Safe? Maybe not so much! Learn about blockchain scams and frauds
As the pillar that supports everything from the classic Bitcoin to all the latest crypto economy "inventions" (common tokens, non-fungible tokens, and even other cryptocurrencies), blockchain technology has always been seen as a true web revolution. It works like a ledger, facilitating the immutable registration of transactions and asset control in a given business network, ensuring transparent information and greater security for those involved. Transactions and information are encrypted and only shared with those who have authorized access and these networks are seen as a key tool of the non-repudiation principle in information security.
Sound confusing? It means that blockchain supposedly guarantees the authenticity and veracity of something, since, in theory, not even a bad actor or an administrator can change the available information. John owns that digital asset, period. Mary's birth certificate is legitimate, period. Instead of localized records, the technology proposes decentralized information validation, making it much more difficult to apply scams and frauds in the next generation of the Internet.
In practice, however, it is not all roses. For some time now, criminals with nefarious intentions have been finding ways to circumvent blockchain-based systems, leading to the theft of digital assets. According to a report released in 2022, in that year alone, the main Web 3.0 ecosystem lost no less than $3.9 billion to crypto economy fraud – and with the popularization of cryptocurrencies, such damage is likely to increase in 2023.
Some of the more popular scams
Some of the most common types of attacks reported range from invading cryptocurrency exchange systems with brute force attacks to the exploitation of vulnerabilities in DeFi, currently one of the most popular protocols and based on the Ethereum blockchain network. In the latter type of attack, malicious actors exploit the open nature of the protocol's source code, while also manipulating logical errors in smart contracts. This results in billions of dollars in digital assets being left vulnerable to hijacking.
Of course, cybercriminals also take advantage of well-known social engineering. Pyramid schemes, phishing campaigns, fake exchanges, malware-infected digital wallet applications, and even man-in-the-middle attacks can be used to circumvent blockchain network security. One scam rising in popularity is the "rug pull," whereby fraudsters create a new NFT project, wait until the tokens reach a good market value, and then make off with everything.
There is a law, but... does it work?
Though many people remain unaware, it’s worth noting that in December 2022 Brazil passed legislation (Law No. 14,478/2022) with "guidelines for the provision of virtual asset services and the regulation of virtual asset service providers." However, experts point out that the text is not enough to regulate the sector and protect Brazilian Internet users, or even serve as legal support in case someone falls victim to more elaborate scams exploiting blockchain networks.
For now, the advice remains the same: be careful if you’re considering investing in the crypto economy. Get as much information as possible on the subject, and take it slow as the technology supporting this universe matures.
