5 Ways to Identify a Crypto Coins Legitimacy

Blockchain and cryptocurrency technologies are changing at a fast pace, and even experienced investors sometimes find it difficult to keep up. The prospect of taking advantage of new investment opportunities while staying away from fraudulent initial coin offerings (ICOs), dubious currencies, and shady tokens might be worrisome.

Every month, dozens of new coins appear, along with a succession of new ICOs. Even though cryptos were hammered in 2018, the hunger for these options has increased. These elements all encourage fraudsters. Investors who are ready to risk money on a high-risk cryptocurrency appear inclined to invest in false tokens.

One such example of a fraud token is the Squid Game token. The currency, which was introduced in response to the enormous success of a Netflix program of the same name, turned revealed to be a scam. The Squid Game token skyrocketed and collapsed after a few days of its launch when the creators fled with coins value millions of dollars.

In parallel with the increasing number of investors in the cryptocurrency markets, the number of scammers attempting to defraud them is increasing daily. We must be aware of the information available to us that provides information on how to avoid being a victim of these scams. The answers to these problems are provided in the next section.

What to Look for to Avoid Scams?

When it comes to investing in a new cryptocurrency, there are numerous red flags to look out for that every investor should be aware of.

Check the returns on Investment:

Remember that any investment needs time to grow in value. Also, there are coins with extreme price variations. Scammers use these traits to promise unrealistic returns in a short time. Spammers and social media profiles are regularly used to attract unwary first–time investors.

Last May, the Dogecoin Twitter account issued a warning message against such schemes. At the time, malicious hackers were spreading false claims guaranteeing two- or three-fold profits. Similar claims were made recently with Squid token as mentioned before.

Fake websites and apps (confirm the URL):

Several websites have sprung up replicating well-known crypto sites and apps. These are commonly marketed through phishing emails and message forwarding that lead people to bogus sites. Anything uploaded on these fake websites may readily reach criminals, including your money. Unsafe sites lack a lock icon in the URL bar.

Scammers are using Google Ads to lure consumers to phishing websites impersonating major crypto wallets. The fraudulent website then asks for the wallet password and private key from visitors. Once the credentials are obtained, the fraudsters steal the funds from the crypto wallet.

Check the smart contract:

Most crypto-based initiatives need smart contracts or code collections that execute instructions on the blockchain. It’s worth looking into a project’s smart contract or asking a qualified person to do so. Because if a developer’s code is flawed, the project may be weak.

In August 2021, a Defi platform that links several to blockchains was hacked; analysts claimed the perpetrator was able to manipulate a flaw in the network’s design.

Verify the team members:

You should be able to locate who runs the coin, including each team member. You can look into their history, their social media sites, how old they are, who follows them, how many followers they have, etc. If you find anything suspicious about the team .it is advised to avoid it as it could be a fake crypto platform.

Check the company offers:

Companies that chase ICOs should not be trusted. They might be nascent firms with little operational history, making it impossible to distinguish between a genuine service and a fraud. ICO scams, like Rugpull, take monies from early investors only to quit the enterprise soon after.

According to recent research based on publicly accessible information and sources, approximately 80% of initial coin offers (ICO) are frauds.

Qualities of a Good Crypto Coin:

The following are the factors to consider while evaluating cryptocurrencies:

Security:

A reliable cryptocurrency with a high level of financial stability. When creating the ultimate cryptocurrency, it will be important to consider security. The use of safety precautions will ensure that, in addition to two-factor authentication and strong passwords, the system is protected from being hacked.

Store of Value:

A good store of value will enable its owner to sell or trade it at a later time for a price that is equivalent to or greater than the price at which it was obtained initially. Many people consider Bitcoin to be a valuable store of money, and it is often referred to as “digital gold” by its supporters. Bitcoin is both uncommon and indestructible, making it a valuable investment.

Asset-Backed:

It enables businesses and investors to avoid the time-consuming, exclusive, and regionally controlled capital-raising process. That is required by venture capitalists or banks by releasing a portion of coins in exchange for cryptocurrency over permissionless global blockchain networks, rather than through traditional financial institutions.

Utility:

A good coin symbolizes a utility that exists on its blockchain and allows the holder to use it for investment or commercial purposes, depending on the situation. To use cryptos to acquire & trade products and services in the same way that you would be using dollars is one of the most important elements of cryptos to understand.

Scalability:

It is the scalability of a cryptocurrency that is measured in terms of the number of transactions that can be completed or verified in a single second. This is essential for any monetary currency to function properly. Transactions between two parties must be resolved as promptly and effectively as possible.

Conclusion:

Because of the volatility of the global economy, cryptocurrency has risen to the top of the current trending topics list. The fact is that it is a relatively recent invention that seeks to solve concerns associated with the use of current fiat currencies. The best course of action you can take is to research and comprehend cryptocurrencies while exercising extreme caution. The information will help you to be aware of the scams as well as to select a good crypto coin.