Those who have spent a lot of time in the cryptocurrency space are aware of how many different types of scams are out there and how frequently you run into them. The focus of this dispatch from the cryptospace are two types of scams I have seen repeatedly online: fake faucet wallets and fake online mining pools. The goal of this story to describe my own experiences with these types of sites and help others avoid falling victim.
A faucet wallet is a website that appears to a combination of an online crypto wallet and a faucet. As a wallet, it will typically offer the opportunity to register for an account and receive addresses for bitcoin and various altcoins conveniently on one site. As a faucet, it will offer free daily deposits of small amounts of bitcoin and other cryptocurrencies into your account. However, unlike a conventional faucet, which actually pays out claims even if they are infinitesimal, faucet wallets are pure scams. The point is to lure you into depositing your own coins into the site. Here is a screenshot from a fake faucet wallet that was still live at the time writing:The balances are supposedly from free daily deposits into my account. In reality, there is nothing in the wallets.
It seems to be a one-stop-shop for bitcoin and various altcoin addresses. Notice it also offers a “100% first deposit bonus.” This is typical of faucet wallet scams. It offers to pay a bonus on any deposits you make into the site to get you to deposit hard earned coins. If you do, all will seem well until you go to make a withdrawal and nothing happens, or the site simply disappears one day. In the case of the site above, I requested a withdrawal of the bitcoin balance once it crossed the stated minimum withdrawal limit. I clicked “withdraw” and a message appeared saying it was a “success.” I was unimpressed because I had never inputted my BTC address. The site had no place to withdraw the bitcoin to… needless to say, I never received the withdrawal.
Fake faucet wallets also typically have a referral structure that offers additional bonuses for users who sign up via a personal referral link. Those who post their link to social media unwittingly become accomplices in the scam.
Over the last few years I have seen multiple different faucet wallet websites comes and go. However, one has proven to be particularly tenacious, existing for several years and seemingly scamming people the whole way. QoinPro claims to be an online wallet that deposits bitcoin and various altcoins into users’ wallets daily. I am personally familiar with QoinPro as I encountered very early in my time in the cryptospace. I was naive about the amount of scams out there and registered for an account. I believed I was really getting the daily deposits, and even shared the site on social media. Fortunately, I had almost no followers at the time and the only people who signed up were family members, none of whom deposited their own coins. Thankfully, I also never deposited my own coins.
I had completely forgotten about my QoinPro account until recently when I saw some social media activity from people claiming that they never received the withdrawals they had requested through the site. On QoinPro’s Twitter was a post announcing the site was down for an upgrade and would be back on May 25, 2018. The day came and went and tweets from angry users followed. QoinPro then tweeted the re-launch had been pushed back to July 23, which also came and went with no new site appearing. The posts from angry users angry continued.
I dug a bit deeper into QoinPro’s history and discovered the site had gone live on February 6, 2014, when a user posted on Bitcointalk announcing the site was a “multi-currency crypto wallet” with free coins deposited daily. For a few weeks there were several posts made by uses who had registered for an account and were trying to profit from the referral bonuses by offering to send individuals small amounts of altcoins in exchange for signing up to QoinPro via their personal link. Some posters organized promotions where those who signed up via their referral link were entered into a draw of an amount of BTC. While there is little evidence many people responded to such outreach (i.e. almost no replies to these posts), it is clear that people were pushing their referral links quite aggressively.
My research further revealed a new tactic from QoinPro beginning in 2017 as the Bitcoin Cash hard fork approached. Account holders began receiving emails stating that they would be able to claim BCH through the site if they deposited their Bitcoin before the fork. One user mentioned having deposited 0.7 BTC into QoinPro in response to the email. He requested a withdrawal after the fork and it never came. He sent “thousands” of emails to QoinPro and never received a reply.
With all the evidence online of users not getting withdrawals you would think it be impossible for QoinPro to stay up, however, I recently discovered that the site has indeed returned at a different URL.
Fake Mining Pools
Fake mining pools are websites that offer to sell different amounts of hash power. Hashing power is the power a computer uses to run and solve hashing algorithms. These algorithms are used for generating new cryptocurrencies and allowing transactions between them. This process is also called mining. A fake mining pool site will let you sign up for free, promising that you can mine small amounts of crypto for free (tip: getting something for nothing is always a red flag). Once you register, you discover that the amount of free coin you get is very low but can be increased with the purchase of more hash power. Here is a typical example:This image is from a fake Litecoin mining pool website offering to sell hash power
I joined one of these sites when I was still new to the cryptospace. Fortunately, I decided not to purchase any of the hash power packages offered for sale. Instead, I waited to see if it really was possible to mine a small amount of LTC for free. The minimum withdrawal on the site was 0.2 LTC. I kept the tab open on my computer for five consecutive days until it showed an accumulated account balance of 0.2 LTC. I initiated a withdrawal…. It never came. I sent a couple emails to the support channel but never got a reply. I then did some research online and found stories from people who had purchased the hash power packages complaining about not receiving payouts.
Spotting the Scams
The best way to determine if something that appears to be a faucet wallet site is a scam is to look at whether it is offering to give free coins in exchange for a deposit. This is a huge red flag. Genuine crypto wallets do not give users free coins. They try to design the best possible product so users want to use it. If in doubt, try searching the name of the website with the word “scam”. If the site has been around for a bit you will likely see hits about it ripping people off. A related option is to consult social media. Check for mentions of the site on Twitter, Reddit, and Bitcointalk. Often people who have been burned by scam sites will post their stories to warn others
Unlike fake faucet wallets, fake mining pools are a bit trickier to spot for those new to the cryptospace. The reason is there are legitimate mining pools where individuals combine resources to benefit from communal hash power. Mining in pools began when the difficulty of bitcoin mining increased to the point where it could take centuries for slower miners to generate a block. The solution was for these miners to pool their resources so they could generate blocks more quickly and receive a portion of the reward on a consistent basis, rather than randomly once every few years.
A fake mining site will purposely try to confuse you by describing itself as a mining pool. For example, the scam Litecoin mining site mentioned above calls itself an “LTC Mining Pool,” even though it is anything but. The key difference between a scam mining site and a legitimate mining pool is that the latter is a group of miners who agree to share block rewards (mined coins) in proportion to their contributed hash power. In other words, they are selling hash power to the pool. They are not buying hash power from the pool. If a website is offering to sell you hash power it is a scam. Think about it this way: why would anyone sell you hash power and give you some of the reward for mining when they could just use the hash power themselves and keep all the reward? For this to be rational from a legitimate business perspective, the value of what you get would have to be less than what you are paying or else it wouldn’t generate profit for the site
Fake mining sites and fake faucet wallets are two well-established scams in the cryptospace. Common sense dictates that newcomers are most at risk of falling victim. Some good rules of thumb are that faucet wallets are always scams, so steer clear of them. The telltale sign of a scam mining site is that it offers to sell or rent hash power. You will not make money from such an arrangement so steer clear as well. Finally, when dealing with any website that offers to sell you something in exchange for crypto always do some research online. If you see reports of people losing funds, stay away.
Two Super Common Scams in the Cryptospace and How to Avoid Them was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.