As the popularity of NFT and DeFi projects rises, crypto scams become more common. There are many ways that cryptocurrencies can be stolen through deceit, including discord server bots or imitation NFT projects hosted on OpenSea. Most in the space are familiar with a typical rug pull scenario in which many invest in a new blockchain project, only for the project to later disappear and the owner to make off with all the investors’ funds. Others may have fallen victim to “pump and dump” schemes, in which wealthy holders of vast amounts of a cryptocurrency (a.k.a. “whales”) have been known to buy mountains of it cheap to drive up the price and increase its scarcity (thus creating FOMO), only then to sell it immediately, sending the price crashing down and then pocketing the profits.
These are some ways to protect yourself against scams.
Keep an eye out for community-owned, renounced projects
Contract owners can renounce ownership and give it to their community to prevent the traditional rug pull. Although this prevents a single entity from making an exit with all of a project’s capital, renounced projects can also come with a catch. They will need to restart the project if there are any issues with the contract following launch.
Make use of the latest security tools
These security concerns have been addressed by blockchain-based tech companies. EverRise’s solution to rug pulls is its EverOwn platform, which maintains the ownership of a decentralized project’s contract instead of the owners themselves. The community can accept the changes made by the owner and reclaim their ownership. While it might be more difficult for projects to be found using such a tool, the knowledge that they are available will give you added peace of mind.
Many scams have taken place on the Binance Smart Chain (BSC), and a company called RiseUpV2 has developed a BSC token and a technology called “Rug Screener” to bring safety and security to the world of cryptocurrencies. Rug Screener allows investors to quickly find out all information about projects to avoid falling for scams. RiseUpV2 has collated research tools from various platforms to quickly provide potential investors with information on any smart contract such as contract details, who the creator of the contract is, the project’s liquidity and more. Rug Screener also has a score system, which alerts the user if it considers a project to be unsafe.
Do Your Own Research
It is important to conduct thorough research prior to making any investment decision. In crypto-world, there is usually a designated channel for the project, either on Telegram (or Discord), which is great to get information. Not only can the team members contribute, but other users also have the ability to report suspicious activity and fraud to admins. Twitter, crypto’s go-to social media platform, is also a great place to stay up to date with project developments and news. The industry is growing and investors can access information through both crypto-focused media.
Investors in DeFi need to remain vigilant and be careful about their decisions. There is hope that the cryptocurrency industry will become safer through more community-based solutions.