Cryptocurrency came with several opportunities for people to grow their finance in a decentralized way. It was created on the blockchain to make it safe and decentralized, however, scams somehow crept into the system making it unsafe and risky. In this blog, we are going to look at crypto scams and why they may not easily be eradicated.
First, how did the decentralized and secure Cryptocurrency system become vulnerable to scamming activities?
The earliest crypto scams were run through investment platforms like high yield investment ( HYIP ) platforms where people are promised a higher return for their initial deposit. This type of scam doesn't show vulnerability on the part of the Cryptocurrency system. It was more of people being scammed due to their greed.
I believe the cryptocurrency world first became vulnerable to scams with the introduction of Smart contracts. Smart contracts were introduced to offer a decentralized financial system. Just as it is said, when trying to solve an existing problem, another problem is usually created. Smart contracts came to take away the atom of centralization in the cryptocurrency world but ended up creating room for exploits.
As we know, Smart Contracts are self-executing programs usually created from coding. Now, these codes are written by humans and as thus are susceptible to errors. These errors are what bad players capitalize on and carry out things like Flash loans. They also create their smart contracts but with unlimited permission, such that with a single permission granted to it, it can drain the user's wallet.
From here, they upgrade to creating tokens and rug-pulling them, crypto group admin impersonation, use of phishing links to steal people's tokens, etc were new formats they developed.
Below are reasons why I think Cryptocurrency Scams won't be eradicated easily.
1. Crypto is still not fully regulated.
One of the main difficulties in fighting crypto scams is that they happen in a world where people can remain anonymous. While this privacy is important, it also allows scammers to hide their identities and cover their tracks. Again, the decentralized nature of crypto makes it hard for regulators to oversee the entire system effectively.
SBF is facing the consequences of his scam activities because he is from a place where there are active regulators. If not, he would have gotten away with things.
2. Constant Changing of Scam Format to account for the anti-scam solution being implemented.
As the crypto world is trying to offer new strategies that will close the doors for crypto scams, scammers are also looking for loopholes. Sadly, new loopholes are created with every new solution implemented. For example, Smart contract auditing was used to control the rate at which smart contracts are exploited but these audited smart contracts are still exploited at some point.
3. Lack of Awareness And Education.
Newbies are usually the target of scammers, and most times they are successful with them. As far as people are going for money first and not knowledge, scammers who constantly follow trends in the crypto world will always find ways to scam them.
4. Greed
As far as crypto investors are still enticed by highly rewarding investments, they will continuously be exploited by scammers. This includes Defi degen who jump into newly launched tokens with high APR.
I believe the best type of protection against scams is self-protection. If every crypto investor will go the extra mile of constantly updating himself with information and following trends in the crypto world, the chances of being scammed will be little.
