DeFi Mining Pool Scam – Another Crypto Threat Out There

Decentralized finance is promising to revolutionize the way we use money and services. While safety and security of funds are embedded features of any cryptocurrencies, the largely unregulated markets that DeFi assets belong to are prime targets for various online swindlers.

Our article will delve into some of the key crypto concepts, and how cybercriminals may use them to rob you of your hard earned coins.

What is a DeFi Mining Pool?

No matter how difficult to mine any crypto coin is, its value would plummer to near zero if it were proven to be a limitless resource. To make the entire crypto thing work, the developers of various projects have imposed certain restrictions.

A good example of this in practice is Bitcoin halving, and the imposed market cap of a total of 21 million coins by the year 2140. Thus, as the time progresses, a more sophisticated computer hardware is necessary to compensate for the increased difficulty of crypto mining.

Thanks to blockchain technology, it is possible to create a dedicated network of relatively simple computational machines, created for the purpose of more effectively mining a single type of cryptocurrency. In laymans’ terms, a DeFi mine pool would be a group of miners that work together to get a better yield out of their mining shaft.

The coverage of different hardware is truly mind-boggling, with some networks allowing DeFi mobile mining as well. For some you don’t even need your own hardware at all – you may rent computing power for DeFi cloud mining solutions.

What Is The Purpose Of Smart Contracts?

DeFi smart mining is one of the key concepts without which the mining pool idea simply wouldn’t work, as it provides a transparent, tamper-proof and trustless environment.

Smart contracts are pieces of software that contain the contractual obligations written in its code. They function automatically, enforcing and executing the terms of the contract once certain predefined conditions are met.

It is only possible to create crypto mining pools thanks to smart contracts. Without them, effective utilization of the necessary mining hardware and fair distribution of coins would not exist.

What is a Rug Pull Scam?

Although not entirely related to crypto schemes or exclusive only in the crypto world, the rug pull scam is now more commonly happening to crypto investors. With billions of dollars stolen every year, rug pulls are so common in the crypto niche now that you simply have to be informed in order to successfully avoid them.

What we commonly mean under this term is what happens when creators of new crypto projects suddenly close the entire campaign, disappear with investments and leave those that have invested hefty amounts of cash hanging.

Now let’s discuss how rug pulls commonly manifest in decentralized finance and why. 

DeFi Rug Pull Scam

DeFi rug pulls are based on programming smart contract languages utilized by DeFi tokens. By reprogramming a DeFi smart contract, scammers can ensure that investors will find it almost impossible to sell the particular token. 

At the same time, swindlers provide themselves with the possibility to limitlessly mint new tokens or simply charge astronomical trading taxes and fees and line their pockets that way.

When the fundamental coding of the underlying asset or DeFi mining app is tampered with, this is also known as hard rug pull.

Exit Rug Pull Scam

Also known as soft rug pull, the DeFi exit scam happens when no code altering is employed but rather fraudulent marketing and promotional techniques. 

This sort of scamming tactic happens when the cyber criminals exploit social networks and other promotional platforms to hype up the investors and capture their interest in a particular project or token before it’s even released.

Fake websites and advertising boost the fear of missing out, but fraudsters also employ the crypto wash-trade technique to artificially increase the trading volume and the price of a token. All of these campaigns are suddenly stopped and their creators disappear without a trace.

DeFi Phishing Scam

You’re probably already familiar with the so-called phishing scams. They rely on obtaining secure information like passwords, account numbers, and ID details by using various deceptive strategies. DeFi phishing has the end goal of the fraud being entry into secure wallets, or otherwise misappropriating the users’ crypto assets.

Some of the common techniques used by the swindlers include:

• Compromised smart contracts – smart contract code can be modified in such a way to leak either the mining results, or the secure information to a third party collector. They are also known to edit the market price of coins or tokens, exploiting the miners in the process.
• Fake token sales – phishers can promote sales of worthless coins or tokens, giveaways or airdrops in order to get the DeFi wallet information from their victims.
• Impersonation – the main method for this scam involves sending malicious links to the victim. It may be as simple as suspicious emails or social media profiles, may use advanced methods like creating copycat websites of Coinbase DeFi mining, compromised wallets, or even promoting full fledged Ponzi schemes.

DeFi Liquidity Mining Pool Scheme

Instrumental for the functioning of decentralized exchanges, liquidity pools represent a collection of user-deposited coins or tokens that are used to facilitate trading on the platform.

These users are known as liquidity providers (LPs), and are compensated for staking their crypto assets for the platform. DeFi liquidity mining pool scams attempt to gain illicit funds by presenting themselves as reputable staking platforms.

There are different ways they can damage your finances, ranging from leeching a percentage of mined assets, to rug pulling once a certain amount of funds accumulates. These can be even more unscrupulous and use compromised wallets or smart contracts to completely clean out your wallet!

What to Do If I Got Scammed?

With the regulatory confusion and not enough developed supervisory laws relating to decentralized finance, fraudsters are finding it easy to get to our wallets and rob us blind. Despite the regulatory forces trying to timely detect, prevent or sanction the perpetrators of this type of fraud, it is still hard to counter them in time. 

Your best option is to assemble your smart contract data, blockchain transaction history, gather proofs of correspondence with the malicious entity as well as records of fiat transactions if they happened. With this data you can go to relevant authorities, such as banks, law enforcers and jurisdictional financial regulators to ask for help.

Is It Possible to Recover Crypto?

Cryptos are notoriously difficult to recover due to the numerous safety systems implemented in their workings. While this may prove challenging for any individual, we provide a professional service with a proven track record.

You may book a free consultation with our specialists via the live chat. We are available 24/7 for your convenience.