• Introduction
  • What is cryptocurrency?
  • Rug pulls
  • What is a honeypot crypto scam and how to spot it?
  • Smart Contract Scan
  • Look for the website and whitepaper of project
  • CoinMarketcap and Coingecko listing
  • Security Audits
  • Do Your Own Research (DYOR)

Introduction

Cryptocurrency is an exciting industry to invest and get involved in, though! There are reasons to take care in what projects you invest in, but that doesn’t mean it’s not worthwhile investing or exploring the ever-emerging space. There are a couple of ways to look out for rug pulls and other scams and enjoy the cryptocurrency space without falling prey.

Everyone hopes to find the coming Doge coin that will x100 within a days or month

This article will show you a few hints & hints that you can practice to avoid many scams that happen every day. Even when making use of these tips, investing is now not hazard free - but after studying this, you will spot and keep away from scams a great deal faster.

What is cryptocurrency?

Cryptocurrency is a type of digital currency that generally only exists electronically. There is no physical coin or bill unless you use a service that allows you to cash in cryptocurrency for a physical token. You usually exchange cryptocurrency with someone online, with your phone or computer, without using an intermediary like a bank. Bitcoin and Ether are well-known cryptocurrencies, but there are many different cryptocurrency brands, and new ones are continuously being created.

Rug pulls

A rug pull occurs when crypto developers abandon a project but keep the funds raised from investors. Bad actors can list a new token on a decentralized exchange, pair it with a legitimate cryptocurrency, and drum up interest on social media to lure in investors. Once enough money funnels into their token, the developers scratch the project and run with investor funds.

By sticking to centralized cryptocurrency exchanges, which typically have stricter oversight and regulations, you have a better chance of avoiding illegitimate projects.

You can perform a background check on the Presale developers and management team. If the company's ownership is anonymous or has a minimal track record in the crypto space, that should also be a cause of concern.

What is a honeypot crypto scam and how to spot it?

A virtual trap to lure attackers so that you can improve security policies is what honeypot aims for!

What is a crypto honeypot and why is it used?

Smart contracts programs across a decentralized network of nodes can be executed on modern blockchains like Ethereum. Smart contracts are becoming more popular and valuable, making them a more appealing target for attackers. Several smart contracts have been targeted by hackers in recent years.

However, a new trend appears to be gaining traction; namely, attackers are no longer looking for susceptible contracts but are adopting a more proactive strategy. Instead, they aim to trick their victims into falling into traps by sending out contracts that appear to be vulnerable but contain hidden traps. Honeypots are a term used to describe this unique sort of contract. But, what is a honeypot crypto trap?

Honeypots are smart contracts that appear to have a design issue that allows an arbitrary user to drain Ether (Ethereum's native currency) from the contract if the user sends a particular quantity of Ether to the contract beforehand. However, when the user tries to exploit this apparent flaw, a trapdoor opens a second, yet unknown, preventing the ether draining from succeeding. So, what does a honeypot do?

The aim is that the user focuses entirely on the visible weakness and ignores any signs that the contract has a second vulnerability. Honeypot attacks function because people are frequently easily deceived, just as in other sorts of fraud. As a result, people cannot always quantify risk in the face of their avarice and assumptions. So, are honeypots illegal?

How does a honeypot scam work?

In crypto cyber-attacks like honeypots, the user's cash will be imprisoned, and only the honeypot creator (attacker) will be able to recover them. A honeypot usually works in three stages:

Types of honeypots

There are two types of honeypots based on the design and deployment of smart contracts: research and production honeypots. Honeypots for research collect information on attacks and are used to analyze hostile behaviour in the wild.

How to spot a crypto honeypot?

Examining the trade history is one technique to recognize a honeypot crypto fraud. A cryptocurrency should generally allow you to buy and sell it whenever you desire. There will be a lot of buys for the coin in a honeypot scam, but people will have a hard time selling it. This indicates that it is not a legitimate coin, and you should avoid it.

Moreover, the data science approach based on the contract transaction behaviour can be used to classify contracts as honeypots or non-honeypots.

