Honeypot Scam

A honeypot scam is a type of cryptocurrency scam in which a malicious actor creates a fake cryptocurrency wallet or token to lure unsuspecting victims into investing, sending, or trading crypto tokens. 

The scammer typically poses as a legitimate business or organization and promises rewards or services. Victims may be tricked into investing, sending, or trading crypto tokens to the malicious actor’s wallet or token, only to find out later that the wallet or token is a scam. 

The purchased tokens usually can’t be sold at all on only with extremely high tax (90-100%) resulting in a complete loss of funds. This is achieved by a special malicious code included in the token’s contract.

Tactics used by scammers

Crypto token scams are an increasing problem in the world of cryptocurrencies, and honeypot scammers are a major contributor to this problem. Honeypot scammers use a variety of tactics to lure unsuspecting victims into their schemes, and it is important to be aware of these tactics to protect yourself from becoming a victim.

Bait & Switch

One of the most common tactics used by honeypot scammers is the “bait and switch” scheme. In this scheme, the scammer will offer an attractive investment opportunity, such as a promising new crypto token, but then switch to another token or investment when the victim has invested. This is done to trick victims into investing money that they may not have otherwise invested and can result in significant financial losses.

Pump & Dump

Another tactic used by honeypot scammers is the pump and dump scheme. In this scheme, the scammer will buy up a large amount of a particular crypto token, and then artificially inflate the price by promoting it heavily on social media or other forums. Once the token’s price has been inflated, the scammer will then sell their holdings, resulting in significant profits for themselves and losses for unsuspecting victims who bought at the higher prices.

Pyramid Schemes

Finally, honeypot scammers may also use “pyramid schemes” to entice victims into investing. In this type of scam, the scammer will offer to share profits with investors who are willing to recruit additional investors, creating a “pyramid” of investors and increasing the scammer’s profits.

How to protect yourself?

The first step is definitely education about all possible forms of scams. By being aware of these common tactics used by honeypot scammers, you can protect yourself and your investments from becoming a victim of a crypto token scam. Be sure to only invest in legitimate and reputable tokens, do your own research before investing, and never give out your personal or financial information to anyone.

CoinBrain can help you avoid a honeypot scam by providing you with a safety check of all tokens. It implemented GoPlus Security API which automatically scans all tokens on the blockchain for malicious code. The information is displayed on the token’s page.

Signs of a (Honeypot) Scams

There are several warning signs that can help investors identify a potential honeypot scam. The first is the use of false or exaggerated promises of returns. If an investment opportunity promises a return that is too good to be true, it likely is a scam.

Another red flag is the lack of information available about the investment. If the website or promotional material fails to provide details about the investment, such as who is involved and how the money will be used, it is likely a scam. Be sure to research any investment opportunity thoroughly before committing to any funds.

Another thing to check is whether or not there are any burned coins associated with the project. If more than 50% of the coins are in a dead wallet address, it is a sign of a relatively protected project from rug pulls, but not necessarily a honeypot. However, if there are less than half of the coins dead or no coins dead at all, it is best to be cautious.

Finally, be cautious of any investment opportunity that requires a large number of tokens to be purchased. Crypto tokens are highly volatile and can be easily manipulated, making them an attractive target for scammers. If an investment opportunity requires a large number of tokens to be purchased, take the time to thoroughly research the investment before committing.

How to Avoid a Honeypot Scam

Do Your Own Research

Before investing in any crypto token, it’s important to do your research. Make sure to read up on the history of the token, look at the team behind it, and read up on any news or reviews related to the project.

Beware of Too-Good-To-Be-True Offers

If you see an offer for a crypto token that seems too good to be true, it probably is. Make sure to do your research and verify the validity of the offer before investing.

Avoid Shady Websites 

Be careful of websites that promise quick returns or guaranteed investments. Many of these are designed to be honeypots and can be easily identified by their lack of transparency and security.

Ask Questions

Don’t be afraid to ask questions. Ask the team or community members about the project and its objectives. Be sure to ask questions specific to the project and make sure there are clear answers that can be provided.

Verify the Team

Make sure the team is legitimate and that the project is backed by real people. Check the background of the team and make sure they have experience in the crypto industry.

Conclusion

Honeypot scams are a growing problem in the cryptocurrency industry and it is important to be aware of the tactics used by scammers in order to protect yourself and your investments. By doing your own research and being wary of too-good-to-be-true offers, you can avoid becoming a victim of a honeypot scam.