Crypto and blockchain are arguably one of the bigger revolutions of the 21st century. But where there is opportunity, there is also risk.
Everyone wants to find new, still undiscovered projects that will eventually moon, but sometimes, such coins unfortunately turn out to be scams, rugs, or honeypots.
In this guide, you will learn a few tips and tricks you can use to avoid scams. However, keep in mind that even with our tips, investing is never risk free, and you should always DO YOUR OWN RESEARCH on each and every coin.
1. Perform a Contract Scan
First things first, you should scan the contract of the token you want to invest in. This should, in most cases, recognize serious rugpulls straight away, although some scams are harder to notice and might sneak past the scanner.
We recommend using a tool such as https://www.bscheck.eu/ . It will look for things like:
Top Token holders – do a few wallets own a big chunk of the supply?
Liquidity (LP) Information – Is the liquidity locked? Does the dev still own the LP tokens, thus being able to pull the liquidity (rug pull)?
Contract Owner – Is the contract renounced? If not, the owner can change the contract at any time, which is problematic with very new tokens without much background. However, this is usually not an issue with serious projects/tokens with registered companies and fully doxed owners.
Honeypot Code – Meaning he contract only allows buys, but not sells.
Bscscan.eu offers a few different ratings.
A red SCAM rating usually means the contract is a scam.
A yellow WARNING rating might just mean the contract you are scanning is not renounced because it is a long-term project and the team needs to retain, but is not a scam.
However, in some cases it also might mean that the contract is a scam but is successful at hiding some of the malicious features.
A green SEEMS SAFE rating is fairly self-explanatory. The vast majority of these coins are not scams, but this is not a 100% guarantee.
2. Analyze the Website and Social Media
You can find a project’s social media / website on their listing on CoinMoonHunt.
Important: Check that the token address listed on the website and social media (Telegram, Twitter etc.) matches the address in the listing.
A well designed, complex website with a very detailed Whitepaper is a good sign, whereas a simple one page website with little info might be a red flag.
Next, thoroughly check Twitter, Telegram and Discord. Does the telegram have a lot of members? If so, are they active, real users? Out of the member total, how many are online currently, and how many are writing an interacting?
A locked Telegram chat where only the developer can write might be a red flag as well (this does not refer to announcement channels).
3. Doxxed Devs & Registered Company
Serious projects will usually have a fully doxed core team.
This means the team will record videos, post their LinkedIn profiles, post pictures etc. Additionally, larger projects will also have a registered company, usually an Ltd.
It is also important to make sure that the doxed profiles (Linkedin etc.) are not fake, or in other words, that the token developers are not impersonating other people.
4. Security Audits
Another plus for a coin is if they have completed a security audit. Commpanies such as Certik or Techrate will look at the contract and look for flaws/exploits.
If a token is claiming it has been audited, take a good look at the audit pdf for any possible issues with the contract.
After that, go to the auditor website (the company that completed the audit) and check if they published the token to their list of completed audits, as sometimes scammers will create fake audit PDFs for their token without completing any audit.
5. CoinMarketCap / Exchange Listings
Although a CMC or Exchange listing does not guarantee the safety of the token, tokens listed on CMC or a larger exchange are far less likely to be quick rug pulls / scams.
Of course, there is always a chance of a slow rug pull or scam, where devs take profits / dump tokens over a long period of time.
With these tips and information, you will fare much better at avoiding Scams and Rugpulls, hopefully making your trading much more profitable.
However, even if you follow all our tips to the letter, investing is still risky, and you should always do your own research and make your own decision if you wish to invest in a coin.