Bitcoins are a type of cryptocurrency. Satoshi Nakamoto launched bitcoins in 2009. People store bitcoins in electronic wallets called “Bitcoin Wallets.” It would be best if you had a private key to access the bitcoin wallet. With the help of bitcoin wallets, sending and receiving bitcoins have become convenient. Just like we carry real money in our purses or wallets, there are bitcoin wallets for bitcoins. Bitcoins are decentralized, meaning banks or other financial institutions are not involved in bitcoin management. Despite all this, Bitcoin scams take place, and people fall prey to them. These scams occur due to the ignorance of bitcoin users. Therefore, bitcoin users should clearly understand bitcoin scams and their preventive measures.
Functioning of bitcoins:
The following are the functions of Bitcoins:
- Bitcoins depend on blockchain technology. Blockchain creates a history of shared bitcoin transactions and makes them into small “blocks” and “bonds” to stop interference.
- Blockchain technology assists in creating a permanent record for each Bitcoin transaction.
- In a bitcoin wallet, there are public and private keys. These two keys unite to permit the bitcoin owner to initiate and sign the transactions digitally.
- Bitcoin transactions are verified with a process called mining. Mining is designed to confirm that the new transactions are consistent with other transactions completed in the past. In addition, it will ensure that you will only be able to spend a bitcoin that you have or have previously paid.
Methods to purchase bitcoin:
For buying bitcoin, the practical ways are described below
Centralized cryptocurrency exchange:
You can purchase bitcoin from a cryptocurrency exchange in the following manner.
- Please visit a cryptocurrency exchange website.
- Create an account for yourself on that website and verify your identification.
- Follow the instructions mentioned on the website to purchase bitcoins.
- Your desired bitcoin will appear in the exchange account.
- If you want bitcoin under your control, send it from the crypto exchange to your self-custody wallet.
Purchasing bitcoins from peer-to-peer trading platforms:
The methods to purchase a bitcoin from a peer-to-peer trading platform are as follows:
- Please review the listings, such as payment type, amount, seller location, etc.
- Begin a trade. By doing so, an escrow account locks your bitcoin.
- Send the payment that is agreed upon through the agreed-payment method. Remember that this could even mean meeting the seller and handing the cash directly to the seller.
- After that, the seller confirms the payment through a website or app. Finally, it shows that bitcoins should be released to your Bitcoin wallet from their escrow.
- In a few cases, the bitcoin purchased would be released from escrow to the Bitcoin wallet of your choice. In other circumstances, it will first be sent to your account in a peer-to-peer platform account wallet. In that case, you should withdraw it to a Bitcoin wallet under your control.
Methods to store Bitcoins:
One can follow the most effective and safe ways to store bitcoins.
Storing in Hot wallets:
Hot wallets are the wallets that are available online. To maintain these wallets, you need an internet connection. One can quickly access and exchange funds faster.
Storing in cold wallets:
Cold wallets don’t require any internet connection to store bitcoins. Instead, these wallets require physical devices where bitcoin and other cryptos can be stored offline.
Advantages:
There are various advantages of bitcoins mentioned below.
- You can transfer bitcoins to anyone, irrespective of the location. So, for example, if a person in the USA wants to send money to his brother staying in Canada, he can transfer bitcoins quickly.
- You can send bitcoins in a matter of minutes. For example, you can send bitcoins to your relative in minutes compared to online bank transactions.
- The cost of a bitcoin transfer is low, but money transfer through a bank involves a lot of expenses. For instance, sending a hundred dollars through a bank transfer to your father living in a distant place costs you a lot. But if you send bitcoins to your father, the transfer cost would be low,
- Decentralization exists with bitcoins, meaning banks or other financial institutions don’t manage the bitcoin transactions.
- You are in charge of your bitcoins. None can access them. Once you own your bitcoins, it depends on how you manage them. Whereas, in the case of traditional money, we rely on banks or other financial institutions regarding money management.
- Bitcoin can be accessible to anyone and at any time. It is a peer-to-peer network that is open and can be used by everybody.
- Bitcoins are secure, and their public key cryptography ensures that every transaction is authentic.
- You can trade all twenty-four hours a day and seven days a week with bitcoins. Bitcoin trading has no break in between. Just like an ATM, you can always deal with bitcoins.
- You can use bitcoins for regular payments like coffee, tea, groceries, online micro-payments, etc.
- With bitcoins, purchasers can complete their transactions without disclosing critical information to the seller.
Disadvantages:
The list of disadvantages are:
Bitcoin romance frauds:
In this fraud, the victim meets the romance scammer through dating websites or social media. Then the connection between the romance fraudster and the victim develops. At an advanced stage, their relationship gradually becomes trustworthy and more robust. Finally, the fraudster asks for money in the form of bitcoin from the victim by giving reasons like a medical emergency, flight ticket to home country, etc.
The victim takes pity on the scammer and sends the bitcoins. After receiving bitcoins from the victim, the fraudster disappears with them.
For example, “A” comes across a person online on a dating website. Then A starts an online relationship with that person, and their relationship becomes trustworthy. Afterward, the person starts demanding money from “A” in the form of bitcoin. When A asks why the cheater says it is for the operation due to an elbow injury. “A” gets pitiful with the story and transfers bitcoins. Unfortunately, the person disappears immediately after receiving bitcoins from “A.” After a few days, “A” realizes that his bitcoin wallet is empty and the money is lost. At that moment, A realizes the person is a romance fraudster and is after A’s money.
Bitcoin employment frauds:
In this fraud, scammers pretend to be job recruiters and post fake exciting job offers on social media or job sites. These job postings excite job seekers, and they contact these fake recruiters and demand money in the form of bitcoin. Then, after getting bitcoins, they run away with them.
Fake social media bitcoin investment scams:
A link is also present in those posts for users to invest money to gain bitcoins. These opportunities promise significant returns to bitcoin investors, but they are not real bitcoin investment opportunities. When users click on the link, it leads them to their bitcoin wallet details.
Conclusion:
People interested in bitcoin investment should know how to distinguish between real and fake investment opportunities. In addition, they should also learn about bitcoin scams and prevention tips. Finally, one should preserve bitcoin wallets so that no scammer can hack them.