What’s the biggest difference between cryptocurrency and traditional money? Well, cryptocurrency doesn’t have any centralized authority, so it’s not being monitored by banks or governments (although there are some exceptions). While that may seem appealing, cryptocurrencies aren’t immune to scams — you just have to know what to look out for. Here are five of the most common cryptocurrency scams you should know about.

1) Fake ICOs

Many people may not be familiar with this term. An ICO is a crypto-currency version of an IPO and it stands for Initial Coin Offering. An ICO occurs when a company or an individual offers investors some units of a new cryptocurrency or crypto-token in exchange against cryptocurrencies like Bitcoin, Ethereum, or other more established coins. Due to the lack of regulation in this space, ICOs have been at the center of some scams such as Ponzi schemes and fake token launches.

Similar to investing in a regular business, do your own research before you invest in an ICO. Check their website and whitepaper for credibility and legitimacy of their claims. If they seem too good to be true, they most likely are and then there’s a high risk of you losing all your money in case they are scams. Stay safe! ICOs are still relatively new as a phenomenon, so keep your eyes peeled for more information on how it works in order to stay safe.

2) Market Manipulation

The most common type of cryptocurrency scam is market manipulation, which is when someone artificially inflates the price of a currency by buying it with another type of coin they own. This takes money away from the currency’s economy and causes its value to go up. It's a classic Ponzi scheme.

Crypto-jacking is another common type of cryptocurrency scam where hackers embed malicious code in an online website or application and then use your computer's processing power for mining purposes without your knowledge or consent.

If you get scammed out of money through a cryptocurrency scam, there is no way to reverse it. That’s because all cryptocurrencies are decentralized, which means that they don’t have any governing body that can step in and regulate them like real-world currencies do. That makes it incredibly risky to conduct transactions using cryptocurrency as opposed to using a service that has some kind of customer protections, such as PayPal.

3) Pump and Dump Groups

Pump and Dump Groups are one of the most popular scams that exist in the world of cryptocurrency. They take advantage of individuals who are eager to make money through cryptocurrency investing. The groups collaborate on a coin, buying up as many of them as possible at a low price before spreading word about it to unsuspecting buyers, or dumps. This causes prices for the coin to skyrocket which leaves investors with little time before its value plummets back down.

Once investors buy into it, group members will then sell their coins off, and leave investors with a coin that's now worth far less than what they paid for it. It's an effective scam because

So many people are quick to jump into investing in cryptocurrency because they saw what it did for others. The opportunity of making significant amounts of money is too good for them to pass up.

4) Mining Malware

One of the most popular scams is mining malware. Mining malware, often hidden in pirated software, runs on a user's computer and mines for cryptocurrency without the owner's consent. Other times, an app will ask for permission to mine cryptocurrency but then turn around and install mining software in the background. These hidden miners can use your computer's resources without your knowledge, slowing down your system and making it more vulnerable to other cyber threats.

If a website you frequent or download files from is using your computer's processing power without permission, that's called drive-by mining. Website owners may install mining software on their own sites and then offer premium content in exchange for cryptocurrency. Some sites will hide mining scripts in images, which load up as soon as you visit them.

5) Ponzi Schemes

Ponzi schemes are a form of fraud that relies on new participants in order to make payments to earlier participants. These scams often promise high rates of return with little risk and require an initial investment with no guarantees.

Ponzi schemes are built on deception. Those looking to capitalize on these scams promote them as a great investment opportunity and urge those interested in participation to act quickly. Once enough participants join, a Ponzi scheme is revealed when they’re unable to make promised payouts, leading all new members into financial ruin.

Conclusion:

Crypto scams can be hard to spot, which is why it’s important to take some time and learn about the market before investing. Remember that you don't need to make a quick profit in order for your investment to be worthwhile. The best way to avoid scams is by having an awareness of the different types of cryptocurrency scams.