New Stats Show ETH Blockchain Is Scammers Paradise

The crypto analytics specialists Chainalysis recently published a report which indicates Ethereum has become a crypto platform which scammers seem to thrive on. The research suggests that last year saw a lot more sophisticated, higher-earning scams being carried out using Ethereum, although the specific number of the crimes has plummeted significantly year on year.

The amount that was stolen through Ethereum based scams doubled from $17 million in 2017 to $36 million last year. This sums up to 0.01 percent of ETH in circulation.

Chainalysis identified more than 2,000 false Ethereum addresses which managed to secure funds from almost 40,000 unique users in the network. In around two years, the way that the scammers are operating has seemingly changed according to the data to analytics specialists.

Pyramid schemes, initial coin offerings and phishing are still sticking around though and they are still the most prevalent but even so, there has been a change in the trend.

Two years ago, phishing scams were a big thing and led to a big surge in that kind of crime. Users seemed to catch on to the continuously increasing number of these attacks which led to a decrease in the effectiveness of phishing scams.

A result of this, the average amount sent to a scam address was nearly half of the amount that it was in 2017. There was a significant rise in Pyramid schemes last year though and ICO exit scams yielded millions of dollars in income.

As reported by CoinTelegraph, one of the key reasons for Ethereum’s popularity with scammers is due to the “utility as a platform in which people can start and launch their own native cryptocurrency tokens through ICOs.”

With the price of Bitcoin and other cryptocurrencies surging in 2017, investors were happy to sell their crypto holdings in the hope for seeing to massive returns on the investments. During this time, fraudsters took advantage of the situation which has inevitably swindled many investors.

As a platform, Ethereum doesn’t directly provide the right tools nor environment for scammers to carry out their numerous schemes and ideas. Entrepreneurs who are looking to launch a decentralised, blockchain based project should look to the Ethereum platform because it is what it was designed for.

There are three main scams used on the Ethereum platform which scammers seem to favour when they play out their schemes, plans and things of the sort.

ICO exits

To start with, ICO exits. This a type of scam that quickly grew in popularity over the course of last year. Fraudsters would set up a fake company or project with elaborate marketing and websites. Funds are then raised through ICOs but after that is complete then the fraudsters will then sell off the proceeds and *poof*… vanish into thin air. Not only are they gone so there isn’t anyone to point the finger at but the capital is gone leaving investors with nothing.


Next, let’s talk about phishing. This is perhaps the most popular type of Ethereum scam which has been going on over the past few years. The idea behind this type of scam is when scammers send potential victims emails or another form of digital communication, they get tricked into sharing private financial information and thus, the scammers will have access to their Ethereum wallets.

Pyramid Schemes

Pyramid schemes – also known as Ponzi schemes – have also occurred a lot over recent years. The schemes promise investors an unusually high return on their investment which are then paid out by new investment funds coming in. In the end, the scammers make off with most of the funds and leave the investors with nothing. A good example of a Pyramid scheme in the crypto space is Bitconnect which officially died in September last year.

Chainalysis explains that in 2017, phishing scams were the most popular method of scamming but in the following year, users became a lot more aware of what was happening with them so fewer scammers attempted it. In addition to this, when criminals started to change up their methods of attack, the median amount of money stolen from individuals seemed to decrease too.

Which is the most Effective?

As technology develops and people wise up to scams, the overall success of fraudsters seems to be sinking. There is a small number of these activities which have managed to steal millions of dollars from unsuspecting investors.

“What this could indicate is that criminals have had to get smarter in the way they dupe potential victims, with complex scams that have garnered massive amount of money. To this end, Chainalysis notes that twice as many users lost up to four times as much in 2018 compared to 2017.”

There is a possibility that channels like Telegram and WhatsApp could be utilised by scammers in the future but as for cryptocurrencies, they will continue to be a method to launder money and regulatory moves will be made by the authorities.

Overall, Ethereum remains a very safe and secure platform, though caution should be exercised when dealing with Ethereum based technology. Never give away your personal details and never get involved in any giveaways or schemes that sound too good to be true – this tends to mean they are too good to be true and thus, are of a fraudulent nature. Stay safe out there!

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