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The earth of cryptocurrency, DeFi, and decentralized exchanges (DEX) are unfortunately riddled with scams and tactics to swindle traders and investors out of their money.

Commonly these scams are referred to equallyHoneypots andRugpulls.

The vast majority of these scams happen on either the Ethereum (Uniswap or SushiSwap) or the Binance Smart Chain (PancakeSwap).

In this article we'll have a look at how these scams work and some tactics you lot tin employ to avert them.

Our master goal with this content is to help our community and ListingSpy users to avoid losing money. Education is a powerful tool, so permit's become into information technology and run across how to avert scams!

Table of contents

• How the Scams Work
  • Rugpulls
  • Honeypots
• What You Tin can Do to Try and Avoid Scams
  • Larn TO Use THE TOOLS
  • Spotter the Transactions
• Exercise YOUR Own DUE DILIGENCE / Research (aka DD / DYOR)
  • 1. Scrutinize Their Website:
  • ii. Check Their Social Media
  • 3. Investigate Their Followers on Telegram and Twitter
  • 4. Large Wallet Holders:
  • 5. Mint Function
• Slow RugPull
• Use ListingSpy'south New 'Depression Liquidity' Filter
• NEW! Low Liquidity Filter
• Contract Check Filter (coming shortly!)
• Wrap Up

How the Scams Work

Rugpulls

When you buy a money, it is normally attached to a Liquidity Pool.

A liquidity pool is a collection of funds which are locked in the contract and provide a "pool" for you lot to purchase and sell coins from. Rather than waiting for someone to come up along to lucifer your buying or selling, the pools are used by the automatic market makers to allow fast and efficient trading.

What the scammers do is that they launch a new money, attach a liquidity pool to it and wait for people to start buying coins. Once enough people have bought the coin, the scammer will pull the liquidity puddle, run off with the money and go out yous with a worthless coin.

You won't observe out until it'southward too belatedly. The carpet has been pulled.

Honeypots

Are often less obvious to the untrained eye and therefore more difficult to detect, even for experienced crypto traders.

Experienced traders routinely autumn victim to honeypots considering they see a money pumping and jump in without verifying everything first.

How do they work?

The scammers insert a piece of lawmaking into the contract which allows only their own wallets to withdraw from the money/contract.

They launch the coin and people start buying. You see the coin pumping and think wow, this is amazing. It's just going up and upwards. There's little or no ruby-red candles on the chart. You lot volition likely stay for a while until you think information technology'due south enough and try to cash out. And that's when yous notice that you can't, because the contract says nobody except specific wallets can cash out.

Your money is stuck forever and in that location is nothing you can do about information technology. The scammer can withdraw any fourth dimension.

Notation – some of these scams go on for days or weeks and people think they institute a real gem of a coin that is going to the moon and volition continue buying.

What You Can Practise to Effort and Avert Scams

Learn TO Apply THE TOOLS

Across due diligence, at that place are tools to assistance you observe carmine flags and avoid common scams.

Etherscan and BscScan are two tools you can use to help you fight back against the scammers.

Hither's how they can be useful:

First, find the Token ID for your money and enter it on the relevant blockchain scanner (BscScan/Etherscan).

On the next folio, go to "Token Tracker". You volition see a tab that says "Holders". There, you can run into all the wallets holding tokens and the liquidity pools.

Token Sniffer

Another great resource isToken Sniffer. Enter the Token ID on the elevation right and look for the results of the "Automated Contract Inspect". If there are any alerts, stay away from the project.

The "No prior similar token contracts" is sometimes a false flag alert, because many projects use contract templates these days, and unique contract simply ways it was written without using a template.

These custom contracts have additional risk of exploits though, because they were not thoroughly tested and can take unknown vulnerabilities.

Watch the Transactions

You can monitor transactions using Etherscan/BscScan, or tin go to websites likePooCoinorDexTools, again enter the Token contract accost, and examine the transaction list.

If you detect no wallets selling or simply one or two wallets doing all the selling, stay away from it. It's almost likely a honeypot. If many wallets are selling, it'southward probably safe and non a honeypot.

DO YOUR Own DUE DILIGENCE / Enquiry (aka DD / DYOR)

One of the all-time things you tin can exercise to avoid scams is to exercise proper due diligence.

What does that hateful? It means looking at who created the token, inspecting the website, checking out the code, learning about the team, and so on.

It basically means do your inquiry almost the project before aping in.

This is what you should watch out for, some of the crimson flags are:

1. Scrutinize Their Website:

This should exist fairly piece of cake, if the website looks rushed and the development is subpar this is a red flag!

One pull a fast one on is to check when the domain was registered for a website by heading over to whois.domaintools.com and type the domain name in.

If the domain was registered inside 24 hours or less of the project launch y'all tin be fairly sure it's scam.

