Navigating the crypto world can be tricky, especially with new coins popping up daily. How do you tell which ones are legit and which are scams?
This guide will walk you through five simple ways to check if a cryptocurrency project is trustworthy. We'll show you how to spot red flags and avoid falling for schemes that could end up only costing you money.
By the end, you'll have practical tools to assess whether a token is likely to last or disappear quickly. This knowledge will help you make smarter choices and protect your investments.
Let's get started on how to separate the Bitcoins from the deadcoins in the world of crypto.
- Start with social media and good old Google
Start your crypto research with basic Google and social media searches. Look for the token's official website, whitepaper, and verified social media accounts. Be wary of projects with many followers but little genuine engagement - comments like "Great project!" or "To the moon!" from multiple accounts could be red flags.
When searching for the token address, you should easily find links to block explorers, the official website, and whitepaper. If these aren't readily available, it's cause for concern. Also, be cautious of Google Ads, as scammers often use them. And always double-check you're on the official site to avoid potential scams or malware.
Remember, a legitimate project will have a clear online presence and purpose. If you can't find basic information about a token, it's likely not worth your investment. Trust your instincts - if something seems off, it probably is.
- Utilise block explorers’ comments section
Another simple yet effective way to vet a crypto project is to check the comments section on block explorers like Etherscan. While many tokens have no comments, scam projects often attract a flurry of negative feedback.
To do this, visit the token's page on Etherscan (or another relevant block explorer) and look for the comments tab. If you see users calling out the project as a scam, take it very seriously - these warnings are usually accurate. Remember, people who've lost money are likely to warn others, so these comments can be valuable red flags.
If you've personally fallen victim to a scam, consider leaving a comment to alert others. This simple step of checking (and potentially contributing to) the comments section can be a quick way to gauge a project's legitimacy and protect yourself and others from potential fraud.
- Look for its listing on a token explorer site
Checking token explorers like CoinGecko or DappRadar's Token Ranking can quickly reveal potential scams. If a token isn't listed on these platforms, it's often a red flag.
Even for listed tokens, watch out for warning notifications like the one below. These are valuable alerts designed to help you spot risks.
Keep in mind that while legitimate projects usually share information with these ranking services, not all tokens appear automatically. Some platforms have specific listing criteria.
- Check the token’s liquidity on DEXs
When determining whether a coin is a scam, assessing its liquidity is always a good call. Liquidity on DEXs refers to the amount of cryptocurrency or tokens locked in smart contracts, enabling trading on decentralised exchanges like Uniswap V2.
Checking liquidity is simple and can provide valuable insights into a token's legitimacy. If the liquidity is below $100,000 or rapidly decreasing, it's often a red flag indicating a potential scam.
Tools like DappRadar can be helpful in this process. For tokens tracked on their supported blockchains, DappRadar provides warnings when liquidity levels are concerningly low.
Remember, adequate liquidity is essential for a healthy token ecosystem. Low liquidity can make it difficult to trade the token and may suggest a lack of genuine market interest or support.
- DappRadar’s blacklist
DappRadar offers a useful tool for identifying potential crypto scams: their community-driven blacklist. This feature allows users to contribute to a shared database of suspicious tokens.
To use this resource, simply check if the token you're researching is listed in the DappRadar blacklist on GitHub. If you find the token's address there, consider it a strong warning sign - tokens on this list are highly likely to be scams.
Additionally, if you've encountered a scam token yourself, you can contribute to the community's safety by submitting it to the blacklist. This simple act can help protect other investors from falling victim to the same scheme.
Final thoughts
Remember to use these tools as part of your broader research. A token's absence or presence of warnings should make you cautious, but always combine this with other verification methods for a complete picture.
Whether you're investing or simply observing, new cryptocurrencies and tokens offer a unique window into the evolving narrative of cryptocurrency. They remind us that in the digital age, finance isn't just about numbers; it's about stories, cultures, and communities. As this corner of the crypto world continues to evolve, it will undoubtedly provide both entertainment and lessons in the broader dialogue about the future of digital assets and their impact on society.
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