The modern blockchain is full of promises of quick and easy money. However, it is crucial to know if the tokens you hold are part of an elaborate scam designed to defraud you of your hard-earned money. With thousands of different meme coins being released on a regular basis, it is becoming increasingly difficult to determine if a token is safe and scam-free.
In this article, we will explore effective ways to check tokens and projects for scams. These methods can help you avoid scams and increase your chances of achieving profitable growth!
To check the legitimacy of a token, you can always start with the most easily accessible methods, such as searching on Google and Twitter. This includes researching the token and its team, checking for red flags or warning signs, and looking for reliable sources of information, such as official websites, news articles, and verified social media accounts.
Verified Twitter accounts can often help prove the legitimacy of a project. Additionally, you can participate in token discussions to understand the community's views and opinions.
Be cautious of projects with a large number of social media followers but little activity. Automated comments from spammy accounts should also be a cause for concern. If all the comments are "this is a great project" and "the moon is coming", beware.
To view token information on Twitter, type: $TICKER in the search bar.
Or use #TOKEN_NAME to find more information about the project:
If the token was recently launched, check for the first news about the token first. To do this, type $TICKER in the search bar and scroll to the bottom of the feed.
Usually, the first news about a token comes from news bots or influencers, such as in the following case:
An important factor is to study the project's profile on Twitter. If it posts repeated news and uniform calls to buy, the likelihood of a scam increases.
To find token projects on Twitter, go to DexScreener and insert the contract of the token (for example, Ponke - non-financial advice):
In the upper right corner, you will see the project's website, Twitter and Telegram. By visiting these links, you can research the project:
If you can’t find any links to the project (no website, Twitter, or Telegram), this is a clear red flag and indicates a higher likelihood of a scam.
When analyzing the project’s Telegram, pay attention to the community’s attitude towards the project. If the community strongly believes in and supports the project, then this is a positive sign for potential short-term growth.
If you search on the internet and can’t find a clear homepage, “white paper,” or obvious purpose for the token, then it’s likely a scam. When you search for the token address, you should easily find links to a block explorer, official website, and white paper. If not, consider this a red flag.
Also, be aware that Google ads are often free areas for scam sites. Never click on ads at the top of Google search results. Always make sure you are visiting the official website to avoid clicking on wallet cleaners or other hacker software.
Visit the block explorer of your chosen chain and see if the source code is verified. For example, on Ethereum's block explorer Etherscan, it looks like this. The code shown below is unverified, which should be an obvious warning sign. If the code is unverified, you may be dealing with a scam.
If you want to inspect a token deployed on another network, use these browsers:
Base — https://basescan.org/
Solana — https://solscan.io/
Ton — https://tonscan.org/
BSC — https://bscscan.com/
Because once the source code of a contract is public, everyone can understand the intention behind the contract. Then they see a ridiculous tax system or a way for the developers to steal all your tokens.
It's simple, but various block explorers usually have a comments section. In most cases there are no comments, but if the project is a scam you will most likely find an angry mob in the comments section. So make sure to check it out. If someone calls it a scam, 99% of the time it is. Also don't hesitate to leave a comment if you have fallen victim to such activity.
When analyzing a coin, the comments section can be found on this line (example on Etherscan), but for most coins it is hidden.
DappRadar allows the community to help identify scam tokens. Once found, you can add it to the token blacklist on GitHub.
Also, if you are researching tokens, you can check the blacklist to see if your token is on the list. If the token address is on the list, then the token is definitely a scam.
If the token is only traded on a few decentralized exchanges (DEX), then it is almost certainly a scam. Listing on a centralized exchange requires KYC and additional trust, and the larger the exchange, the better the reputation of the listed token.
Does this mean that tokens that are only listed on decentralized exchanges are necessarily scams? No. Some projects do not require a large amount of trading volume, and other projects may only offer tokens to Web3 users and not to token traders.
Since most meme coins show significant gains before appearing on CEXs, having a token on a CEX is not a strict criterion for coin analysis.
However, cryptocurrencies that are only listed on decentralized exchanges represent a higher risk investment.
To find which exchanges list the token, go to Coingecko, enter the token address in the Search bar and select Markets:
If the token is on at least one CEX, it’s a green signal. In this case, the token is listed on CEXs: Bybit, BingX, Bitget, Gate.io:
Before investing in a token, you can check the overall demand and available liquidity. It is very easy to check the liquidity of a token on platforms like Uniswap V2 or other decentralized exchanges.
Liquidity refers to the amount of cryptocurrency or tokens locked in smart contracts that allow people to buy and sell assets through (decentralized) exchanges. If liquidity is below $100,000 or drops significantly, you are most likely dealing with a scam.
You can check the liquidity amount on the well-known DexScreener, where you can see the liquidity amount in the middle right after entering the token contract:
If a lock symbol in a green circle appears next to the liquidity amount, it means that liquidity is locked - another green sign for the project.
It is also important to consider the fully diluted valuation (FDV) or market capitalization. The higher these numbers are, the more buying volume is required for the token price to rise.
Good indicators for such tokens are liquidity starting at $1 million, token age greater than 2 days, and a liquidity/FDV ratio of about 1:10.
Here are some token analysis tools:
Smell test — an automated audit of a token. The lower its score (out of 100), the more likely the token is a scam.
Check tokens on honeypots. Honeypots are smart contracts that intentionally create obvious software flaws. When an attacker tries to exploit the vulnerability, another hidden piece of code is triggered, essentially attacking the attacker. Whether you plan to be a crypto hacker or not, you should always avoid honeypots.
It records the current token price and helps you evaluate the true value of tokens in real time as well as identify major holders.
For example, to identify users who recently purchased tokens for more than $5,000, click on "USD" at the bottom of DEXScreener:
Enter the amount $5,000 (optionally, you can specify a maximum token purchase amount) and press "Enter" or "Apply":
After this, all recent buyers of tokens for $5,000 or more will be displayed:
You can also check the purchase area of certain wallets. To do this, click on the cup icon next to the desired wallet and view all purchase areas and token purchase levels on the wallet chart: Analyzing Tokens Using De.Fi Antivirus De.Fi, a project that recently distributed an airdrop to its community, acts as an antivirus by evaluating the token contract based on various parameters and providing an estimated safe balance for the token: Using TTF Bot
This versatile robot can quickly and automatically analyze tokens, which is very convenient for token hunters. Pay special attention to the amount of liquidity locked or destroyed. If liquidity is destroyed, it is a green signal.
Also, pay attention to the scale of taxes on the token. If the tax is zero, it is a sure fact.
Also, pay attention to the number of holders and the supply they hold:
If the top 10 holders hold more than 30-50% of the token supply, the probability of encountering a scam is higher.
By using the above analysis tools, you can learn how to avoid scam tokens and profit from legitimate tokens. However, always remember to do your own research (DYOR).
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