On how to identify scam crypto project
Hey crypto dudes, why am I writing this piece? Well, what we see every day is that hundreds if not thousands of crypto projects and platforms are being created and defined and mostly have similar characteristics: 1\ project is layer two, 2\ offering tokens immediately to monetize or fund the project, 3\ they fit into #DeFi category, public can stake tokens or liquidity pairs, 4\ high staking APR & APY and therefore high expansion of circulating supply. So what is wrong? So many things! I am going to explain it point by point that a 10 years old can understand. I, me, myself and thousands of others felt for so many projects that appeared to be promising, a good investment or fun to engage and contribute but got disappointed, lost their hard-earned money or wasted their time, holding or #HODL ing to an absolute nonsense. Likewise, I’ll try to make it short as much as possible and avoid technical bla bla bla.
Anonymous developers
Yes, this book has started with #SatoshiNakamoto, people always argue that the anonymity of the project and its developers offer lots of freedom, protect their privacy, an ease of mind to let them just concentrate on developing the platform and not get into the side stories and problem, or not to involve with countries rules and regulations. I say yes, but it also facilitates frauds and scammers to work easily in shadows of internet, without being recognized or being held accountable. What I understood from cryptoverse and projects so far, that anonymity is a big red NO Entry point.
Past History
I understand who might be reading this piece is maybe a young earthling who never employed anyone or lead a large team, well, I tell you that hiring someone to do a job is not an easy task. In any sort of group, team or company, people look at the experiences or mark or grades. What exactly you did to earn your place on the team, or deserved to get paid. Indeed, the most natural way is just to be there, that mean your present is sufficient, but as the job or project gets more serious and complicated, your set of abilities and dedications shines through. The point is, when a project is running by a team or anonymous developers, the past history, experiences and achievements is nowhere to find. The minimum requirements will be having a username or kind of pseudonym presence on the internet that links your past to your current project. All said, I can categorize today’s blockchain and crypto projects into the following groups:
- Total anonymous developers. The biggest representatives of this group are PancakeSwap or Sushi, a million dollar projects that offer absolutely nothing much about the team or founders. Everyone remembers how Sushi started and got many lost their investment due to greed and fraud of one of the founders. Furthermore, I believe anonymity harmed the crypto community more than it offered in terms of privacy and autonomy. Most of the scam and fraud projects do not have an established team of developers, partners or investors.
- Pseudonymous developers. The mighty Bitcoin founder Satoshi Nakamoto real identity is unknown, but not his vision and work. This is the best of all worlds, to use something other than a real name, for whatever reason, personal privacy, legal or social, it is a common practice is real world and virtual. Either you are just a casual gamer or god on earth, doesn't matter. What matters is your past. Who are you, what have you done that put you in this project, and why you should be getting all the attention or money? I do not see a potential problem with this, if you are able to link a project member to their current platform. However, many fraudulent projects misusing it, by creating fake profiles and résumé. Conning people with fake identities is most common in real world cases, not only on the internet. Why? Because it creates more trust to trap bigger investments.
- Real people
Twitter Fraud
I am not sure how many of the Twitter users are real, but after seeing that you can buy 1000 followers for somewhere around $10 to $20 easily and instantly, I believe lots of them are just fakes. There are so many bots and automated content swarming around. It is not just on Twitter, Instagram, TikTok or even Twitch has the same issues. It is pretty easy to spot fake tweets and fraud projects. How? 1\ pay attention to the age of Twitter account of project and number of followers, a new name project or person can not make thousands of followers in a short amount of time naturally. Developing your follower and fan basis is not an easy task, requires lots of hard work, skills and plenty of time.
So, always compare the joined date with the number of followers and number of unique published tweets.
The sparktoro has a free tool, detecting approximate number of fake twitter followers, you will be amazed that some of big names like Jeff Bezos or Elon Musk have more than 50%!! fake followers, perhaps pre-managed or unintentionally.
Do not follow or listen to Twitter Promoters or alleged celebrities
Speaking more on fakes and frauds, it is very common on social media platforms like Twitter and Instagram that individuals buy up their way to success and fame. Instead of working hard, showing up talent and sand their buts to gain attention and followers, they start by adding tens of thousands of bots and fake followers to their list. On the way, some photos of a good-looking girl gets extra attention in a man dominated categories like cryptocurrency and video gaming. This is how many #cryptochick has been created.
What is the purpose of these so-called promoters or celebrities?
They sell advertisements. The newcomers usually hire them to promote their website, platforms or tokens. These promoters typically have between absolute-zero to minimal-research on the project or customer they plug. It is just a simple equation of money, how many tweets, how many hours, how many days.
So if the project collapses, rug pulls, or vanishes all of a sudden, be certain that the promoted gives absolute zero sh** about the project and whoever got into that because of his/her recommendations. End of the story: only you are who to blame!
There is a silver lining though, these kinds of cheap and shabby messages are easy to spot, just go to the profile and look at the recent tweets or posts, mostly are having the same recognizable pattern, just like a spam list, different random names, some cheesy, lousy and insincere lines like “Awesome Project”, “Congratulations on your success”, “Just launched bla bla”. Some of these guys run an extra mile, make a short video or selfie for each post they make, and certainly will charge the project for them. Would like to practice finding these? Just for #cryptogem or similar tags, and just tons of these people will pop up selling you hot garbage, mostly meme tokens.