Scam projects often pop up like mushrooms, and more often than not within a mean solar day they've launched the following:

• A website
• Forked (copied) script of yield farm, NFT marketplace, etc.
• Thousands of followers on social media
• An airdrop/giveaway with a suspicious corporeality of followers

Skilful projects will hire professional social media managers, writers, and other content creators.

The branding will exist standardized and highly-seasoned.

The text will be clear and concise.

Generally, there will be links to skilful content, documentation, and informational manufactures most the projects besides.

Scam projects, on the other manus, will often neglect to bank check any of these things.

They will accept:

• Stolen and poor quality images
• Grammatical errors and unappealing "spammy messages" (Like and tag two friends, join our TG, drop your ETH address below! )
• No links to relevant information about their project, so on.

iii. Investigate Their Followers on Telegram and Twitter

Spotting bots and fake accounts is pretty piece of cake.

The accounts are more often than not not very one-time, created within a week or maybe terminal few months.

They will have ridiculous handle names like "Ray12321dadafew"

• They will generally have the aforementioned name equally their username
• No information or bio
• Fake photos, usually of women.
• Their tweets don't make sense, usually lots of tagging and re-tweeting.

All these same things generally apply to Telegram accounts besides

• Lots of numbers and random crap in their usernames
• Fake photos, usually of women.
• Usernames that don't brand sense

four. Large Wallet Holders:

Stay away from tokens where one or a few wallets agree almost of the tokens.

1. Unlocked liquidity pools. Even if they have liquidity pools locked, they could unlock them if the contract allows them to. Yous could dig deeper into the contracts but that unremarkably requires coding knowledge.
2. No audit. If token contracts are non audited by a reputable company, the chance of a rugpull or honeypot is almost always there. Be careful!

5. Mint Role

A mint part allows the contract possessor to create more tokens whenever they desire!

Sometimes, the possessor volition mint himself a agglomeration of tokens then sell them, tanking the cost of the token and allowing him to run off with all the coin.

Are mint functions always a bad thing?

No, not always, there are some utilise cases where they make sense and are needed.

A mint function is required, specially, when tokens are minted every block for rewards — think of yield farms on DEXs like Pancakeswap and Uniswap, rewards have to exist minted from the office.

How to be safe when there is a mint role?

Always make sure in that location is a demand for it.

Yield Farms and similar projects will have a need for a mint office, considering farming requires this blazon of part in order to event rewards.

Notation- if you're trading a token that is supposed to have a maximum supply but it has a "mint function" then information technology should raise alarm bells!

Tedious RugPull

These are much harder to discover!

Typically the scammers create a perfectly legitimate looking money with no other warning signs, merely they distribute a large corporeality of coins beyond hundreds of wallets only they have access to.

For example, 20% of coins are distributed to 500 wallets of 0.04% each. As people start buying the coin and the toll increases, they will slowly start dumping (selling) their coins in order to generate money. People volition keep buying and they will go on dumping until all their wallets are empty.

These are super hard to find, but the nigh reliable mode to notice them is to use Etherscan or BscScan to cheque for many wallets with the aforementioned % corporeality of tokens.

Use ListingSpy'south New 'Low Liquidity' Filter

We continue to improve Scam Filter to make things even meliorate for our users. So far it'south working well and is removing a huge corporeality of scam tokens.

These tokens are removed based upon low trading volume, transaction count, holders, and liquidity. This protects you from 90% of scams already!

The scam filter notwithstanding is Not perfect and many scams may still announced, so nosotros always suggest yous do your own research earlier because any token.

NEW! Low Liquidity Filter

With the help of this filter you can quickly reduce the number of new tokens on PancakeSwap for yous to clarify from ~two,600 to but a few hundred.
All of the $0 liquidity (and other low liquidity) tokens will not be displayed!

Contract Cheque Filter (coming shortly!)

Side by side level improvement to the filter, where nosotros scan the token contracts for various scammer tricks, is under testing now and will be released this month.

Wrap Up

The crypto world in a lot of means is like the wild westward; full of potential and amazing rewards simply also somewhat lawless and riddled with scammers and potential threats.

Most new coins should be treated equally heir-apparent beware!

Although with some prudent due diligence and utilise of tools like ListingSpy, Token Sniffer and Etherscan/BscScan, you'll be well on your way to avoid nearly of the scams out at that place.

If yous are withal using a Free version of ListingSpy, practice consider upgrading to Standard, Premium or Exclusive to become access to more powerful features.

Don't forget to check usa out on Twitter for updates and promotions.

Feel costless to join our community on Telegram to chat with us or other community members nearly hidden gem tokens.

Best of luck Spys!

Part two of this article is bachelor!

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Source: https://listingspy.net/blog/en/how-to-avoid-honeypots-rug-pulls-and-other-scams-1