Darius Devėnas, DappRadar
Translation: Felix
The blockchain industry is filled with promises of quick and easy money. It is crucial to identify which projects are safe and which ones are destined to fail in three months. This article presents eight methods to help traders avoid effective scams.
1. Start with the Basics
To verify the legitimacy of a token, start with the easiest accessible methods. For example, use Google search and Twitter to research the token and its team, check for any danger or warning signals, and look for reliable sources such as official websites, news articles, and verified social media accounts.
Check for Social Media Danger Signals
Verified Twitter accounts (X) can usually help prove the legitimacy of a project. Additionally, participating in discussions about the token can provide insights into the community’s viewpoints and opinions.
Be cautious of projects with a large number of followers but low engagement on social media. Automatic comments from fake accounts should also be considered a danger signal. If all the comments are “This is a great project” and “Moon is coming,” be cautious.
Check Token Addresses in Google Search
If a clear homepage, whitepaper, or obvious token use cannot be found through an internet search, it is likely a scam. When searching for token addresses, it should be easy to find links to blockchain explorers, official websites, and whitepapers. If they are not available, consider it a danger signal.
Furthermore, be aware that Google ads are often a free zone for scams. Never click on the ads at the top of Google search results. Make sure to visit the official website and avoid clicking on wallet drainers or other hacker software.
2. Verify Code on Etherscan
Access the blockchain explorer of the chosen chain and check if the source code has been verified. For example, on the Ethereum blockchain explorer Etherscan, it should look like the image below. If the code has not been verified, it should be a clear warning signal. If the code is not verified, you might have encountered a scam.
Why don’t scammers directly verify their code?
Because once the source code of a contract is made public, everyone can know the intentions behind the contract. It could be a ridiculous token system or a way for developers to steal all your tokens. But does this mean every unverified contract is a scam? Not necessarily, but it is a very serious danger signal.
3. Check the Comments Section on Etherscan
This part is straightforward, as most blockchain explorers usually have a comments section. Most of the time, there are no comments, but if a project is a scam, you might find a group of angry individuals in the comments section. So be sure to click and check. If someone says it’s a scam, there is a 99% chance it is a scam. If you have been a victim of the project, please leave a comment as well.
4. Check DappRadar’s Blacklist
You can compare the token’s address with the token blacklist compiled by DappRadar on Github. If the token address appears on the list, it is a scam.
5. Check Token Details in Token Indexes
If you cannot find the token on CoinGecko or DappRadar’s token index (or similar token price trackers), it is likely a scam. If you see a warning like the image below, proceed with caution.
All legitimate tokens share their information with token index websites for verification. However, platforms like CoinMarketCap and Coingecko have specific requirements. Therefore, not all tokens, whether legitimate or not, will automatically be listed on these token index platforms.
6. Check How Many Exchanges Have Listed the Token
If a token is only traded on a few decentralized exchanges (DEX), it might be a scam. Listing on centralized exchanges requires KYC and additional trust, and the reputation of a token is better if it is listed on larger exchanges.
However, tokens listed only on DEXs are not necessarily scams. Some projects do not require high trading volumes, and some projects cater only to Web3 users rather than token traders.
Nevertheless, tokens listed only on DEXs are a riskier investment, and you are more likely to encounter scams. The image below on the left is a token used only on DEXs, while the one on the right is a token that can be used on multiple CEXs.
7. Check the Liquidity in the Token Balance Pool
Before investing in a token, it may be necessary to check the availability of overall demand and liquidity. Checking the liquidity of a token on platforms like Uniswap V2 or other DEXs is straightforward.
Liquidity refers to the amount of cryptocurrency or token locked in a smart contract, allowing users to buy and sell assets through (decentralized) exchanges. If the liquidity is below $100,000 or rapidly decreasing, you might have encountered a scam.
When using DEXs, make sure to check basic other on-chain activities, including:
– Trading volume
– Number of transactions
– Number of independent active wallets interacting with the smart contract – the number of users connecting to the DEX using Web3 wallets.
If any of these appear unusual, conduct further investigation.
8. Use Third-Party Analysis Tools
Here are some token analysis tools:
– Smell Test: Automatically audits tokens. The lower the score out of 100, the more likely it is a scam.
– Honeypot: A honeypot is a smart contract intentionally inserted with obvious programming flaws. When attackers exploit the flaw, another hidden code is activated to counterattack the attacker. Honeypots should be avoided, whether or not you intend to be a crypto hacker.
– DEXtools: Records real-time token prices and helps you assess the token’s true value in real-time.
Scammers exist both in the blockchain and the real world. By following these suggestions, you should be able to avoid fake tokens that aim to deceive for financial gain.
Tags:
Etherscan
WEB3
Token
Scam
Source: https://www.panewslab.com/zh/articledetails/i4px70q4.html
Note: The opinions expressed in this article represent the views of the author and do not constitute investment advice.
Original article link: https://www.bitpush.news/articles/6757569
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