Spotting Cryptocurrency Mining Scams

As cryptocurrency continues to witness a boom, so also has cryptocurrency scams. Chainalysis, a blockchain analytics firm, reported that scammers made away with a whopping $14 billion in cryptocurrency in 2021. One of the ways scammers were able to dupe crypto investors and enthusiasts was through the pretext of cryptocurrency mining.

Cryptocurrency mining occurs when a node (a computing device on the cryptocurrency network) solves a cryptographic puzzle to add transactions to the blockchain and receives a coin as a reward. The process is called mining because, like other forms of mining (e.g., gold) work is done and a new commodity is brought into circulation that previously was not there. Note that not all cryptocurrencies can be mined, an example of a non-minable cryptocurrency is Ripple (XRP). Also, for minable cryptocurrencies such as bitcoin, Ethereum etc., different mining methods are employed, the most popular being proof-of-work and proof-of-stake.

Types of Cryptocurrency Mining

The three ways that people can take part in mining activities that have the potential for financial payoffs are via pool mining, cloud mining and hash rate marketplaces.

Pool Mining

Pool mining in cryptocurrency is a collective method of mining, in which miners join their computational resources or computer devices over a network to strengthen the probability or chances of finding a block or successfully mining a particular cryptocurrency. Miners taking part in the mining pool donate their computer processing power or computational resources to the effort of discovering a block or mining a cryptocurrency. If the pool is successful in its efforts, it is rewarded, usually in the form of the cryptocurrency involved. The reward of each participant is calculated based on the processing ability of their computational resources or labor compared to the total group. Sometimes individual miners may have to supply proof of labor to get their rewards in some instances.

Pool Mining Methods

Proportional mining pool: In this type of pool, miners contributing to the pool’s processing power receive shares up until the point at which the pool succeeds in finding a block. After that, miners receive rewards proportional to the number of shares they hold.Pay-per-share mining pool: This type of mining pool is similar in operation to proportional mining pool, in that each miner receives shares for their contribution. However, these pools provide instant payouts regardless of when the block is found. A miner contributing to this type of pool can exchange shares for a proportional payout at any time.Peer-to-peer mining pools: This type of mining pool aims to prevent the pool structure from becoming centralized. As such, they integrate a separate blockchain related to the pool itself and designed to prevent the operators of the pool from cheating as well as the pool itself from failing due to a single central issue.Solo Mining Pool: Solo pools work the same way as usual pools, with the only difference being that block reward is not distributed among all miners. The entire reward in a solo pool goes to the miner who finds the block.Bitcoin Pooled mining: This mining pool is also known as “slush’s system”, due to its first use on a pool called ‘slush’s pool’, it uses a system where older shares from the beginning of a block round are given less weight than more recent shares. A new round starts the moment the pool solves a block and miners are rewarded Proportional to the shares submitted. This reduces the ability to cheat the mining pool system by switching pools during a round, to maximize profit.

Cloud Mining

Cloud mining is a hands-off way of earning cryptocurrency by renting computing power from third-party sources. In Cloud mining, computational work is outsourced. Instead of buying expensive computers to mine these coins yourself, you can rent the computing power of a specialized miner from a cloud mining company based anywhere in the world.

Hash Rate Marketplaces

This is an online marketplace in which people with hashing power (the power used by a proof-of-work cryptocurrency to process transactions in a blockchain) sell that power to people who want to mine without the hassle of setting up mining equipment. An example of a hash rate marketplace is Nice Hash (

Pointers to spotting a cryptocurrency mining scam

Guaranteed profits: If you are promised a high return rate at minimal risk, then it is most likely that the mining platform is a scam.

Anonymous owners: Legit mining schemes have individuals and entities that are publicly verifiable and known. It is important to note that if the owner or founders of the mining platform is hidden behind private registration, the platform is a red flag.

Has an MLM or pyramid part: Some mining pools offer large rewards for those who recruit others into the scheme. Do your research carefully to figure out if the mining has a pyramid (MLM) component. It is important to note that if the crypto mining platform advertises a referral payout scheme. This is an obvious sign that you might be dealing with a Ponzi scheme.

No publicly auditable infrastructure: Most mining services that are not transparent and have no public videos or pictures of their mining facilities and do not publicize their hash rate data might be scams.

