But when an industry begins to grow, cybercriminals will always take a stab at capitalize on its popularity.
DeFi is no exception to this rule, and scams have become commonplace in the industry in recent years.
But what, exactly, are DeFi scams, and how do they work?
Image Credit: Bybit/Flickr
What Is DeFi?
In our modern world, the majority of financial services and institutions operate on a centralized basis.
There is a small group of decision makers existing within every organization that hold the majority of power.
Image Credit: Bybit/Flickr
When power is shared unevenly, and data stored in an undistributed fashion, things can go wrong easily.
DeFi tackles these issues by offering you financial services that operate solely on a decentralized basis.
For many, DeFi is a great alternative to traditional finance.
But cybercriminals are targeting this industry to make a profit.
Why Cybercriminals Conduct DeFi Scams
There are many things about decentralized finance that make it secure.
So, what’s so alluring about DeFi here?
Firstly, DeFi offers users an elevated level of privacy.
Because DeFi platforms use cryptocurrency, the identities of users behind transactions can be kept private.
On a typical blockchain, the only information given about senders and receivers is the wallet address.
Another aspect that cybercriminals tend to capitalize on is the fact that many people are new to DeFi.
DeFi in and of itself is a somewhat emerging industry, and was only popularized in the early 2020s.
DeFi rug pull schemes usually start with a new project or token.
At this point, the demand plummets, and the price of the token goes with it.
A cybercriminal can set up a smart contract that looks like it can be used to make a profit.
This smart contract may appear similar to others, but are designed specifically to lure in victims.
However, in reality, they are simply handing their money over to a cybercriminal.
By doing so, the cybercriminal can uncover the identity of the recipient addresses.
Once a suitable target is identified, the attacker will make it a focus for their scams.
Phony NFTs
NFTs (non-fungible tokens)have sold for huge amounts in the past.
In fact, some NFTs have been purchased for tens of millions of dollars.
Again, cybercriminals were quick to notice this money-making opportunity.
Today, NFT scams are rife, with people losing huge sums to scammers.
But how do they work?
The most common kind of NFT scam involves selling a buyer a fake NFT.
That’s why it’s so important you know how tospot phony NFTs and similar scams.
Phishing
The DeFi industry is also no stranger to phishing.
Once the user enters their login details, the phishing page will grab them for the attacker.
Now, they can dive into the victim’s account.
