retrieve your holdings. Also, don’t write the seed phrase on your computer or any electronic device that can be accessed digitally. Ideally, save it in multiple locations on a physical paper and keep it safe.
So what are the Dangers that life ahead of you that you need to be aware of
1. Scams.. Lots of Scams
This is like the wild west, very little protection from your friendly regulators
Scams are everywhere online, and cryptocurrency exchanges are no different. As you consider investing in different startups and exchange platforms, be aware of the possibilities of losing your cryptocurrency investments.
Feels like everyone is coming for you and your money in a different way
I. Imposter websites
You may be following a solid tip from someone with a lot of expertise but still become a victim by accidentally visiting a fake website. There's a surprising number of websites that have been set up to resemble original, valid startup companies. If there isn't a small lock icon indicating security near the URL bar and no "https" in the site address think twice.
Pro Tip: Look up the Twitter or Discord channel if possible for the group you are looking to invest with. See how many followers they have - make sure it is a legitimate account and then use their official links to access their website. If you are looking to buy NFTs ideally buy it directly from Opensea or Solanart without direct trades - it would be worth paying the extra fee charged.
II. Fake Mobile Apps
Another common way scammers trick cryptocurrency investors is through fake apps available for download through Google Play and the Apple App Store. Although stakeholders can often quickly find these fake apps and get them removed, that doesn't mean the apps aren't impacting many bottom lines. Thousands of people have already downloaded fake cryptocurrency apps.
While this is a greater risk for Android users, every investor should be aware of the possibility. Are there obvious misspellings in the copy or even the name of the app? Does the branding look inauthentic with strange coloring or an incorrect logo? Take note and reconsider downloading.
III. Bad Tweets and Other Social Media Updates
If you're following celebrities and executives on social media, you can't be sure that you're not following impostor accounts. The same applies to cryptocurrencies, where malicious, impersonating bots are rampant. Don't trust offers that come from Twitter or Facebook, especially if there seems to be an impossible result. Fake accounts are everywhere.
If someone on these platforms asks for even a small amount of your cryptocurrency, it's likely you can never get it back. Just because others are replying to the offer, don't assume they aren't bots, either. You have to be extra careful.
IV. Scamming Emails & Direct Messages on Discord
You will get loads of scamming emails or direct messages from people claiming to be the company or the group you are engaged with. They will offer you something that looks legitimate but will be a special offer. I know we are all trained to look out for this, but the sophistication of these attacks in crypto is totally at a whole different level.
Pro Tip: Never respond to these messages. Go back to the official site or platform to complete your transactions. If you are part of a Discord Messaging group always interact directly on the group - not in private DMs
Some examples for your reference
Rug Pulls & Exchange Shut down
The term “rug pull” has been used repeatedly to describe a very disastrous situation that occurs in decentralized finance and elsewhere in cryptocurrencies that can leave an investor with extreme losses.
Rug pulls are a blatant exit scam in most cases, designed as a promising project that attracts users. When liquidity flows into the project and the price grows, developers then pull all the liquidity they can, crushing the capital of those left holding the bags in the end.
Several major projects that had gained widespread attention, even again attracting some of the world’s most well-known billionaire investors, were involved in such schemes and resulted in enormous losses for everyone involved. Even with all the attention, developers disappear with everyone’s funds, never to be seen or heard from again.
DeFi100 Coin Scam: DeFi100 Creators Rug Pull Investors, Disappear With $32 Million
Defi HACKS
DeFi-Related Hacks Account For 76% Of All Major Hacks in 2021. When you put your tokens in a smart contract, while the contract is immutable on the public ledger a hacker can find a way to leverage an exploit and remove the money from the smart contract. For some of the reputable Defi sites, they undergo a full audit of the smart contract and certain providers even offer insurance against theft and loss. However, this is limited to only a handful of the Defi sites and definitely, the risk of losing your money/tokens is real.
Reproduced from an article in Mission Critical Magazine
According to the recent Atlas VPN team findings, DeFi-related hacks make up 76% of all major hacks in 2021. In addition, many fraudsters have started fake DeFi projects to benefit from the crypto industry hype. The data is based on the Cryptocurrency Crime and Anti-Money Laundering Report released by CipherTrace in August 2021. Even though the first Ethereum-based protocol (MakerDAO ) for DeFi was released in 2017, hacks abusing the system were not recorded until 2020. In 2019, money lost to hacks was mostly from phishing, ransomware, and other cyberattacks.
A year later, in 2020, DeFi hacks made up one-quarter of all funds lost to hacks that year — $129 million. One of the biggest DeFi hacks that happened last year was the attack on Harvest Finance. Cybercriminals exploited the crypto asset management platform via a flash loan attack that resulted in a loss of over $24 million. In the first half of 2021, DeFi hack losses have reached $361 million, surpassing last year’s total losses by 180%.
DeFi protocols could get hacked because of various reasons. Many DeFi projects get hacked because of developer incompetence, which causes coding mistakes that hackers can abuse. Other cybercriminals can take out a flash loan and manipulate the token price to hack the DeFi protocol.
Human error in Transfers
The current world of crypto is still complex. When transferring money or assets, you need to ensure you put in the right address, choose the right network - if you get it wrong - your money or your assets are gone - poof.
Its like accidentally setting your pile of cash on fire. There is no undo button. You cant call a helpline or support number. If you are transferring money between exchanges, there are enough warnings but if you still get it wrong, then it is all on you!!
In Summary, some tips
Don’t rush into crypto for all its glitz, glamour, and promise of future riches.
Do your own research before you decide to put in your hard-earned money into something.
Ideally diversify across sites, exchanges, tokens etc to ensure that if there is a bad apple it doesn’t burn the house down
Take our time, to understand and learn the ropes before you venture into the deep end of the crypto pool
If you can make it past all of this, you would get to enjoy this experience
And on a parting note. Let Morpheus set the stage for us 🤣🤣🤣
Some of my earlier posts if you have not read them yet
💸 De-centralized Finance (Defi) - A BIG SCAM or the Next Banking killer?
🥇Next 5 Crypto Currencies and their smashing returns! [Top 10 Series]
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🚨Reminder of Disclaimer: This is not investment advice. I am not an investment advisor. This information is meant to be for educational purposes - DYOR(Do Your Own Research). Please do your own research before you decide to invest your hard-earned money. If you are unsure seek help from a professional financial advisor who can understand the full breadth of your financial needs & commitments to advise you on what you should do.