How to Identify Crypto Scams

The digital transformation in recent times has taken the world by a storm. From Fintech innovations to cryptocurrencies, the world is experiencing a one-of-a-kind digital switch. Investing in cryptocurrencies is a new on-the-go trend that we all are intrigued to perform. The fascinating world of blockchains and crypto coins is a call for diving into the depths of future finances. However, with great opportunities come greater risks, and with the increasing cryptocurrency investment, there has been a surge in crypto scams.

Types of Crypto Scams

Before digging deep into the forms, causes, and variants of crypto scams, here are certain examples of crypto scams in recent times. From Ponzi schemes to pump and dump methods, scammers in the previous year stole more than 14 billion USD. One recent fraudulent project named “Squid Game”, inspired by the latest South Korean drama, has dominated global news headlines. In this scheme, scammers pulled out the rug under the investors, once the coin started skyrocketing in two weeks. This is a perfect example of how a rugpull, one of the most common crypto scams, functions.

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Rugpull as the name suggests is taking out the safety carpet underneath your feet and leaving you without any support. With these types of scams, scammers launch a new coin in the market that is trendy and attach a liquidity pool to it. Once the coin starts gaining momentum in the market, they pull out the liquidity pool and run off with the money leaving investors with worthless coins.

Another major scam known as the honey pot scam has deceived investors in the crypto world. In a honeypot, scammers generally insert a piece of regulatory conditions in the contract where money withdrawal of the coin can be done only through specific wallets. The analogy used to describe this scheme is sticking your hand into the honey pot to extract the honey but getting your hand stuck inside the pot.

How To Identify a Scam

While scams and fraud are increasingly holding back traders from investing in cryptocurrencies, there are a number of methods to avoid these Ponzi schemes. Before investing your capital into a crypto coin, you need to understand, research, and gauge the liquidity assets and the progress of the coin. To identify any scams, you need to do in-depth research and extensive material to find reliable sources for these coins. You need to identify certain red flags such as dead coins, large wallet holders, an unlocked liquidity pool, and much more to steer yourself away from these scams.

The next step in identifying a scam is to search through their whitepapers and websites to understand the core purpose of the coin. The token name, creator address, and contract source code are major points to look out for genuine tokens that are published for transparency. Creators’ discrepancy, unlocked URLs, and high return promises are also major red flags of a crypto scam.

Moreover, you also have to find smart contracts and track tokens to understand the pattern of these coins. From Etherscan to Bscscan, you are required to look for red flags before categorizing them as a scam. While a thorough research may take countless hours to perform, projects like RiseUpV2 invest time and effort to identify fraudulent coins for you. 

RiseUpV2 is a decentralized finance token that focuses on making the crypto industry a safer space for investors, while also offering ways of passive income. The Rug Screener, a unique in-built technology developed by RiseUpV2, provides information including smart contacts, token names, total supply, total holders, social media platforms, contract creators, score system, burned tokens, and much more to help you identify scammers and avoid investing in fraudulent schemes.