What is Bitcoin Mining?
Bitcoin Mining is the process of verifying transactions in the blockchain-often done by a group of individuals called miners. These miners volunteer to offer their computational skills and computer resources to solve complex mathematical calculations to process a transaction.
Basics of Mining:
Investors buy and sell products and services using digital currency like Bitcoin, Ethereum, Litecoin, etc. To complete a transaction, the investors create a block consisting of details like the amount to be paid to the seller, transaction id, product details, etc.
The block created using cryptography consists of three elements-block, hash, hash from the previous block. Each component is assigned a 16-digit alphanumerical code that miners must decode to process the payment. When miners verify the details of these blocks correctly, they receive a reward in the form of bitcoins. On the contrary, every incorrect evaluation offers a penalty to miners.
Bitcoin mining has emerged as a profitable venture in the past few years. One way to win the high mining costs is to join a mining pool. Pools allow average miners to share resources and share resources. Shared resources mean shared rewards. Therefore, the potential payout is divided equally.
How Does Bitcoin Mining Scam happen?
Every blockchain contains participants in the network who are privy to all the details of the transactions so that the details cannot be manipulated. Therefore, the chances of bitcoin mining scams are almost negligible. However, according to a theory, when more than 51% of participants in a particular blockchain agree to refute that a transaction was valid, bitcoin mining can occur.
Since Bitcoin is still new territory, there are risks involved that individual members aren’t familiar with. According to reports, the highest risk in bitcoin mining is when scammers target people who intend to buy and sell Bitcoins for quick financial returns. Criminals usually target such personas by promising to execute business on their behalf and guarantee higher returns.
They present various schemes to unsuspecting targets to demonstrate why a particular scheme is lucrative. A common tactic is to assure that investing in a particular scheme through a broker or an agent will enable the broker to pool funds from various people and ensure large investment returns.
Many times, a large number of these investors would be sourced from huge groups, but only a few of them receive the profits. Additionally, bitcoin mining is costly-especially on an individual level.
However, when individuals lack the technical capability or manage the transactions, scammers can penetrate the systems guaranteeing supposed benefits.
What Are The Common Ways Bitcoin Mining Scams Occur?
- Fraudulent Bitcoin Exchange: Scammers may set up illegal bitcoin exchanges, fooling users by offering highly competitive returns on their investments.
- Bitcoin Mining Schemes: According to account recovery specialist Peter Thompson, because Bitcoin mining tends to be costly on an individual level, many fraudsters try to create fake web pages to offer to share mining power. “Scammers create these web pages guaranteeing profits on investments in a short period of time.” Later, they close these pages and disappear with the investors’ money when they collect sufficient money.
- Malware: When Bitcoin wallets are connected to the internet, scammers may inject malware into the system and gain access to users’ funds. The malware can be sent through emails, texts, messages, or embedded links.
How to Protect Against Bitcoin Mining Scams?
There are many ways to avoid becoming victims of bitcoin mining scams. Some of them are as follows:
- Protect bitcoin’s private keys. Never share them with anyone.
- Use strong passwords and keep updating them at frequent intervals. Use a combination of letters, numbers, and other characters to maintain strength.
- Never open suspicious or unsolicited texts, pop-ups windows, or click on links sent in attachments.
- Be careful when shopping online and conducting transactions using e-wallets. E-wallet frauds are becoming increasingly common.
- Ensure to use reputable and trustworthy websites for conducting transactions.
- Do not rush into making a half-informed decision regarding transactions on the blockchain.
- Identify the entities interacting with. Find out if the investors are registered with any firm regulatory body.
- Check the details of the third-party apps before downloading them from Google Play, Apple Play Store, etc.
- Beware of the type of online scams prevalent online.
- Stay alert of investment schemes. Read about the features carefully. Look out for words like “guaranteed” “once-in-a-lifetime.”
- Put Bitcoin mining alerts on accounts.
Can Fund Recovery Companies help Recover Money Lost in Bitcoin Mining Scams?
Unfortunately, it is incredibly challenging to recover funds lost in bitcoin mining scams. But it’s not impossible if the victims hire expert fund recovery companies.
Fund recovery agent Timothy Benson says, “bitcoin mining scams reached record-breaking heights in 2021. With reports emerging from nations worldwide, identifying the criminal faces behind the fraud and recovering the lost funds is overwhelming.
Scammers stole nearly $7.8 billion in 2020, with a boom in the year 2021. It’s no wonder scammers have taken notice of new opportunities and continue to bilk people of their hard-earned money.
However, recent advances in blockchain tracing technology have given a ray of hope to people. The first logical step towards bitcoin recovery is to bring the matter to light with investigators. For the same purpose, the victims can record the details of the scams, the medium through which corrupted emails were sent, etc.
Additionally, bitcoin owners need to remember the companies they interact with organizations they send money to. When everything falls into place, investigators may reverse the transactions and retrieve the maximum possible amount back to the victim’s account.
The Scam in Digital Currencies
Laying the ground rules for digital currency startups can make all the difference in avoiding a bitcoin mining scam. Some scammers look for smart contracts and integrate a coin into a computer’s processor, which means it’ll mine bitcoin automatically. A mining scam can be anything from installing malware on a PC or spreading malware around online, stealing your hard-earned money and then deleting your wallet without you ever noticing.
Since the entire value of bitcoin and other digital currencies is based on the computing power of the computers it’s run on, miners have a tremendous amount of power over what cryptocurrency users see and how much they’re making.
How To Avoid Bitcoin Mining Scams
So if you’re looking for legitimate bitcoin mining startups, you have a couple of options. If they track their use of electricity use in their bitcoin mining operations, you can see where their mining rigs are located. You can also search online for legitimate bitcoin mining startups and verify whether their platform has active development, competitive prices, and an active customer support team. Always make sure that the company is regulated by an entity (preferably a U.S regulator).
“For the vast majority of Bitcoin mining startups, it’s actually okay to take their word on energy consumption numbers because they often are low, however it’s usually not a big deal, because there’s so many scams out there to compare to that, if it is verified and if it’s in line with what they’re claiming, it’s fine,” says Ronnie Moas.
Keeping your cryptocurrency secure isn’t a matter of being tech-savvy. You need to be educated on the best ways to avoid scams that plague cryptocurrencies and the people who deal with them. If a company won’t respond to you or makes you feel uncomfortable, reconsider that investment.