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Cryptocurrency Wallets: The Difference Between “Hot” and “Cold”

In the world of cryptocurrency, wallets come in different forms, each with its own level of security. Among these are “cold” wallets, physical objects such as cards or jump drives that store cryptocurrency offline. In contrast, “hot” wallets are web-based, desktop, or mobile app- based storage solutions.

Why Choose Cold Wallets?

Cold wallets offer a higher level of security compared to hot wallets because they are not connected to the internet, making them less vulnerable to hackers and cybercriminals. This physical separation from the online world reduces the risk of hacking, phishing, and other forms of digital fraud.

How to Avoid Cryptocurrency Fraud

To ensure safe cryptocurrency transactions, it’s crucial to take precautions when dealing with exchanges, identity verification, education, and real-life cases of fraud. Here are some tips:

  • Use trusted cryptocurrency exchanges: Research popular exchanges with strong security protocols and good customer service.
  • Require identity verification: Implement a risk-based approach to onboarding and transaction monitoring to spot or deter suspicious activity.
  • Educate customers: Publish information about common crypto fraud schemes and provide tips for protecting themselves.

Real-Life Cryptocurrency Fraud Cases

To highlight the importance of caution, here are three notable cases of cryptocurrency fraud:

  1. OneCoin: A Ponzi scheme that promised educational materials and a centralized cryptocurrency, but was actually a massive scam worth almost $25 billion.
  2. Bitclub Network: A cloud crypto mining operation that promised investors profits through mined cryptocurrencies, but was exposed as a Ponzi scheme, costing investors around $722 million.
  3. Axie Infinity: A phishing scam involving a fake job offer led to the theft of nearly $600 million worth of cryptocurrency from players and the game system.

Reporting Cryptocurrency Fraud

If you’ve fallen victim to a crypto scam, it’s essential to report it to the authorities to help prevent others from being scammed. Some US organizations that can be contacted include:

  • Federal Bureau of Investigation (FBI)
  • Federal Trade Commission (FTC)
  • Securities and Exchange Commission (SEC)
  • Commodity Futures Trading Commission (CFTC)
  • Internet Crime Complaint Center (IC3)

Preventing Crypto Fraud

To stay ahead of crypto fraud, it’s crucial to use digital anti-fraud tools such as Unit21’s Transaction Monitoring and Case Management solutions. These tools can help track and analyze suspicious activity, intercept scams before they run through to completion, and provide a comprehensive overview of the connections to crypto fraud.

Contact Us for More Information

To learn more about how Unit21’s infrastructure can help your team fight fraud involving crypto, contact us today for a demo.