While crypto scams come in different forms, a common one is creating a scam coin or token, which is easier than you might think! The crypto market is not regulated, so it is a dream come true for scammers. Plenty of coins and tokens make it to the crypto market each month, and indeed some of them are illegitimate.
You would be surprised to learn how many people invest their money blindly into a coin or token without knowing what they represent. Scammers prey on ignorant, naive, simple-minded, impulsive, and lazy people who neglect due diligence and skip the research phase. Exercise extra caution in this space as there is no one out there who can protect you. With crypto, scamming has never been easier!
How to spot scam coins?
No one can guarantee with certainty the authenticity of newly released coins or tokens. Research is the most valuable tool here at your disposal to protect you from fake crypto projects or fraudulent initial coin offerings (ICOs). Here are a few things you can look into to minimize the risk of landing on a crypto scam:
Since the whitepaper is fundamental to every crypto project and its ICO, you may get a lot of insights just from having a glance at this document. The whitepaper contains essential information about the project, such as tokes allocation, token supply, road map, partners, and more. Avoid projects with absent or suspicious, inconsistent, unclear, and shallow whitepaper at all costs.
Centralized exchange listing
It is easy for scammers to list their coins or token on decentralized exchanges, such as Pancake and Uniswap. Legitimate and unique projects with strong fundamentals and utility in real life have no trouble getting listed on one of the most popular centralized exchanges such as Binance, Coinbase, Kucoin, Gemini, or Gate.io.
Suggested reading: difference between decentralized and centralized crypto exchanges.
New crypto projects usually go through a regress vetting process by the top centralized exchanges before approval. However, these exchanges sometimes bow to market pressure and the hype surrounding a project, and therefore, they may allow the listing without further considerations. Also, less popular exchanges usually do not vet new projects and get listed quite easily. They prioritize quantity over quality!
So always check where the new coin or token is listed first. If it is not listed on a well-known exchange, you should be skeptical.
Sound crypto projects have an active presence on most social platforms. Check the community surrounding the project through its follower base on Twitter and Telegram. See if the team responds to people’s questions and addresses their concerns on these popular platforms. Media presence such as interviews is a bonus. Having a fancy website and social accounts is not enough as anyone can easily make them and maintain a presence. Therefore, you should look further into the people behind the project.
Legitimate projects are transparent with both product and developer team members. Scammers may never disclose their real identities – instead, you may come across some fake and even impostor images. After confirming the identity, check the team qualification and history.
Not all scammers hide their identity, but they hide their project behind a pyramid or Ponzi scheme. The scammer slowly dumps the tokens on newcomers until they fill their bags and leave the project. The project will eventually collapse when investors finally figure it was a scam, usually too late! That is why you should not trust a project even if the team members make themselves know.
Scammy crypto projects over promise and under deliver and invest heavily into marketing. They focus their marketing campaign on returns rather than technology and utility. Their marketing campaign can even include a budget to buy influencers in the space. So be careful whom you follow on youtube and other social media platforms!
Furthermore, get rich quick, and a trip to the moon are common slogans among scam coins and tokens. This type of marketing should always raise a red flag. Since people buy into this rhetoric, the coin or token does land on the moon, but soon after, it lands back on earth shattered.
Solid projects focus on the technology and utility of the project in their marketing, and they merely discuss prices and returns. If the project is promising and has a lot of hype around it, and eventually makes it to the market top list, then yes, you can get rich and but maybe not so quick. It depends from here on how much you invest and how long you hold your position.
There is one thing you need to remember. You could do all the research in the world and pick a legitimate project. However, that does not guarantee success. After all, crypto projects are businesses, and they, too, are prone to failure. It is estimated that 80 % of startups fail in their first five years of operations. Cryptocurrencies projects are no different.
Your token or coin pick is more likely to eventually land on the moon when you find an answer to the following question:
What utility does it offer to the world or what problem does it solve?
Lastly, we remind you to stay cautious and invest wisely! Invest your time in research before investing your hard-earned money into new crypto projects.