Crypto fraud is an unfortunate reality of the unregulated DeFi space.
29 Sep 2023, 14:08
Crypto fraud is an unfortunate reality of the unregulated DeFi space. ✍️ Here is a quick checklist of steps you should be taking, as an investor, to ensure you stay safe from these common scams:
1. Classic Rug Pull
➡️ Use a sniper like @MaestroBots that allows you to set up "anti-rug". The bot will sell all your tokens and front run a developer's malicious action.
➡️ Beware of very small or very large liquidity pools with a low amount of buys.
➡️ Make sure the deployer has locked their LP tokens with a reputable 3rd party liquidity locker such as UNCX.
2. Honeypot (Tax Change & Transfer disabled)
➡️ Again, use a sniper like Maestro.
➡️ Use a token scanner like @Token_Sniffer , @TokenPocket_TP , @PIRB_ERC20 , etc. These will help outline potential threats.
➡️ Learn basic Solidity and check if it is possible for the deployer to raise taxes. (Example in our linked article)
➡️ Check if the ownership has been renounced by going to a token's @etherscan page and selecting "Read Contract". (Example in our article)
3. Hidden Mint
➡️ Again, use a sniper.
➡️ Many hidden mint scams employ the use of a proxy smart contract. In the case that the token you are interacting with is not a major protocol or DeFi product, it is normally best practice to stay away from anything that is not immutable. (Example of a token using an OpenZeppelin's Proxy Upgrade Pattern is in our article)
4. Tax Farm
➡️ Detecting this scam normally has a lot to do with feeling out the overall connotation of a token's development team. Here are a few steps a farming team might take to trap money:
i. Immediately lock liquidity and renounce the contract.
ii. Pay for basic marketing at the very beginning (a trending service, socials update, and 1 KOL).
iii. Leave buy/sell taxes high for an extended period of time (usually longer than 5 minutes after launch is a sign).
iv. After initial marketing push, only using Twitter shilling until the token slowly dies.
v. Developer sending extra tokens to the contract for it to sell.
➡️ There is a very popular contract circulating that is meant for farming. It is cheap to deploy, extremely "safe" as far as the previously mentioned rugs, and very trivial to copy/paste and use. The contract is regularly deployed with either pragma solidity 0.8.20 or 0.8.21. At the head of the contract there are a few very distinct lines of code. (See article)
Note: Not every token using this contract fails. Not every person who uses this contract means to farm, but almost every farm uses this contract.
Read the full breakdown of these common scams, solutions, & examples here: 👇https://t.co/jhyYQbmKvz