How can I protect myself against Bitcoin scams?

Over the past few months, we have watched Bitcoin and Ethereum push cryptocurrency into the mainstream media limelight as the total market cap reached almost $125 billion CAD (even peaking above $140 billion CAD for a short time).

During this same timeframe, cryptocurrency has found itself receiving media attention for reasons both good and bad. As is often the case, the bullish market created a new batch of wealthy Bitcoin owners as many investors saw their portfolios triple over the course of a few months.

An 18-year-old American entrepreneur revealed that he had become a Bitcoin millionaire after converting a gift from his grandmother into Bitcoin. These types of overnight success stories have prompted a large influx of new cryptocurrency users.

Unfortunately, cryptocurrency scams are also on the rise. Earlier this month, hackers managed to steal over $40 million CAD in Ethereum through a vulnerability in the Parity digital wallet application. Just yesterday, law enforcement revealed that a Pennsylvania man had exploited a software bug to divert $50 million CAD of Bitcoin from unsuspecting users.

With all of the growing interest surrounding Bitcoin and blockchain technology, it has truly become the “Wild Wild West.” Everybody wants to join in on the apparent “gold rush” in an effort to make a quick fortune.

Meanwhile, malicious hackers act as modern-day thieves and bandits, siphoning money out from poorly-protected wallets. New coins are collecting millions of dollars by launching ICO’s each day — hopefully the majority of these coins are legitimate, but undoubtedly others are sold by snake oil salesmen willing to make an empty promise before taking a quiet exit.

With so many cryptocurrency scams prevalent in the world today, does that mean you should avoid Bitcoin and Ethereum altogether? For the everyday individual, these security concerns might be enough to dissuade one away. Those of us who recognize the benefits of Bitcoin — both financial and practical — know that these scams are just a reminder to utilize extra caution.

In fact, this brings up one of the benefits of working with a Bitcoin brokerage. Bitcoin Brains has already developed reliable technology and partnerships to save you from dealing with the fear and uncertainty that a new Bitcoin investor may otherwise have. That being said, we don’t want to see anybody fall victim to a cryptocurrency scam, whether they choose to work through our Bitcoin brokerage or not.

Here are a few basic recommendations that can protect you from falling victim to scams:

Use “double-authentication” to increase the difficulty for hackers to access your account. This typically involves providing a unique, randomly-generated verification code — typically provided through a phone call — that would be difficult for malicious intruders to guess.

Watch for phishing attempts from hackers seeking to steal your personal information. Do not enter your personal information, even just a username or password, unless you have verified that you are using a secure connection. Be cautious when clicking links, especially those included in emails, and make sure you are using an HTTPS connection (you will see a green lock in the address bar) before entering your information.

Store your Bitcoin in a physical hardware wallet. If you don’t have a trusted brokerage handling your investment, purchase a hardware wallet to store your coins. When you leave your Bitcoins in an online account — like that used for an exchange — you are relying a third-party to protect your account against invasion.

Distribute your Bitcoins in multiple different wallets or accounts. In the event that one of your wallets or accounts is compromised, only those coins will be jeopardized.

Only exchange Bitcoin with individuals you know and trust. Scammers are using increasingly complex schemes to exploit unsuspecting victims. A scammer may ask you to perform a number of deceptive “favors,” such as sending funds to bail a relative out of jail, cashing a fraudulent check or money transfer at a Bitcoin ATM, or acting as their “personal shopper.” As soon as the Bitcoin is sent, the individual is gone without a trace.

Following the recommendations above is a great start to help you avoid Bitcoin or other cryptocurrency scams. Bitcoin users should remain confident and optimistic about their investment in the coin. However, one can never be too diligent in protecting their digital identity and financial portfolio.

“How can I protect myself against Bitcoin scams?” is a guest post contributed by Aaron Lillie, writer and editor for Daily Cryptocurrency. Looking for even more Bitcoin-related content after reading the Bitcoin Brains blog? Follow Daily Cryptocurrency on Facebook or Twitter.

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