How Kenyans (and the world) are falling for a Bitcoin Scam

Many of us have heard about Bitcoin, cryptocurrency, digital wallets and more along this line. Most are interested to learn more about the same, and especially more when they hear a lot money can be made from them.

So I will try to explain how some of these scams that involve the said ‘Bitcoins’ work, how the real Bitcoin mechanism works and how to avoid being scammed and your close ones.

To start off, bitcoin is still fairly new and still shrouded in some controversies and a lot of misinformation. This makes it easy for people with malicious intentions to take advantage and exploit people.

What is Bitcoin, really?

Bitcoin is simply a digital form of currency. Bitcoin is not centralized, meaning no one really controls it, so no single person can claim ownership. Banks have no control over Bitcoin, and if you have Bitcoin in your digital wallet, you can send them to anyone else if they provide an address for their digital wallet. Bitcoin is based on a technology called blockchain, which is a public distributed ledger.

Breathe…

So let’s say you want some Bitcoin, where do you start? It goes like this:

First thing is to set up a Bitcoin wallet. Think of this like your bank account. It is where you will store your Bitcoins. Bitcoin wallets allow you to manage and manipulate your Bitcoins, technically, the Bitcoins themselves are stored in the Blockchain. On setting up your wallet, you will get a Bitcoin address which is like your account number. It will be a long string of random numbers and letters. Keep this safe.

This process is FREE.

Second step after setting up your wallet is decide how to get bitcoins to your wallet. You can chose one of possible ways:

• Buy Bitcoins from someone who has them. You can select one of many cryptocurrency exchanges and buy from there. But on my opinion I’d prefer either of CoinBase, Kraken or Gemini. The crypto exchanges will direct you on how to purchase Bitcoin depending on which you chose.
• You can know someone who has Bitcoin in their wallet send some to your wallet. This can arise from things like donations.
• Option three is called mining. This involves installing some software on your computer (which is outdated nowadays) and join a dedicated mining pool, or you can buy a dedicated mining device called a mining rig. Mining is the process of generating Bitcoins. Bitcoins have a fixed upper limit of 21 million. After this number of Bitcoins are reached, no more can be produced. This means people and nowadays organizations are racing to mine as many Bitcoins as they can. Once someone successfully mines a Bitcoin, it is added to the existing ledger of Bitcoins, and this person gets a ‘reward’ for their work in mining (or creating) this Bitcoin. This is how new Bitcoins are really created.

The scams now

So now we got some basics out of the way, lets see how these Bitcoin scams operate.

By understanding how Bitcoin works and how you can earn Bitcoins, it’s easier to understand when being scammed, right? NO!

People are still being scammed using several ways. I have devised some names for them, I’ll explain as we go.

Utter scams

These operate as a form of membership, where you pay say a subscription fee for an ‘investment’ of some sort. They then tell you big promises like high returns, large weekly cash outs, and then need you to pay either a recurring payment or a membership fee.

These kind of scams are so intensive such that people rarely question their authenticity. However, this is a means to hide their true intentions. If they come at you, ask them the tough questions.

They will also have the design of a pyramid scheme, where you refer to someone to earn some of their referral money.

Remember the ways you can get Bitcoins from up above, none requires a membership fee.

Avoid these by:

• By testing and by looking up the project online extensively
• Checking out reviews of the project from trusted sources
• Take your time in making a decision
• If you are still not sure, then stay away until you are ready

Social Engineering Scams

Social engineering scams are scams in which hackers use psychological manipulation and deceit to gain control of vital information relating to user accounts. Phishing, for example, is a widely used social engineering scam by which hackers send emails linking their targets to a fraudulent website specially created to solicit important details, such as bank account information and other personal details.

Within the context of the cryptocurrency industry, phishing scams target information pertaining to online wallets. Specifically, hackers are interested in crypto wallet private keys, which are the keys required to access funds within the wallet. Their method of working is similar to that of many standard scams. An email is sent leading holders to a specially created website that asks them to enter private key information. When the hackers have acquired this information, they can steal the Bitcoin and other cryptocurrencies contained in those wallets.

The best way to stay safe from phishing scams is to avoid clicking on links in such emails or verify whether the email address actually belongs to the said company by calling them up or checking the email syntax. For example, users should check whether the linked web address is encrypted (i.e., its URL begins with HTTPS). Visiting unsecured websites is a bad idea.

Exchange and Wallet Hacks

Previously, cryptocurrency exchanges were the main sources of crypto wealth for hackers. Now, hackers have directed their attention to other areas, such as online crypto wallets, as well. One of the biggest such hacks occurred in June 2020, when hackers stole 1 million customer email addresses by breaching the email and marketing databases for Ledger, a France-based crypto wallet company. They also stole personal details for 9,500 customers and published 242,000 of the customer email addresses on a website for hacked databases. At the end of 2019, cryptocurrency exchange Poloniex suffered a similar breach and had to email its customers asking them to reset their passwords.

Don’t Fall Victim to Bitcoin Scams

Bitcoin is a volatile enough investment as it is. Don’t increase your chances of losing money by falling prey to these Bitcoin scams. Stay alert for potential Bitcoin fraudsters and trust your instincts. If something seems too good to be true, it probably is.