My educated guess in how much a well-designed crypto scam costs is about $20k-$100k, the code and smart contract is a copy and clone of previous jobs, with a different names indeed, only for a one year subscription for a domain, web hosting etc. All acquired from less sensitive providers like Porkbun or Namecheap, that can be paid with cryptocurrency not a traceable credit card. And the rest of money is just to spend on advertising, fake reviews, and for our favorites: promoters and influencers.
The amount of scams, #rugpull and frauds are so many, that nobody bothers to talk about them unless it’s tens of millions of dollars. I always say, in 2017 and before, any fraudulent projects had to invest more into the material, white paper and most importantly the mining pools. Otherwise the project barely could lift up any attention. Now these days deploying a smart contract costs nothing, there’s a zero control on the ownership and authenticity of the project.
Plagiarism, copies & clones
How we got here? And why this amount of crap nonsense fraudulent does not exist on real world or neighbor industries like video gaming or software applications? Well, it is a combination of many things:
- Instant rewarding: Unlike many other projects and businesses, the cryptocurrency projects offer instant incentives in the form of self-made tokens, which in real-world businesses called credits, or rewards, or in gaming industries, as a part of microtransaction system, can be used inside the game or platform. However, these cannot be swapped out with real money and only to be used for internal purchases, to upgrade services or something. On the other hand, in the cryptoworld thanks to a flawed system 1/ not being regulated in terms of monetary system, 2/ being anonymous, that the ownership and accountability is unknown, selling and swapping tokens to another form of cashable cryptocurrency is totally normal.
- Easy to copy and clone: making literally an operational clone of some of the token’s smart contract requires few days, if not few hours. As the most blockchain runs on decentralized public ledger, there is not a patent, or custody to preserve the intellectual properties or even filters or indicates the amount of plagiarism on a piece of code. I personally believe that more than 95% of blockchains and its products like cryptocurrency is just repeated and edited materials on the surface like a new solution or product to answer the problem or demands of the system. If the cryptocurrency environment was to be graded or assessed academically or professionally, most would miserably fail and ceased to pass or exist. Why is this happening? Mainly because of point 1. Secondly, lack of a controlling body, standardization or regulating institutions.
- Unparalleled business model: As it was mentioned on instant rewarding system, blockchain project that sell coins and tokens, do not need a service or product and therefore an established customer base to survive, it includes them in an unconventional business model. If you call a platform solution, the roadmap or white paper the business plan, the product and services, the projects existed for months and years, allegedly working on the plans and services, and made millions without accomplishing featured goals or offering solutions. Many projects got together by apparently famous or revolutionary developers that may were part of an original group of people like founders of Ethereum, started a brand-new project and in a few months could sell millions of token in some crowdfunding. This is sick and flawed.
High APR Yield Farming
Yield farming is the product of #DeFi 1.0 movement or part of it. After introduction of smart contracts, layer 2 platforms and rise of PoS based blockchains rather than mining and PoW concept, rewards and incentive on token staking concept was introduced, first in the form of smart/super nodes. As a functional DEX platforms like Uniswap grew, the concept of earning based on the providing liquidity (LP) got more ground. Then suddenly hell got loose, people leading by Sushiswap started to give away yield tokens as an extra bonus incentive for LP and staking tokens, in reality the earning which is made by percentace of transaction fees is minimal, so these alleged finance, dex and swap platform boosted the earning by air dropping or giving away their platform token to make it super attractive. This is how 1000++% APR system created and still being used.
High APR (HAPR) means high expansion of circulating supply, the 365% APR means average of 1% daily. HAPR platforms usually offer very high rates on native token staking and native token liquidity pairs, but much lower APR on the non-native pairs. So people attracted to buy and stake the native token and liquidity more than other pairs. What happens is, usually the platform development, marketing and achievement cannot keep up with high rate of expansion, simply cannot attract let’s say 1% new funds from customers and investors. Consequently, as the earned yield tokens are being sold and cashed out, price of token starts to fall. The constant drop in price, will multiply eventually by psychological effects, will results in steep price tanking. All these happens very quickly in a few month. So, usually these platform rise and shine to glory in about 3 month and the rest is hitory. The real example of these is autofarm.network. At the time of writing this article, $AUTO is sitting at $414, about -97% ATH price.
However some may survive this with a more controlled expansion and well-managed and precise planning for future.
Stay away from .swap .dex .fi .finance projects
I talked about clones and copies. Also, high yield farming platforms, most common of these undoubtedly worthless and pointless projects are .dex and .swap ones. What are the problems?
- Does not provide independent liquidity, mostly are attached to the bigger dex or swaps, on BSC mostly using Pancakeswap, on ETH Uniswap or Sushiswap. They just reroute the service.
- Many are not offering a .swap or trading services, again using APIs from bigger DEXes like 1inch.io .
- Usually they offer high APR and therefore the native token has high expansion rate.
- The native token does not have a use, or offer a solution, only purpose to pay for farms and pools.
- Market is flooded and over saturated with these type of projects, therefore competition is fierce.
- It is the best option for a fraud and scam project. Easy to make just merely changing the names and graphical design of the website, cheap to run, and attractive enough for making millions.
