1、Cryptocurrency wallet, is a support system for storing the public and private keys of cryptocurrencies led by Bitcoin, the address corresponding to the private key, the monetary settlement of that address (group), and the monetary transactions.
(1) What is a crypto wallet
To store cryptocurrencies, you need a cryptocurrency wallet. Broadly speaking, a cryptocurrency wallet is a program that stores your private and public cryptographic keys that you need to use to access the blockchain on your own behalf and to trade with your cryptocurrency. The public key is similar to the wallet address, while the private key is used to unlock the public key. When someone wants to send you money, the other party will reassign their address to you. To do this, the sender needs access to their private key. Then, to unlock and use the newly received money, you have to enter the private key that corresponds to your public key.
There is one very important thing to remember here: holding some cryptocurrency and storing it in a cryptocurrency wallet does not mean that you have money in your pocket. The wallet is really just two keys, the money is in the blockchain, and it never leaves the blockchain. When a transaction occurs, the only action that actually happens is to add the block used to describe the transaction to the blockchain.
(2) Common Frauds in Crypto Wallets
①rug pull
This is usually when the project owner suddenly abandons the project and absconds with the investors' money. This also exists in traditional markets, except that the founders are in all likelihood punished by the law.
In the cryptocurrency market, however, we may not even know who the founding team is, and many investors like these mysterious projects, thinking that there may be great benefits, not realising that they are being involved in this type of fraud.
One of the more famous cases is Squid Coin SQUID. The gaming platform squid game took advantage of the burgeoning popularity of the squid game and launched the same game and issued the token Squid Coin, players had to hold Squid Coin in order to enter and participate.
Squid coin was only online for 3 days, but it rose 700 times to an all-time high of $2861. However, the project owner is suspected to have absconded with the money, and the coin price plummeted to $0.0008, and even the official website could not be accessed, and many investors lost a lot of money as a result.
② ICO (Initial Coin Offering)
ICO means Initial Coin Offering, which is similar to an IPO of a stock, where a company goes public to raise capital and retail investors invest in a new project of their choice to make a big profit later. Of course, this is only if you are investing in a "golden egg", otherwise the future is uncertain. Because in the cryptocurrency market, anyone can launch an ICO, and you don't know who's on the other side.
If you launch an ICO just to make a quick buck, all you need to do is talk up the project and there will be investors clamouring to redeem it. Then the money is just like putting in the lotto, buy a happy one. That's why we recommend trying to choose a team with real names and a concrete plan and a viable business model.
ICOs are also a two-sided blade, and there are indeed people who can make money on some floundering projects if they are willing to take the risk.
③Over the Counter (OTC)
The cryptocurrency market has a very large number of exchanges to choose from, and usually the exchanges charge a fee. Some people choose to transfer money privately in order to save this money, which is the most common type of OTC trading.
By paying with one hand and shipping with the other, eliminating the exchange process, it is possible to just transfer money and have the other party blacklist the investor.
This is also found in traditional markets, where it is common to see police officers kindly advising some middle-aged women not to transfer money to a fraudulent syndicate at an ATM. But the cryptocurrency market is unregulated, so there is no one to stop you from being scammed. You can only be vigilant yourself and try to do over-the-counter transactions between acquaintances.
④ Airdrop Airdrop (Initial Airdrop Offering)
This scam is a method that has emerged with cryptocurrencies and requires special attention.
Airdrop Offering is when a new virtual currency or NFT is issued, the developer will give away some currency to investors in order to attract more users to use it.
It is normal to receive a gift of currency by simply providing your wallet location, but it is in the act of "casting" that the scam is perpetrated.
Fake wallets.
Investors are led to install a fake wallet and told that they need to add value to the funds, and then quickly transfer the funds from the fake wallet once it arrives.
Fake links.
This is the most difficult to prevent because cryptocurrency is an online activity that often requires you to click on links that you don't know are real or fake.
The scam occurs when you click on the link and open up your wallet to authorise it, and once authorised, you are allowed to transfer the cryptocurrency from your wallet, leaving many people unaware that they have been looted.
To protect yourself from airdrop scams, here are two tips for investors.
Prepare multiple wallets.
You can prepare one wallet specifically for airdrops and keep your own large sums of money in another cold wallet.
Check wallet authorisation.
There is some software online to check wallet authorisation, which you can use to check that your wallet is properly authorised and that it has not been accessed by an unknown entity or IP.
⑤ Fake exchanges
To protect yourself against fake exchanges it is easy to select the top 10 exchanges via CoinMarketCap. Exchanges that are not found in the top 1,000 have very limited trading volume and are usually fake.
The scam is simple: they will first friend investors in various communities to gain their trust, then 'tell them some "gossip", such as which exchange is more profitable, and then they won't allow you to withdraw your funds after you've made a deposit. The more sophisticated ones will let you get a taste of what's in store for you and only then won't allow you to withdraw your funds when you invest more.
Another distinctive feature is that fake exchanges will often use instant messaging to communicate. Well-known exchanges, on the other hand, use email as the authentication method due to their large number of users.
Always remember that the exchange is only the platform, it is the investment strategy that determines whether you will make money or not.
(3) How to prevent crypto wallet scams
① Store your private key and helper in a secure location. The recommendation is to write it down on paper and put it in a safe place, or use some password manager tools if you must store it online.
② Never share your private key or mnemonic with anyone. (equivalent to not giving out your password easily)
③ Protect your wallet password. If you have a separate password for your wallet, anyone with that password will have access to the private key.
④ Transfer a large amount of assets out of the hot wallet you use on a daily basis into a cold wallet or other hot wallet; don't put your eggs in the same basket for the same reason.
⑤ Check website URLs, emails before taking any action. Scammers will pretend to be a very reliable looking platform to phish.
⑥Close the Discord DM and do not interact with unknown assets in your wallet. DMs on dis are a very, very common scam, just remember that no one will be keen to chat to you privately and teach you how to solve your problem.