What is a cryptocurrency?

Cryptocurrencies allow you to conduct transactions and make payments without banks and credit card companies, which are currently the most common payment networks. All cryptocurrencies work on the same basic rules: each currency has a set number of "coins," or units, and the currency's value is based on the supply and demand.

That means if you have Bitcoins and use them to buy a product, the seller gets Bitcoins and you pay in a Bitcoin. As with any cash transaction, there is a set fee associated with every cryptocurrency transaction.

What is a bitcoin scam?

One scam startup is taking advantage of what's arguably the most hyped news story in tech. It's called Winklevoss Capital and it's an early bitcoin-related investment firm.

Over the past few years, the Winklevoss twins have made a bunch of big-name Wall Street names wealthy by going on trading expeditions with them. But back in 2013, Cameron and Tyler Winklevoss made a few questionable transactions involving bitcoin. The twins allegedly lost their bitcoins during these deals, and claimed they were holding the money for a lawsuit settlement, and it took them a long time to come through.

This left fans scratching their heads. If the Winklevosses lost all their bitcoins, how did they become billionaires? Was it really an investment? (Turns out, they just re-named their fund.

How to avoid getting scammed

The scam artists can be very convincing and have many strings to their bow, so making a hasty decision that could mean you lose a lot of money may seem like the easiest solution. But, as mentioned, even making this decision can be risky and may open the doors to a more damaging scam.

Here are some of the key steps you should take:

Go to the company's website and read through its website carefully. The scammers will often state that they're based in New York or London, but this may not necessarily be true. The company may also look legitimate, but it could still be a fake. If you feel you can't verify the legitimacy of the company, then it's worth taking your business elsewhere.

Avoid clicking on the links from the company website.

Conclusion

If you believe that your funds are at risk and you’ve received a suspicious email or text message, make sure you follow the instructions to verify the legitimacy of the offer. Contact the seller via email or telephone and let them know you’ve been targeted by scammers. Tell them you’re currently tracking the email address and/or number to verify their details. You can also check the Blockchain.info profile for the scammer.