No hash rate proof: Legit mining schemes publish and provide their hash rate proof which can be independently verified by any prospective miner. Any mining scheme with has rate that can’t be verified or does not have any evidence to back it up could be a scam.

Unlimited hash power purchases: If the mining platform has no limits to the amount of hashing power you can lease or promise instant and limitless scalability, which is not possible, it is a scam.

Other Pointers

Demand for unessential mining fees: A scam mining website may demand for blockchain activation / wallet activation fees/ mining activation fees or any other activation fees for mining.Similar properties with other scam mining websites: If a mining platform shares similar properties with a previous scam you have heard of or experienced, it is advisable to take a step back, pay more attention, and tread cautiously.No clear-cut path for divesting: If the platform provides no clear-cut path for divesting, the platform is a scam. Crypto mining platforms should provide easy-to-understand methods for withdrawing funds or closing contracts.

Also, what is common to experiences shared by those who have been victims of Cryptocurrency mining scams, is that the offer was unsolicited. People who they did not know contacted then via email or social media. Hence, be wary of unsolicited messages about people making money from cryptocurrency mining.

In conclusion, as with most other scams, watch out for spelling mistakes and poor grammar, bad or no reviews, and the use of stock images, these signs should set off alarm bells. Stick to well know mining platforms, ask questions, and do your due diligence by doing tons of research. Acting in such a manner will keep your funds from the clutches of crypto scammers.


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Defending Against Persuasion Techniques

Emmanuel’s Story

“Hello Emmanuel, I am the Escrow for the (*calls the name of the telegram crypto group where I was scammed of my close to last 3k earlier in the day*) what happened you just disappeared, the guy that wanted to sell the cypto to you was looking for you, we couldn’t proceed with the transaction”

Quick Pause, Let’s rewind.

So here I was, a broke Nigerian student who had just received his monthly 10k from home. I had heard a lot about how ‘**Crypto has changed a lot of people’s lives**’ so I started planning on how I would also invest small money and cash out big -lol, I did my own research online and in the process of my ***great research***, I ran into a telegram group whose **mode of operation made sense to me; it appeared okay**

You announce if you want to buy or sell, then a potential buyer or seller who is interested negotiates with you in public, then after agreeing on a price you guys call on the Escrow who then sends his account details and the price he would charge for the transaction, payment is made to his account, and the coin is sent to the receiver who then notifies the admin on receiving the coin so the money can be released to the seller. The admin acts as a middleman who makes money from commissions – who would think it was a well-planned fraud.

I observed the platform for a while, and I was persuaded by what I had seen on the platform. Fast forward to the D-day, I had just received my monthly alert, paid my tithe did my calculations, and saw that the money left wasn’t close to being enough, so I thought the best thing to do was *invest 2k in one coin like that* which I heard about online, it pumps between 1 or 2 weeks and then I kiss SAPPA bye forever – perfect plan.

So, I announced I needed a coin on the platform, found a seller, we agreed on the rate then called on the admin/Escrow who told us about his commission, I agreed, and then he sent his account details which I sent the money to after which I was waiting for the escrow to confirm the alert. After waiting for a while, I sent him a message on the group that I sent the money to, he told me to wait for him to confirm and then suddenly, I could not find the group in my telegram app – I had been removed….. I searched for the group on telegram but I could not find it. It was then I started to think the group might be a scam.

Back to the future [later in the evening].

The admin called asking me what happened, that “all of a sudden I disappeared from the group”, he sounded so concerned that for a moment I believed it could have been a bug in the telegram. To cut the story short this guy only called to extract more money from me but as I was broke already I couldn’t pay more money to get more crypto-like he suggested so I asked for a refund which he promised after his Association of Telegram Escrow meeting, two days and multiple calls passed but I still didn’t get back my money, only for me to end up being blocked by the Escrow, at this point, it became clear beyond doubt that I had been scammed. How is that even possible –PERSUASION

What are persuasion techniques?

Persuasion is the process by which a person’s attitudes or behavior are, without duress, influenced by communications from other people. One’s attitudes and behavior are also affected by other factors (for example, verbal threats, physical coercion, one’s physiological states)

Hackers, social engineers, or con artists often employ Persuasion Techniques to influence people’s attitudes, thought processes or decisions. Below are the most used of these techniques.


