The cryptocurrency market is bubbling with energy, with new tokens and crypto projects debuting every month. However, such a crypto euphoria makes it increasingly challenging to check the authenticity of coins and tokens, and traders, investors, and crypto enthusiasts often fall for cryptocurrency scams. Platforms like CoinMarketCap offer all the needed information to verify if a crypto project is legitimate and not a crypto scam. Of course, you should always do your research and check if the token is traded on trustworthy exchanges and platforms such as PointPay.
With that in mind, here are some basic but essential checks from PointPay experts through which traders and investors can identify the scam tokens and fake projects from the legit ones.
Check the code
The first thing you can do is check if the code of a token is verified on Etherscan. If the code is not verified, most likely, you’re dealing with a crypto scam. One of the reasons why fraudsters do not reveal their codes is because the project is a cryptocurrency scam and has different issues or bugs. So, the code is not verified? It is definitely better to give such a project a miss. PointPay experts also recommend checking the Etherscan comments section. If other users were calling a project a fraud, it probably is. What is more, if you’ve already fallen victim to a crypto scam, you can also leave a comment to help others stay away from the project.
Check how many trustworthy exchanges host the token
The next step is to check how many trustworthy and popular exchanges and trading platforms host the token. If it is only traded on a couple of unknown decentralized exchanges, the project also might be a crypto scam.
Check the liquidity
Liquidity, the amount of crypto or number of tokens locked in smart contracts, refers to how easy it is to convert cryptocurrency into cash and whether it can be achieved without the asset’s value suffering. It is not difficult to check a token’s liquidity on trading platforms and decentralized exchanges. If liquidity is less than $100,000, it might be a cryptocurrency scam. Check volumes, transaction counts, and unique active wallets interacting with the smart contracts. If something looks suspicious, do more digging to find out as much as possible.
Check out the website and a white paper
Checking official links and documents is the best way to ensure that the token you’re planning to invest in is legitimate and not a crypto scam. Every trustworthy crypto project has to write and then publish a white paper with explanations of all fundamentals and technologies involved in the design of the blockchain. Pay attention to the token name, names of creators and developers, creators’ addresses, contract source codes, and all the essential information and details you could find. Is anything missing? Then it’s better to find another token to invest in.
Don’t trust big promises
Every investor should be cautious when the project promises extraordinary results with immense profits in a little time. Even crypto newbies and novice traders should know that any investment needs time to grow in value. Investing in crypto requires patience and making smart decisions. However, don’t forget that some volatile cryptos display extreme price swings. Fraudsters like to use these traits, so be aware of phishing emails and social media announcements that promise surreal returns within extremely short periods of time.
Final thoughts
Crypto scams can be sophisticated and convincing. So don’t forget to protect your wallet, only invest in things you understand, take your time, be wary of social media adverts, and always do your thorough research, especially if you haven’t heard of a particular token or a crypto project. Finally, PointPay experts also want to remind you that you should never invest money you can’t afford to lose. Cryptocurrencies are highly volatile and speculative, so it’s always wise to understand all the risks.
So stay safe, and start your trading journey with PointPay!
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