I have seen numerous crypto scams, and detecting one is tricky. As time goes on, scams become more sophisticated, and we must find new methods to detect them. This article will look at how to spot fraud within the crypto world.
For example, honeypot scams are the stuff of the past (age 2021) that are hard to find today. Investors are getting smarter. But scammers are getting more ingenious at creating more credible crypto scams. That’s why you need to stay up to date and avoid falling into the traps.
Let’s look at some methods to avoid falling into a scam.
- Services to analyze the contract and detect crypto scams
- Zero sell orders (Sell orders disabled)
- Liquidity pool
- Crypto scam database
- Finding connections among wallets
- Marketing wallet
- Post-presale sales of a crypto scam
- The average life of a crypto scam
- The team
- Minimum Viable Product (MVP) to avoid crypto scam
Services to analyze the contract and detect crypto scams
We generally use contract analysis services to find honeypots and holes in the contract that can lead to :
- Draining liquidity
- Preventing selling (so investors cannot exit, and scammers can drain liquidity as soon as it is unlocked)
- Raising selling fees
All of these methodologies allow scammers to steal money from investors’ pockets. Fortunately, nowadays, numerous services warn of this danger. The phenomenon is so widespread that now any crypto service has a warning contract analysis system.
Zero sell orders (Sell orders disabled)
Go to Dextools to check if the token has sell orders. If there are no sell orders, the contract contains a honeypot, which blocks sell orders. This is a typical scam that should be avoided. Poocoin prevents you from buying tokens that block selling in the contract. I prefer to buy on Poocoin over Pancackeswap, which does not disable buying on these types of tokens.
A liquidity pool is a repository of funds in a smart contract. They enable various functions, such as trading or lending; they are the backbone of many decentralized exchanges.
How do we check to see if the liquidity pool is locked?
Enter the contract number in BSCHECK in the LP INFO section. The analysis tool will tell you whether the liquidity is locked or not. A red screen will warn you if it is not locked. Poocoin also warns you if liquidity is not locked.
UNycript can also check whether a liquidity pool has been locked. It also provides an additional critical piece of information. It tells how long a liquidity pool has been locked. This is crucial because the team cannot drain a locked liquidity pool and run off with the loot (rug pull).
Finally, I also recommend looking at Token Sniffer, which provides many valuable details about the contract.
There are other ways to determine what other investors think of a given crypto project. If the token is a scam, any attempt to report it is censored on the project’s official channels (e.g., Discord and Telegram). So one must go and do these checks where scammers have no power. This is probably the best way to detect a crypto scam.
Let’s look at external platforms that can give interesting information.
On bscscan each project has a comments section. Users can use this area to report scams.
On Twitter, only authors can delete their own tweets. So if there is a crypto scam, it is easy to spot the whistleblower’s tweets.
Coinmarketcap also offers a social platform for making comments on projects. These comments can be used to gather information about the project you want to invest in.
Crypto scam database
Spywolf is a website that analyzes the contracts of various tokens. The goal of this project is to create an up-to-date database of potential scams to alert investors: SPYWOLF
You can search the website for the project you would like to invest in. If you find it on this website, you need to be careful because it is highly likely to be a scam. Finding connections between wallets
Finding connections among wallets
Bubblemaps allows you to find the connection between wallets. This way, you can find a group of connected wallets holding large portions of the token. This is very useful for detecting possible scams. However, these tokens must have had contacts to be registered and connected.
Unfortunately, this tool does not work for finding hidden wallets that are typically created at the beginning of the contract and have no contact with each other. The problem with Bubblemps is that it only tracks transactions between wallets. Also, it only works on bscsacn. It does not work on etherscan.
The features of Bubblemaps are:
- Each bubble represents a single wallet
- Only the top 150 wallets are loaded
- A bubble’s size is proportionate to its share of token holdings
- Two bubbles are connected if there was at least one historical transaction between the corresponding wallets in BNB.
The marketing wallet is critical to know two things:
- Whether the project has a budget in place
- Whether the marketing wallet has been drained after the presale (typical of crypto scams).
The costs of building a crypto project are high, and if you start without a budget, the chances of being down. If the project does not have a budget available, it should ring a bell. If there is no money, it could be because it was drained after the presale. Anyway, a project without a budget is doomed to fail.
Just click on the the address and you are redirected to the marketing wallet page.
Post-presale sales of a crypto scam
A team composed of foxy people can create hidden wallets not to alarm the automatic tools that analyze the status of contracts.
For example, BSCHECK notices nothing unusual about this contract. It identifies five large wallets that hold normal percentages. The largest one holds 2%. These are fairly normal figures.
Yet the contract owners covertly hold many more wallets. About 20% of the supply is in their hands.
How to detect hidden wallets of owners within bscscan
The average life of a crypto scam
A scam has a brief average lifespan. It can last a month at most but generally lasts a fortnight. The whole point of a scam is to spend little to get a significant gain from hype.
Generally, the hype is achieved by presale on Pinksale and getting indexed on Coinmarketcap (upon payment to the website operators). These two actions bring a large flow of investors who are mercilessly scammed.
This is why I prefer to wait at least 15 days to invest in new projects.
The seriousness of the team is the most crucial element. Nobody wants to fall for a crypto scam. Fortunately, small projects allow all investors to connect with the founders. It is essential to ask the founders questions, but you must assess responsiveness instead of evaluating their answers, especially after the presale. If the response rate drops dramatically, you may be in the presence of a scam.
Did the team post their faces on the web page? It is important that the team’s real names and faces are shown. Also, check if there are any social links to LinkedIn or Twitter. This information is important to verify the seriousness of the team.
Minimum Viable Product (MVP) to avoid crypto scam
Verify the existence of a minimum viable product. The MVP is a product, usually, in alpha version, that is already available to the public but is very limited. Such a product demonstrates the team’s capabilities and gives an idea of what the finished product will look like.
Check to see if the team has already developed an MVP. If so, the project could have a long life.
Ask the team if they have a presence on Github. If so, it means there are probably developers on the team.
Crypto scams are constantly evolving. To be a small-cap investor, you must continually be up-to-date on the latest scammers. You don’t have to read the Financial Times, but Crypto Garage, which gives you new information every month on how to fight scams and make profits in the World Wild Web.
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