The rise of new decentralized exchanges (DEXes) like Uniswap has brought a range of innovative novelties, including the liberty for new listings. Now, users can list any new token they want free of charge, without having to meet the requirements imposed by central authorities. However, the free market has shown that this liberty does not come without a price.
Historically, a team of blockchain developers had to meet certain requirements before being able to list their cryptocurrency on an exchange. These requirements would be different based on the exchange in question, but the fact remains that most required almost impossible prerequisites. For example, leading trading platforms would often require the team to have a large community, with at least 10,000 members. In other cases, the team would be forced to pay thousands of dollars for a so-called ‘listing fee.’
The situation drastically changed with the rise of decentralized exchanges. As De-Fi grew, Uniswap quickly became the number one spot where users could find new token listings. Teams who did not previously have the funds required to list could instantly expose their project to the crypto market.
Communities were enthralled by this brand new environment, given that they now had access to a plethora of new and promising projects. But as we previously noted, this did not come without a price.
Plagued by Fake Tokens, Uniswap Introduced Token Lists
Suddenly, everyone realized that the market is in a new environment that is faster than ever before. Tokens were listed frequently and often rewarded early investors with promising returns. This created a positive feedback loop where higher interest led to even crazier returns.
Such an environment allowed everyone to prosper, truly everyone. Sadly, this included scammers as well. Malicious actors soon realized that they could list fake tokens or scam projects that could provide them with quick cash.
The first wave of scams started with users listing tokens that impersonated other famous projects, or those that were only about to launch. On Uniswap, users were the ones to list tokens, not the DEX. Therefore, the investors themselves would have to find the token they are interested in on their own. This led to a high number of cases where the investor would select the wrong token or input a wrong token contract address.
In August, the Uniswap team finally had enough and decided to introduce counter-measures. The DEX created an entirely new feature, called token lists, that would completely remove fake tokens. This feature represented a curated and community-approved list of all the tokens in the cryptocurrency market. Investors could access a preselected list of the top 100 De-Fi tokens on CoinGecko for example. Similarly, they could also create their customized lists, which they could share with other users.
An example of token lists on Uniswap
Presales – a New Method for Scamming Investors
However, scammers quickly thought of new ideas to counteract the new features. Instead of listing fake tokens, they decided to create fake projects instead. Practically, the market reached a point where Investors were naive enough to believe that they could quickly profit with anonymous and unaudited projects.
Malicious actors used this by massively producing random De-Fi projects that they would ‘rug-pull’ instantly after listing. As soon as users were to provide liquidity, the developers would steal the money which led to the token dropping to 0.
Another useful tactic was to hold public presales before even launching the project. In this case, the developers (devs) would collect on average, between 10 to 30 ETH, and escape with the stolen assets, as soon as the presale was completed.
Modern technology isn’t yet capable of preventing investors from losing their capital investment to these pitfalls. The community actively encourages its less fortunate members to stop investing in anonymous projects while doing their own research. However, this has not prevented hundreds of victims from being scammed on almost a daily level.
We can only hope to resolve these issues as they become more prevalent by being aware of the recent trends to predict the ones that have yet to surface.