There is no question that the world of cryptocurrencies can be extremely profitable and exciting. Many are attracted to crypto after hearing incredible stories of a mind-boggling investment that turned your average investor into a wealthy and financially secure individual that rides off into the sunset, never having to work another 9-to-5 for the rest of their lives. It is an inspiring and motivating tale for anyone to hear as they aspire to follow in those footsteps.
The issue is that the attention around these stories overshadow the cold truth of what can happen when newer, uneducated, investors and speculators decide to get involved in going after tokens based solely on emotions and greed, without doing their due diligence. In crypto, succumbing to your emotions is the kiss of death.
Without a sturdy foundation of education and experience, one can lose everything before they can even figure out just how bad the current situation already is. The Uniswap Protocol is a Decentralized Exchange (DEX) that has gained immense popularity in the past year.
A lot of the latest and most coveted cryptocurrencies are listed on the Uniswap DEX, before anywhere else – allowing speculators and traders to “buy low and sell high” for a profit, before most others. Some scammers will go to great lengths to part careless people from their money.
Fake Discord and Telegram channels, fake Twitter and Instagram accounts, paying for followers, & creating accounts to retweet the false news and sentiments, are just a few ways they attempt to appear legitimate. As the impressions on these tweets (or posts) increase, the hype begins to build.
It can induce a feeling known as “FOMO” or a “Fear Of Missing Out” as people rush to acquire the latest token. It may feel like it is impossible to ignore for some, but this is a dangerous game to play – and there are NO prisoners. Now, more people rush in to place their buy orders, demand & volume surge in lockstep, along with the price of the asset.
The feeling of greed and excitement often leads to a very costly lesson for those that cannot control their emotions while exercising little to no research, with even less risk-management. The Decentralized Finance (De-Fi) narrative has fueled these scams to heights never seen before in the crypto-space, or any other space, for that matter.
It seems like there is a shiny, new De-Fi project listed every day. Yield-farming has turned that trend into an untamable beast when it comes to the minefield of dangers that await novices in the darkest depths of the crypto universe.
How Scammers Operate on Uniswap
Recently, Tornado.Cash, Curve Finance, & 1inchExchange, all reported fake tokens in circulation BEFORE they were ever listed. The scammers look to find a coin that is ABOUT to be listed. They then create a listing for the token on Uniswap BEFORE it is listed anywhere.
Using a similar ticker as the real asset, they fool victims into thinking they are buying authentic cryptocurrencies. After some time, the proceeds from the purchases of the “assets” are “pulled” without a moment’s notice. Sadly, these victims become bagholders of a worthless token, now, and in most cases – forever.
Their investment capital has just evaporated within seconds, with no recourse. Let this be a warning the next time you think about jumping into a new coin on a whim, without the proper research needed to ensure you are not lighting your money on fire.
Liquidity-Pulls
“Liquidity-pulls” or “rug-pulls” on the Uniswap DEX are scams where the Ethereum (ETH) taken from the purchases of the newly listed coin suddenly disappears, leaving no way for the victims to sell the token they just bought to recoup their initial investment capital back.
They are then stuck with a worthless coin that can’t be returned – with no possibilities of any refund. That’s the danger in blindly committing your precious Ethereum to the newest hyped coin of the day (that is frequently-advertised as “the next 100x gem”). If this is a marketing slogan or selling point of a project that you’re considering, my advice is to RUN, as far away from that “project” as humanly possible, ASAP.
Any project that has any real value and potential will NOT use that as a selling point. Only the ones that are trying to blind you with greed and falsities will attempt such a stunt. They are over-compensating for a-lack-of tangible benefits and a real use-case, so pay attention, and do NOT be fooled.
Ether Shrimp Farm
Let’s take a look at one of the scams that took place before the De-Fi hype took off. Ether Shrimp Farm was one of the first yield-farming scams that cost many speculators everything that they had invested.
The users’ objective was to hatch and sell as many shrimp as possible, with the endgame being that they would get to sell those eggs for ETH. In this case, Ether Shrimp Farm’s contract address was displayed on both the Ether Shrimp homepage and DappRadar.
Using DappRadar.com, we can immediately tell that something is off. The metrics indicate that this would be a very foolish investment to make. Exercising judgment to make decisions can be confusing when you’re new to the game, but at the very least, spend the time needed to confirm that there are NO RED FLAGS present BEFORE investing in ANY token. Let’s take a look at a more recent coin to formulate a strategy.
