Bitcoin and other virtual currencies are confusing to most people. However, many people are rushing to invest their hard-earned money into these digital assets. Perhaps, before you spend any cent on Bitcoin, it's better to understand it first. For instance, know why Bitcoin is different from conventional payment methods and cash. Also, learn how to identify a Bitcoin scam or a crypto exchange that's easy for criminals to compromise.

Understanding Bitcoin and Scams around It
Understanding Bitcoin and Scams around It Pixabay

Bitcoin Basics

Bitcoin is a virtual or digital currency, meaning it exists electronically. Ideally, you can't have a Bitcoin bill or physical coin. People exchange Bitcoin with interested people online using computers and phones. Online platforms like the Bitcoin System also enable users to trade this virtual currency. Such a system allows you to sell Bitcoin and get fiat money or buy Bitcoin using traditional currency. Perhaps, you can check out the BitQT for more information.

People use Bitcoin to complete transactions faster without incurring hefty fees like the ones that banks charge. Paying with Bitcoin also enables you to maintain some levels of anonymity. However, some people hold Bitcoin as a digital investment, hoping that the virtual currency will appreciate.

Initially, people could only mine Bitcoin to get this virtual currency. However, Bitcoin mining is a complex process that requires powerful computers and specialized skills to solve math puzzles. Thus, most people now opt to purchase Bitcoin via crypto exchanges.

Paying with Bitcoin

Paying with Bitcoin is not the same as paying with a traditional method like a credit card. Here's why:

  • Bitcoin payments lack legal protections: Debit cards and credit cards provide legal protections if something wrong happen. For instance, you can contact your credit card provider to dispute a purchase. Thus, the provider can help you recover your money. With Bitcoin, you don't have such an option.
  • Bitcoin payments are irreversible: After sending money to somebody else, you can only get it back if the recipient sends it. Thus, Bitcoin payments require you to know the recipient's reputation, their location, and how to contact them before completing the transaction. Also, confirm your recipient's details before paying.
  • Some transaction details will be public: Bitcoin uses a public ledger called the blockchain to record all transaction details. That means the database has details of the recipient and the sender, including the wallet addresses and the amount. Thus, wallet and transaction information can identify the parties involved in a transaction.

Avoiding Bitcoin Scams

Scammers want to steal money from the people who use Bitcoin. If somebody insists that you pay with Bitcoin, gift card, or wire transfer, they might be scammers. But this doesn't mean anybody accepting any of these methods is a scammer. It only means you should take precautions when using these methods to pay for services and products because most people consider them unconventional.

Other Bitcoin scams to avoid include:

  • Business and investment opportunities that promise you lucrative returns without risks
  • Investments that promise you lucrative payments for recruiting others to join their programs
  • Business opportunities with unsolicited offers for recruiting other investors and convincing them to pay some money
  • Websites that list Bitcoin-related jobs and promise a position if you pay a fee

Ideally, anybody promising you free money, guaranteeing to make you money, or big payouts from a risk-free investment is most likely a scammer. Most scammers don't provide details when making their big claims.

Final Thoughts

The number of people using Bitcoin to complete transactions every day keeps increasing. Some experts argue that Bitcoin could eventually become a mainstream payment method. However, scammers are also targeting Bitcoin users. Therefore, pay keen attention to spot scammers whenever you use Bitcoin to pay for services and products.