While Bitcoin tokens might not exist as a physical element, you can still lose them if you aren’t careful. Once a Bitcoin is lost, it’s almost impossible to get it back and the limited supply of Bitcoin to be created makes it even more problematic when the tokens are lost. So how do you lose something that exists purely online? In this, we explore how you can lose your Bitcoin and how you can avoid it.
According to analysts, such as cryptocurrency research firm Chainanalysis, nearly 20% of all Bitcoin that exists currently can be considered lost forever. This means that the tokens are unrecoverable and will never be used or transacted again.
Five malicious ways you might lose your Bitcoin
Malicious method #1: Cryptocurrency hackers
Attacks on cryptocurrency exchange are the main reason behind the majority of the Bitcoin that gets lost. Because of the centralised storage of Bitcoin tokens, cryptocurrency exchanges are a hot target for hackers and cybercrime. If you store your Bitcoin in an exchange and a cyber-pirate plunders the loot, you can consider your coins lost and, because of Bitcoin’s untraceable nature, generally gone forever.
To avoid this, store the majority of your Bitcoin (especially if you are not trading) in cold storage where the information is not available online and only keep what you might like to move around in an exchange.
Malicious method #2: Phishing
Phishing refers to the method cybercriminals use to steal people’s information. This usually occurs through email and a common tactic is a cybercriminal imitating email addresses from exchanges which requires you to click a link that takes you to a page that identically resembles the exchange and asks for login information. Once the phishers have your information and details, they can access your account and steal your Bitcoin from the exchange.
To avoid this, avoid clicking links that you don’t trust. When in doubt, rather avoid and get in touch with the exchange directly to make sure something is legitimate before processing.
Malicious method #3: Schemes and scams
Ponzi schemes are a type of fraudulent scam where early investors make quick profits from the investment made from later adopters or investors. There is no sustainable or realistic strategy for making money in a Ponzi scheme.
To avoid falling prey to Ponzi schemes and sketchy scams, look out for investment opportunities that sell the idea of massive returns. Generally, these offer unrealistic profit possibilities and you end up losing your funds in the process.
Malicious method #4: Malware
Malware is designed to sneak into your computer and steal cryptocurrency without your knowledge. Malware usually comes in through torrent sites or untrustworthy downloads. Once on your computer, Malware can see, access, copy and manipulate any information you might enter on your browser or desktop. For example, if you copy and paste a Bitcoin wallet address, the malware could swap the information you copied with a different address, meaning you could send Bitcoin to the scammers address rather than the intended.
To avoid malware, be very cautious with your downloads and make sure you have a strong anti-virus software strategy in place.
Malicious method #5: Fraudulent initial coin offerings
In 2017, the initial coin offering (ICO) space was booming. As a method of fundraising a Bitcoin project with little regulation from the authorities, many fraudulent ICOs were able to swoop in and steal from vulnerable users. Using FOMO as a driving force to manipulate investors, ICO schemes offer high returns promising strong investment options. However, once taking the Bitcoin from investors, the founders of fraud ICOs disappear without a shadow intention to uphold the promises.
To avoid fraud ICOs, do your research and make sure the project is legitimate before investing any of your Bitcoin in it. There are other, more regulated and secure ways of investing in cryptocurrency projects too. Consider a more secure option like an initial exchange offering (IEO) which has an exchange backing a project with a vetting process in place.