Know what Cryptocurrency is and stay alert for latest scams

Cryptocurrency may seem complex, but it is actually easy to grasp. Think of it as digital money in the form of coins and notes you use every day, but in a digital format. This form of digital money is called cryptocurrency.

The Reserve Bank of India (RBI) introduced the first pilot of the Digital Rupee for the retail segment on December 01, 2022. Many people confuse the digital rupee with cryptocurrency since both are virtual in nature.

However, they are distinct, to put it simply, the digital rupee is a digital version of the physical rupee, making transactions and settlements more convenient.

On the other hand, a cryptocurrency is virtual currency that uses cryptography for secure transactions. It operates as a peer-to-peer system, enabling direct payments without intermediaries.

In today's world, it is essential to be knowledgeable about finance, digital technology, and how to protect yourself.

Let's delve into the details of cryptocurrency, including scams, and how to safeguard yourself:

What is Cryptocurrency?

Cryptocurrency is a form of digital or virtual money that uses cryptography, a technique for secure communication, to manage transactions and control new unit creation.

Unlike traditional government-issued currencies like the INR, dollar or euro, cryptocurrencies are decentralised.

This means they are not controlled by a single entity like a bank or government.

How Does Cryptocurrency Work?

At the core of cryptocurrency lies a technology called blockchain. Imagine it as a digital ledger that securely and transparently records all transactions.

Each cryptocurrency transaction is recorded in a block on the blockchain. Once a block is full, it is linked to the previous block, forming a chain of blocks, hence the term ‘blockchain.’

Key Points to Understand

1. Decentralisation: Cryptocurrency is not controlled by a central authority, making it attractive to those seeking independence from governments and banks.
2. Security: Cryptography ensures secure and private transactions, making it difficult for hackers to manipulate the system.
3. Blockchain: Transactions are logged on a public digital ledger (blockchain) maintained by a network of computers.
4. Mining: New cryptocurrency coins are generated through a process called mining, involving solving complex mathematical puzzles that also validate transactions.
5. Wallets: To use cryptocurrency, you need a digital wallet, similar to a virtual bank account, for secure coin storage.

Types of Cryptocurrencies

Bitcoin was the first cryptocurrency and remains the most renowned, but there are thousands of others catering to various needs.

Some prioritise quick transactions, while others focus on privacy or specific industries.

Benefits and Risks

Benefits

1. Anyone with an internet connection can use cryptocurrencies.
2. Cryptocurrency transactions often have lower fees compared to traditional banking.
3. Cryptocurrencies can offer banking services to those without access to traditional banks.

Risks

1. Cryptocurrency prices can change drastically, leading to substantial gains or losses.
2. While transactions are secure, safeguarding your digital wallet and private keys is crucial.
3. Cryptocurrency regulations vary by government, leading to uncertainty.

Recent Scam and Avoidance Measures

Recently, the Odisha Economic Offences Wing (EOW) uncovered a significant Crypto-Ponzi fraud. EOW apprehended Nirod Das from Bhadrak, a central figure in the scam.

Notably, the State Trading Association (STA) hosted a lavish event in a Goa hotel, attended by over a thousand members, including many from Odisha.

All the accounts have been frozen. Total money involved (Pan India) in STA is estimated to be more than Rs 1000 crore.

To avoid falling victim to scams like this, follow these guidelines:

1. Be Skeptical: If promises of huge profits with little effort sound too good to be true, they likely are.
2. Protect Personal Information: Never share passwords, wallet keys, or personal data. Legitimate companies won't ask for these.
3. Verify Links: Beware of fake links in emails or messages leading to fraudulent websites. Double-check URLs and avoid suspicious links.
4. Research Thoroughly: Before investing in a cryptocurrency project, research it well. Look for reviews, news, and official websites.
5. Choose Secure Platforms: Opt for reputable digital wallet and exchange platforms with strong security measures.
6. Stay Informed: Understand cryptocurrency and common scams to spot red flags.
7. Trust Instincts: If something feels off, it probably is. Don't ignore doubts.
8. Avoid Unrealistic Promises: Any scheme promising guaranteed profits quickly is likely a scam. Legitimate investments come with risks.
9. Stay Updated: Keep current with cryptocurrency scams to avoid falling into traps.