As cryptocurrency BTC is growing in popularity that is how a lot of people are investing so much energies to delude unsuspecting investors of their funds.
Due to the availability of smart contracts on the Binance Smart Chain at a very cheap rate and the fact that it requires project creators to fill out only the desired token name, total supply and decimals.
Though some have gone the extra miles to hire good developers who activated additional features like anti whales, antibots, buy and sell tax and the other numerous parameters.
It is now very possible for (would be) project creators to easily create and deploy BEP-20 token on BSC. According to recent exercise I carried out on 100 newly launched BEP-20 tokens 95% of them could not pass the test I subjected them to.
For the case of this piece, I will focus on how to detect a scam project and save your money.
Before I go ahead to mention that, it is worthy to note that the new trends that project creators now use to scam their investors is through the underlisted ways
1. Bogus total supply
2. Large airdrop amount
3. Cheap private sales amount
4. Fair Launch concept
They use the above concepts to attract investors first by giving out hundreds of millions of their token and distribute same instantly or within 48hrs (this will be discussed in details in a different topic).
To detect whether a token is likely to be a scam or not you need to carry out the following analysis
1. You need to sincerely and without bias, study the project whitepaper. A scam project will always use ambiguous words and big grammars to confuse their readers. They would use words like "Blockchain, DeFi, Technology, Node, Proof of Work (PoW), Proof of Stake (PoS) etc. With this they make their readers especially those new to the space to assume that they are well informed about the ecosystem thereby buying their trust with ease.
A good project would outline the core use cases of their token clearly stated on their whitepaper.
2. You should check whether the identity of the team members are known. Most scam projects do not reveal their identities so that they won't be easily traced. Most of them use false or fake names and social links to further buy the trust of their investors.
3. Their telegram group and channel are usually very full but with few real members and more of bots. This makes users who does not know the difference to assume that the project has attracted many persons.
4. They usually do not plan to list their token on a centralized exchange any time soon. They only list on pancakeswap or any other DEX where they can easily rug pull and run with investors money.
5. Most times they audit their smart contract just to entice investors.
6. Lastly, they distribute tokens to their wallets in small units so that it won't be easily noticed or observed to be their wallet.
7. They carry out long pre-sale period spanning between 3 to 4 months which allow investors to buy any amount. This is to enable them to raise as much fund as they can because almost anyone can afford their pre-sale.
These are a few point out of many on how to detect a scam project. Before deciding whether or not to invest in a project it is very necessary that you carry out due diligence to help you make informed decision.
If a project does not have a clear use case for their token or they have an ambiguous use case or unrealistic use cases then it is possible that the project is a scam.