As we’re rapidly moving forward with blockchain-related technologies, scammers are also finding new ways to fool out investors.
As an emerging market, cryptocurrencies are still an unknown area for many, and some also invest in them without doing proper research.
There are multiple types of fraud, which the world has witnessed in the past with billions of dollars lost combined. Perhaps, this does not mean that every next project can result in dissolving investors’ money to zero.
In this article, you can understand all the past scams and methods done by fraudsters and at least avoid getting involved in any of them. Moreover, I’ll also share with you some of the major tips on how to avoid scam tokens smartly.
What are Scam Tokens?
A scam token is developed for the purpose of pulling out investors’ money. However, there are thousands of different tokens available, and many are created on a daily basis.
It’s crucial to analyze tokens deeply before making any type of investment. And learning about the previously executed scam tokens can make you aware and help you avoid getting into high-risk projects.
Stay away from these cryptocurrency investment scams
Mentioned below are some of the major fraud scenarios for which scam tokens were used. Let’s quickly understand each of them to avoid future losses.
1. Rug Pull
A rug pull is a most known and common scam, where a group of crypto developers creates a project and pulls out all the investors’ funds, and vanishes away.
Usually, they start with forming hype for their project and invest majorly in increasing the value of their token. Later, they list out their token on Decentralized exchanges (DEX), and pair it with renowned tokens like Ethereum (ETH) in a liquidity pool.
By keeping a considerable share, once their token attracts enough investors and price range, they sell everything, leaving investors with no value tokens.
2. Honey Pot
This is an attractive way of scamming investors that usually happens through smart contracts. Fraudsters create a new smart contract or mimic any known network like Ethereum and bait it with cryptocurrencies.
They make it appealing for victims to fulfill the minimum investment criteria. And once the investor puts in his money, scammers take the bait and the investors’ money, while the victim cannot access the wallet or trade funds.
3. Fake Websites & Airdrops
Scammers create hype about a token and later provide users with free airdrops. These fake airdrops make users think they are valued in thousands of dollars. But, in reality, these tokens do not have any liquidity available and cannot be traded on any Dex.
Moreover, they even make users connect their wallets to scammer’s fake websites that look appealing but contain malicious smart contracts.
Once the user connects his wallet to this fake website, the scammer gets access to the victim’s fund.
Some of the ways to identify scam tokens
1. Check EGLD Community Project Page
Link: https://egld.community/
This is the utmost way for AshSwap and Elrond users to verify tokens on the platform and avoid investing in scam tokens.
You can stay up-to-date with the crypto market through their news and blog section. Moreover, Being an AshSwap user, you can also get access to every transparent and detailed information about the Elrond ecosystem.
2. Analyze the Token’s overall price history:
Often, a new cryptocurrency is hyped, which results in a huge price increase within a few hours or days. It may indicate that the crypto has little utility with a long-term growth vision.
Once the hype is over, you can see the downflow of that crypto by making your ROI zero, as the token is worthless.
3. Check how many exchanges have listed that token
This can be one of the ways to avoid investing in scam tokens. If you can see the token available only on a few decentralized exchanges, then it can possibly end up in the scam list.
4. Deep research of token’s Whitepaper
In the crypto world, the whitepaper plays a fundamental role when you want to understand and invest in any token project.
Being an investor, you should check all the details regarding that token, like future agenda, roadmap strategy, token distribution, etc.
A genuine token project should have a proper whitepaper mentioning all the necessary details. Whereas a scam token project does not contain detailed information, or sometimes, project owners replicate other Whitepaper.
5. Analyze tokens on third-party tools
As there are scammers, we have these analysis tools through which you can research and identify whether a token is a scam project. Try to scan on different tools to get accurate verification results.
- Smell Test – https://tokensniffer.com/token/eth/0x3a6e7ac13311e3500fc1c678a62a8472bd213a9d
- Honeypot Detector – https://honeypot.is/
- Risk Scanner – https://dappbay.bnbchain.org/risk-scanner
- Token Analyzer by Binance – https://bscheck.eu/
- Token Sniffer – https://tokensniffer.com/
As we’re upgrading the system with the best technologies, scammers will also find new ways to crack the code or loot the investors’ money. It’s best to thoroughly check the token project with the mentioned above tools and tips, along with your own smart thinking and analysis methods.
