When you invest your hard earned money, best practice is key! With this we refer to how to act, when to act, what to look for, what to do and what not to do when buying crypto.
In this article, we will discuss a few key takeaways from an investors standpoint when involving yourself in cryptocurrency.
How to avoid scam in crypto?
If investing in crypto is something you want to do, there is no absolute way to avoid scam. However, there are a great deal of things you can do to minimize the chance of being a victim of the most common scams out there.
To start of, let’s have a look at the two most common scams that we see in crypto:
This refers to projects where project owners remove the liquidity from the liquidity pool. Draining liquidity from the pool will oftentimes lead to a complete loss of invested funds, and is sadly a fairly common thing to see in new and early stages of crypto projects.
This refers to projects where project owners make selling the token impossible. This can happen right from launch, or the contract can have a “stop trading function” that the scammer will enable to make sure no one can sell their tokens. This is done in order to wait for the “liquidity lock” to unlock, for later to “rugpull”, or steal the liquidity from the pool.
To avoid being scammed from either a rugpull or a honeypot, there is a few things you can check before investing in a given project:
– Is the team KYC’d?
This gives no guarantee, but most scam projects are not KYC’d.
– Is the contract audited? If yes, is the audit done by a solid company? What (!!?) does the audit report say about the contract?
If not, you should really consider waiting for this to be done before you invest. If the contract is in fact audited, make sure the work is done by a company with some traction. Also, read the report. It’s there for you to read! Most serious auditing companies will highlight potential security flaws in the contract, and it’s also common that these flaws are graded from “minor findings” to “crucial findings”. This will help you assess whether or not the investment is safe or not. If it looks really bad, chances are it is.
– Is the liquidity locked, and for how long?
Referring to the “honeypot” description above, locked liquidity cannot be used to make up your mind about the project’s safety alone. However, a long liquidity lock in combination with KYC and a good audit report drastically reduces the risk that you’ve found a scam project.
– Are there real and active work with the project’s social platforms?
This can be a tough one, but look for organic growth of the community, active members and new content. Most scammers dont bother “taking care” of their socials as they’re only building a short lived facade to steal your money. A big, big red flag could be that a telegram chat is muted, or even deleted without a heads up.
The above is by far a complete list of what you should look for, but if this is implemented as a minimum of what you as an investor look for prior to investing, you will reduce the chance of being scammed by a lot. Really, a lot.
coinKYC was established to fight scam, to provide premium services ment for serious players in the crypto space, and in addition only feature and work with projects that meet our minimum of requirements.
Together with our partners, investors and community, we will make crypto safer – partner by partner, service by service, and client by client.
We welcome you to a safer journey on your path to becoming a successful project, a profitable investor, and a contributor to the better good of crypto at large.
Welcome to coinKYC.io!