How to Use Trusted Sources to Protect Yourself
New World Crypto (NWC) was another scam that cost many speculators dearly. Pretend that you just heard that this was the newest and the most hyped-up token being talked about – below are step-by-step instructions on what you should do BEFORE buying ANY bags of crypto.
(Although this article will be using tokens that were listed on Uniswap as examples, these safety precautions can be employed for any coin, on any exchange.)
Usually, a search will result in the contract address being displayed. You can see Trustswap has it displayed next to “Contract”.
Step 1:
Using CoinGecko, CoinMarketCap, DappRadar, or any other TRUSTED source, locate and copy the token’s contract address. It is possible that the contract address (or the token, itself) might not be listed if the liquidity was pulled a while ago.
If this is the case, you must rely on search engines like Google, Bing, DuckDuckGo, etc. NWC failed to bring up any search results on CoinGecko, CMC, and DappRadar.
Do a search using the keywords “NWC (token name) + token tracker” to see what you can find.
Step 2:
Click the Etherscan link, copy the address, & paste the contract address on any search engine to look for any hits that can be used to check vital analytics needed to make an informed decision.
The contract address is shown above, you can see the address next to “Contract”.
Step 3:
Click the link that displays the contract address you copied earlier. Here, we have found a Uniswap link.
Step 4:
Take a look at the metrics. Does something seem off?
- Total Liquidity
- Volume (24hrs) (Untracked)
- Transactions (24hrs)
Step 5:
Take a look at the transactions. Does something seem off?
- Was the last transaction recent?
- When was the liquidity added?
- When was the liquidity removed?
Analyzing the Contract Address for Red Flags
We can immediately see there are nothing but red flags, EVERYWHERE. The red flags being: the non-existent liquidity, volume, and transactions.
Not to mention, the liquidity added was also removed, on the SAME DAY. We can also see that the most recent transaction was made 99 days ago, with a total of 100.27199 ETH removed. Pretty fishy, avoid AT ALL COSTS.
You can filter liquidity adds/removals by clicking “Adds” or “Removes”, located below “Transactions”.
Liquidity added 101 days ago.
Liquidity removed 101 days ago.
Analyzing Social Media Accounts & Sentiment
To take extra precautions, go to their social media accounts and confirm that there is a lot of RECENT activity and participation from excited (and not hostile) community members. It will add an extra layer of security between you and your funds. Spending the time to find complaints will accelerate your process of finding potential red flags.
Look at all the complaints and concerned comments you can find and get to the bottom of it. Get to the critical points, first. It will save you time and allow you to move on to the next potential investment. Not to mention saving you money, anguish, and stress.
Some complaints may be over-blown while others may be understated, but you must know what the majority (or at least a good percentage of the community) is bringing to light to expand on it. You MUST know BOTH sides of the story, the bullish AND BEARISH.
Doing just a few minutes of research can save you from being parted with your hard-earned capital, but a few hours (at the minimum) is HIGHLY-recommended. Searching for the token on YouTube or other platforms can yield good results IF you can find a non-biased and neutral reviewer. It can be tricky to distinguish for the newer participants of crypto.
Some reviewers will accept payment just to get paid and give dishonest, positive reviews, just for the quick cash. These individuals will have no problems going to sleep at night, knowing you lost everything – if it means that they get a fat check for falsely promoting the token. With enough time, you will easily be able to see the red flags in any given situation.
If unsure, search for them on search engines and forums. See what you can find and NEVER assume someone has your best interest at heart. The keys to staying safe: NEVER stop letting your guard down, ALWAYS DYOR (Do Your Own Research), and NEVER stop learning. Staying up-to-date with the current events will also guide you in knowing what the current trend is, what to expect, and ultimately, how to spot and deal with them.
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Early access to the Alpha release will be available in early October. With Swapolio, ANY coin that becomes listed on the app has been FULLY-VERIFIED by the team for safety. They are guaranteed to be a legitimate token, worthy of your time and ETH.
Cryptocurrencies have a VERY steep learning curve, even for those that consider themselves to be tech-savvy. Take the time to do your homework. Your wallet will thank you for it – in spades.
Join us on Telegram, where the team is always receptive to ideas and questions. Follow us on Twitter to make sure you’re on top of the latest updates and announcements.Stay safe out there and follow us on social media for updates as we near the Alpha release.