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Detecting Fraud in the Bitcoin Sector

Detecting Fraud in the Bitcoin Sector

Ever since the discovery of Bitcoin in 2008, online trading has never been the same. Due to its decentralised nature and the transparency of the whole trading process, renders it attractive for investors wanting to make easy money. But that very nature makes it vulnerable to fraud, and detecting fraud in the crypto sector can be a complex task. The novelty and ease of use of Bitcoin have been the major reasons for its constant rise in value, which is perhaps one of the reasons it is currently, trading at over 3500 US dollars.

However, along with its value and obvious engagement, the world of Bitcoin holds a lot of frauds and scams that a new or unknowing user can fall victim to. One drawback of the nature of all Bitcoin transactions is that they are anonymous and irreversible. Cybercriminals are always coming up with new and advanced scams to defraud online users of their money. Bitcoin is an ideal place for them to prey on unaware traders. Identity theft and fraud are just as common in Bitcoin as in the conventional financial sector.

Frauds Common in the Crypto Sector

Essentially, investors using Bitcoin are scammed into using fake wallets, which can be downloaded as apps. Once a user downloads it and enters their credentials, the scammers access their wallet to steal all their existing funds. Another way fraud works in the Bitcoin sector is that since Bitcoin is dealt through online exchanges, fraudsters use scam exchanges to entice investors into investing. They often offer unrealistic returns in order to make them invest in their exchange. After falling for the scam, the investors realise that the whole scheme was a sham and they have been scammed out of their entire savings.

Fraud Detection and Prevention

Detecting such frauds and scams can be simple once you get the hang of how Bitcoin works. An even better way to deal with them is to avoid them altogether, wherein comes fraud prevention. A system of Know Your Customer (KYC) solutions integrated into an exchange’s interface can help detect any fraudulent activity beforehand. Identity verification and AML compliance measures are now being adopted throughout the crypto industry to ensure the funds routed are through secure channels are clean of any fraudulent or money laundering activity. To know more about fraud detection and prevention services in the market click here.

The user themselves also need to beware of any scams and look for secure wallets to store their funds. Therefore, a bit of research and study into the wallet and exchange you are investing in can go a long way towards securing your funds. The best way to protect yourself from identity theft is to keep your passwords secure. Make sure that that you are trading through secure exchanges that are at a less of a risk of being hacked or breached. Fraud prevention is always better than the firefighting done after you have been scammed out of your money.

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