If your coin is listed on the Binance Smart Chain, go to PooCoin, enter the Token ID again and monitor the charts. Stay away if there aren't any wallets selling or if only one or two wallets are selling your chosen coin. Most likely, it's a honeypot. It's not a honeypot if many wallets are selling the chosen coin. Lastly, you should conduct thorough research before parting with your hard-earned cash when purchasing cryptocurrencies.

Smart Contract Scan

Smart contract scanner can help investors in a variety of ways. The characteristics are crucial for what we believe to be the most effective techniques for detecting rugs and scams. Scam contracts can be detected with free tools like http://www.bscheck.eu they look for common scams and issues like:

Token details such as token name, supply, contract address, symbol, and any other information.

  • Liquidity locked/unlocked
  • Renounced/not renounced ownership
  • Mint function detection
  • Dev wallets
  • Buy/Sell Tax Detection
  • Honeypot Detection
  • Token price impact
  • Top 5 wallets
  • All owner authorized functions
  • All suspicious functions
  • BSC KYC information

Furthermore, token pages and risk labels are managed manually, giving our team the authority to rank any smart contract function as good or bad.

Warning: this website help you to determine if a smart contract could be a scam, without 100% guarantee.

We are trying to do our best to detect all the scams but we could not be responsible for a specific malicious one... Always be careful with your money.

Look for the website and whitepaper of project

This is the best way to ensure that the cryptocurrency you are investing in is legitimate. Every token publishes a whitepaper explaining all underlying fundamentals and technologies involved in the design of the block chain backing that token. It can be found on the official website of the block chain developer.

The token name, creator address, contract source code etc are some important details that most genuine tokens publish for transparency. If these are missing then it is something to be careful about.

CoinMarketcap and Coingecko listing

CoinMarketCap and CoinGecko listings can be a decent indicator of legitimacy of a project. CoinMarketCap and CoinGecko have their own listing process and requirements. Often they take a few days or weeks to list tokens. Exchanges have even stricter listing requirements than statistics websites. If a project is listed on a centralized exchange the chances of it being a scam decrease further. The more listings, the more legitimacy a project has. Even though some scams are listed.

You can easily see if a project is listed on CoinMarketCap or CoinGecko on www.coinraaj.com just look for the icons of the two websites.

Security Audits

The Audit firms provide a paid service of checking smart contracts.

Cryptographic tokens represent a set of rules, encoded in a smart contract – the token contract. A token contract is essentially a smart contract that contains a map of account addresses and their balances.

An audit process is an extensive analysis of the code written in the token contract to pick and sort such minor vulnerabilities if any. The ultimate goal of a security audit is to guarantee that the code is free of bugs and behaves as intended, under every given circumstance.

This Security Audit adds a lot of legitimacy to the project, and takes away a lot of scam opportunities via the smart contract.

Do Your Own Research (DYOR)

Avoiding Crypto Scams: How to Spot a Fake Project

Many people fall victim to crypto scams simply because they don’t know how to spot a fake project. Fortunately, several simple strategies can help you identify fakes.

Ask Questions.

Most legitimate crypto start-ups should provide answers to basic questions about their products.

For example, ask about the types of services offered, the amount of funding needed, and what kind of ROI (return on investment) you can expect.

Use Google.

Search the Internet for reviews of the project.
You can find many valuable articles by typing in ‘project name’

Do your Homework.

Find out whether the token has been traded on an exchange. Also, check its market cap. The higher the market cap, the more likely the coin is genuine.

Use Multiple Sources.

It isn’t wise to rely solely on one source of information.
For example, it would not be brilliant to trust only CoinMarketCap when looking at the price of Bitcoin Cash.

Avoid Dodgy Websites.

Be cautious of websites with unprofessional design or content.
There are plenty of shady websites out there that look professional but ultimately serve fraudulent purposes.

Verify Data.

If you see something suspicious, dig deeper. Is there any evidence that the project is actual? Has it ever been hacked or shut down?
Governments don’t regulate cryptocurrencies. That means that you take some risks when investing in them.
However, you can minimize those risks if you know how to spot scammy projects and avoid getting caught up in pump and dumps.
Cryptocurrency is still new, but it’s already changing our lives and you need to be on the alert side of the crowd.
Use these tips to steer clear from crypto scams. But please note, this is not a 100% guarantee against scams.

Invest Wisely and Stay Safe!

- Team www.coinraaj.com