People are conditioned to respond to an authority figure or do a great deal for someone they think is in authority. Compliance is easier to obtain when it is perceived that the requestor is in a position of authority, as people usually follow an expert or pretense of authority. This is because we tend to assume their position gives them access to information or power. Fraudsters often exploit this to their advantage. An example of how criminals use authority is the common CEO fraud. In this fraud, criminals impersonate the CEO or financial head of an organization either through email or a phone call and get an employee (in the accounts department) to wire money to a fraudulent account.

Spotting the use of authority can be daunting, but possible. It begins by having critical trust in Authority, knowing that even if the source of the message is a legitimate, well-intentioned authority, they may not always be correct. Also, ask yourself if the authority is acting in ways consistent with their character and be suspicious of requests from authority figures that use urgency or fear.

Social proof/Social Influence

People are more likely to conceive of a behavior as normal, and to engage in those behaviors if there is a belief that others are doing the same thing. That is, we are more likely to engage in an activity if we are convinced that others are doing so, or they approve if such. This technique is widely used to commit fraud based on the popular saying that ‘Nothing draws a crowd like a crowd.’ This technique can be seen in Emmanuel’s scam experience. The telegram group was populated with fake accounts connected to the scammers to give it an appearance of legitimacy. To an outsider just joining the group, it would appear as if transactions were being carried out by many people.

To mitigate social proof, it is always good to remember that the involvement of many people does not grant legitimacy. Watch out for conversations that begin with “other are into it,” such you set off alarm bells.

Urgency and Scarcity

Urgency has to do with time constraints while scarcity is concerned with limited availability or quantity. People are influenced to make decisions based on the fear of losing a perceived opportunity or if that thing will soon be restricted or more expensive later. An example of a cybercriminal using urgency would be a phishing email asking you to click a link to reset your password as it is set to expire in the next 24 hours. While that of scarcity would be an investment scammer telling you he has only three more slots available for an opportunity that would earn you a ton of money.

To avoid being a victim of this, you need to train yourself to recognize scarcity and urgency in communications. When appraising any communication, ask yourself questions such as:

Am I being asked to perform an action within a limited time?

Does the offer or opportunity limited with respect to time, information or quantity?

Once the presence of such is noticed pause and do more research.

Commitment and Consistency

As humans we value commitment and consistency. No one admires someone who says one thing and does another. As such people tend to adapt their self-image to commitments, they believe they have made, particularly when those commitments are written down, recorded, or formally made. Fraudsters exploit this trait by getting people to make an initial commitment, they know once someone has made a commitment, they are more likely to abide by it since they would not want to be seen as being inconsistent. An example of this can be found in romance scams. The fraudster asks the victim for a “favor” that is insignificant or would not cost the victim much. Once the victim performs this initial act, the fraudster then sets us a scenario the requires the victim to do something more significant or costly.

A way to mitigate this is to be on the lookout for those who request repeat favors. After ana initial request is obliged, if someone returns asking you for something else, pause and ask yourself, “Am i being manipulated?” Do not perform the action requested but take some time to think it over.

Likability and Similarity

Christopher Hadnagy captures the core of Likability and Similarity when he said “People like people who are like them. People like people who like them.” The first part of the statement, “People like people who are like them” refers to similarity. People tend to like other people with similar interests, hobbies, dispositions, or backgrounds. Fraudsters take advantage of this by joining groups to which their targets belong. For instance, an investment scammer might join a gym or a club where wealthy targets go to get common grounds and points of similarity for future engagements with the targets.

The second part “People like people who like them” refers to likability. People tend to reciprocate likeness to people who like and show an interest in them. Scammers exploit this trait by dressing smartly to appear likable and complimenting their targets and feigning interest in them.

To mitigate this, you must audit your decision-making process and ensure that you are not making decisions based on factors such as your likeness of the person involved or that you share common interests.


This uses the tendency for people to feel an obligation to make a concession to someone who has made a concession for them. People are more likely to follow a request when they feel a sense of obligation or indebtedness towards a requestor. This technique is commonly used by scammers for planned fraud against people, by offering them favors or kindness causing people to feel indebted to returning the kindness. For example, an investment scammer might invite you to attend an “investment seminar” where the first fifty people would get free gifts. Such gifts are to make you more likely to invest your money out of a sense of obligation.


It is worth noting that these techniques can be used on their own but are more powerful when combined. Fraudsters and Cybercriminals often use two or more techniques together, with devastating effects. But we believe that being aware of and understanding these techniques can help you avoid being defrauded.


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