Honeypot Crypto Scam. There are two methods by which honeypot cryptocurrency scams operate, but the result is always the same: if you fall victim to one of these schemes, you will lose your money. The more widely used term “honeypot cryptocurrency” refers to non-transferable tokens. Transferring tokens to a con artist’s wallet is a more manual approach. In the end, it is impossible to remove the tokens. In this tutorial, Coinindesk overviews the two honeypot cryptocurrency scams and gives tips on being safe and not ending up like one of these statistics. Now, let’s get started.
Understanding Honeypot Crypto Scam
A cryptocurrency honeypot is a fraudulent scheme that lures cryptocurrency users in and eventually causes them to lose priceless tokens like SOL. The scam might go in two ways: both utilize an erroneous contract. In the more recognized honeypot, tokens—typically meme coins—are offered for decentralized exchanges. However, the token has a feature that blocks purchasers, making it impossible to sell it again.
The FTC estimates that cryptocurrency scams lose investors over $1 billion annually. Still, the majority of scams in the cryptocurrency space remain unreported.
How Do Honeypot Crypto Scams Work?
We will concentrate on meme currencies with a harmful function because they are more prevalent than other honeypots, even though another kind includes delivering tokens to a scammer’s wallet. In the steps below, let’s examine how cryptocurrency honeypot frauds operate.
Create a Malicious Token
A fraudster will first create a smart contract for a token with a blocklist function. The contract developer can then add wallet addresses that purchase tokens to a blocklist. An allowlist option enables sales to specific addresses, and smart contracts can automate the process overall. Placing a heavy levy on token sales is another typical strategy. The sale tax goes to the token’s maker.
Launch The Token on a Decentralized Exchange
The next step is for the con artist to introduce the token on a DEX. Many use sites like Dexscreener and Dextools to find liquid meme coins on decentralized exchanges. Victims who aren’t paying attention usually find honeypot tokens there.
Run DEX Ads or Promote Via Social Media
The con artists may use Telegram or social media to promote the new coin or advertise to attract the first customers. To provide the impression that the coin is authentic, it has to be a basic website, a new X account, and a Telegram group. The Twitter account and Telegram group vanish once the Honeypot Crypto Scam is over.
Trigger Token Function
Buyers who swap ETH (assuming an ETH-based platform) for the token have their wallet address recorded and blocked by the contract; allowed addresses might be able to sell, allowing the creator or team of the honeypot to sell tokens into the liquidity pool; this makes trading appear more realistic, with sporadic pullbacks on a bullish chart; without this, the chart rises straight up. The bullish chart is the bait; traders want in for the next leg up on what appears to be a moonshot.
Dump Tokens Into Liquidity Pool
Using a liquidity pool, DEX tokens enable traders to exchange ETH for any other token. As token purchasers exchange ETH for tokens, increasing the amount of ETH in the liquidity pool, the market cap rises. The con artists, though, have a deadline. Token contracts are scanned using auditing tools such as Token Sniffer, Quick Intel, and GO+ Security. The token will eventually be reported as a honeypot.
The con artists then drain the liquidity pool by selling their tokens. Closing the liquidity pool and removing the ETH is an additional option. However, scammers may lock or burn the liquidity to make the token appear genuine because many know about this. The outcome remains unchanged. The ETH has been lost, and the fraud tokens are useless.
The Best Honeypot Crypto Checker Tools
You can find Honeypot Crypto Scam with the help of a few crypto tools. A honeypot isn’t always a token that may be added to an allowlist or blocklist. Once activated, these instruments are capable of identifying honeypots.
The auditing tools in the example below show a clean token. However, as was demonstrated earlier, the token is a honeypot. For investors, reporting delays with these instruments can mean losing money. The community has marked this token as problematic.
Another security option is to search for repudiated token contracts. When developers renounce a contract, they lose all control over the token and its features. Yet again, DEX reporting tools may be out of date.
Not all tools are designed to detect honeypot functionalities. Token Sniffer is one among those that provides a more in-depth analysis of the token. Obtaining the token’s contract address is necessary for detecting honeypots and other potential rug pull threats. You may find this on Gecko Terminal, Dextools, or Dexscreener. Since CoinGecko and CoinMarketCap compile token data from DEX platforms, you can also obtain the contract address on those sites.
Honeypot.is
Honeypot scans the Base, Ethereum Mainnet, and BSC networks for honeypot tokens. You must copy and paste the token address from a site like Dexscreener into the field. The program mimics buys and sales to determine if the coin is blocked or has significant taxes and transaction charges. As an integral component of its all-encompassing token analysis, TokenSniffer incorporates the Honeypot.is API.
De.Fi Scanner
You may assess the general health score of the token and spot honeypot frauds with De.Fi’s scanner. You might still need to do further research. De.Fi Scanner, for instance, indicated that certain coins with burned liquidity had no liquidity. Burned liquidity makes the token safer in terms of that one metric because it cannot be removed.
Detecthoneypot.com
Just as advertised, Detecthoneypot.com excels at a single task. To verify the security of the token, copy and paste its contract address into the box. But even if it isn’t a honeypot, a token with the right features can become one.
TokenSniffer
Cryptocurrency projects frequently use TokenSniffer results in their marketing to reassure consumers. The tool provides a more thorough token assessment and is widely regarded as the benchmark by many. To verify a token, copy and paste its contract address into the box. Data used by TokenSniffer is cached and refreshed every fifteen minutes.
Conclusion
As an example of a rug-pull scam, honeypots prey on users who aren’t vigilant on decentralized exchanges; although trading altcoins on DEX platforms might yield positive results, it is important to be cautious and conduct more research before investing in DEX coins. Consider using a token screening tool such as TokenSniffer to assist you in making informed judgments. Nevertheless, these instruments might not be foolproof and might yield delayed outcomes. It’s also a good idea to study community feedback and conduct test transactions.
