How well are scams handled in the crypto space?
You just got scammed, sorry about that! Most people in the crypto space have been through this…a couple of times. According to the wall street journal, cryptocurrency scams took in over $4 billion in 2019 this is almost the amount lost in e-commerce frauds in the same year.
Cryptocurrency scams ranges from the popular exchange and wallet hacks to cryptocurrency ponzi schemes, exchange scams and identity theft scams, in any of these, the perpetrators earn with a fortune, leaving their victims in huge losses of up to millions of dollars worth of cryptocurrency. Wallowing in pain, these seek means to recover their lost funds/token, but this is always a huge nut to crack, if that was anything near ‘easy’, victims of the famous bitfinex hack should have gotten their bitcoin back, but that’s still ‘on the move’
Cryptocurrency’s technology makes it hard to recover stolen funds and most scams go untracked. To be frank, cryptocurrency skeptics are right when they say that ‘cryptocurrencies facilitate scams’. In a truly decentralized and secured world which the blockchain technology promises tracking individual wealth is very easy, however, accessing them is somewhere near impossible. This comes in handy most of the times as security of funds are assured. But this is not the case some other times.
The blockchain is an immutable store of data, manipulating the stored data in any blockchain requires some rigorous procedures which doesn’t even guarantee access to the data stored in the blockchain. Scammers thus explore other possible means of reaching to holders’ tokens. ‘not your keys, not your coins’ the blockchain technology assures fund security, but this is only when they are truly in your custody, and this is as long as you’re the (only) one with the knowledge of your wallet’s passcodes and private keys. Targeting centralized exchanges and user manipulations is hence the only possible ways of getting hold of investors’ tokens and the accounts for most cryptocurrency scams.
But that’s by the way, the aftermath of most scams is complete loss of funds and only in few cases are victims lucky enough to recover their stolen funds. Handling cryptocurrency scams is a very much complicated issue as recovering stolen funds also entails accessing the wallets of the perpetrators, which is impossible by the standards of blockchain technology. In general, fund recovery after a scam is somewhere near ‘impossible’ if breaking the blockchain security is the only option and one could say ‘scams are not well handled in the crypto space’. While this is true, it is however a pessimistic statement which most times comes from anti-crypto individuals.
Handling scams in cryptocurrency is only possible when centralized means could be sort to recover funds, this is actually the only possible means of fund recovery…currently. Another means is if the perpetrators willingly decides to return the stolen funds, which is extremely rare, not sure if ‘rare’ is actually the most suitable term, but ‘impossible’ fits in more…most times.
Centralized exchanges to the rescue?
With blockchain-level security near unbreakable, breaking through personal wallets to recover stolen funds is impossible, hackers will utilize that by any means if it were to be possible. Moving away from the decentralized medium and seeking possibility of fund recovery via centralized platforms where the users have to give away ownership of their private keys before they are able to use the services provided by these platforms.
Centralized exchanges put suspicious wallet addresses on blacklist, track transactions by these address and block deposits from such addresses. Well, on a gross view, that is the most efficient means of scam management in the crypto space. Apart from this, stolen funds are safe in the perpetrators’ wallets until they decide to liquidate them.
Everything points to the fact the blockchain keeps you in charge, ‘you are your own bank’ and this means that you control every aspect of management of your funds, including its security. As long as your cryptocurrency investments are held in your personal wallets with your private keys known to you alone, then safety is at its peak. However, scammers are on the look-out for every possible means of accessing the contents of your wallets. This includes malicious applications which monitors your device clipboards to get hold of private keys copied to your clipboard, ponzi schemes which utilizes personal greed to syphon cryptocurrencies from gullible investors. Exchange hacks are unarguably most profitable for cryptocurrency scammers, hence it is advised not to store a tangible amount your cryptocurrencies on exchanges.
Summarily, it is literally impossible to recover stolen cryptocurrencies, looking out for existing and emerging means of scamming investors and taking precautions to stay safe from them is the most effective scam prevention and fund protection strategy.
Don’t forget “you are your own bank”