You’re not alone if you’re confused about cryptocurrencies, like bitcoin or Ether (associated with Ethereum). Know what makes cryptocurrency different from cash and other payment methods, how to spot cryptocurrency scams, and how to detect compromised cryptocurrency accounts before you use or invest in them.
What is cryptocurrency?
A cryptocurrency is a digital currency that is usually available only electronically. To purchase cryptocurrency, you usually use your phone, computer, or cryptocurrency ATM. Bitcoin and Ether are well-known cryptocurrencies, but many others are being created every day.
Cryptocurrency can be used for a number of reasons, including quick transactions, avoiding transaction fees, or offering anonymity. Some people hold cryptocurrency as an investment, hoping that its value will go up over time.
Where can you get cryptocurrency?
A Cryptocurrency Trading Platform, an app, a website, or an ATM can be used to purchase cryptocurrency. Some people earn cryptocurrency through a complex process called “mining,” which requires advanced computer equipment to solve highly complex mathematical problems.
How and where do you store cryptocurrency?
You can store cryptocurrency in a Bitcoin Trading Platform, on your computer, or on an external hard drive. Digital wallet addresses are long strings of numbers and letters. It is unlikely that anyone will be able to help you recover your cryptocurrency funds if your wallet or cryptocurrency funds are lost – for example, your online exchange platform goes out of business, you send cryptocurrency to the wrong person, you lose your digital wallet password, or it is stolen or compromised.
What is the difference between cryptocurrency and U.S. dollars?
There are important differences between cryptocurrency and traditional currency, like U.S. dollars, since cryptocurrency exists only online.
- Cryptocurrency accounts are not backed by a government. Cryptocurrency held in accounts is not insured by a government, just as it is for U.S. dollars deposited into a bank account insured by the FDIC. The government does not have a responsibility to help get your cryptocurrency funds back if something happens to your account or cryptocurrency funds — for example, the company that stores your wallet goes out of business or is hacked.
- During the course of the day, cryptocurrency values are constantly changing. The value of a cryptocurrency can change rapidly, even changing by the hour. And the amount of the change can be significant. It can depend on a number of factors, such as supply and demand. Unlike stocks and bonds, cryptocurrency investments are more volatile. An investment worth thousands of dollars today may only be worth hundreds tomorrow. And, if the value drops, there is no guarantee that it will rise again.
How To Avoid Cryptocurrency Scams?
Cryptocurrency scammers are always looking for new ways to steal your money. Here are some ways to avoid a crypto scam.
- Scammers are the only ones who ask for payment in cryptocurrency. Legitimate businesses will never ask for cryptocurrency in advance for payment – not to protect money, and never to buy something.
- Profits and big returns can only be guaranteed by scammers. Don’t trust people who promise quick and easy money in crypto.
- You should never mix online dating with investment advice. If someone asks you for crypto, or asks you to send them crypto, that’s a scam.
Spot crypto-related scams
There are some tried and true scam tactics being used by scammers, but now they require cryptocurrency payments. One of the most common scams is investment scams, where scammers trick you into buying cryptocurrency and sending it on to them. Aside from impersonating businesses, government agencies, and a love interest, scammers also use other techniques.
