One of the most common misconceptions about crypto and Non fungible tokens is that they are designed to facilitate fraud and scam. This is far from the truth. In fact, cryptocurrencies are based on the principles of transparency, security and decentralization, which make them more resistant to manipulation and corruption than traditional forms of money.
Cryptocurrencies are digital assets that use cryptography to secure their transactions and control their creation. They operate on a peer-to-peer network, where users can exchange value directly without intermediaries or central authorities. This means that no one can censor, freeze or confiscate your funds, as long as you have access to your private keys.
Cryptocurrencies also have a public ledger, called a blockchain, that records every transaction ever made. Anyone can verify the validity and authenticity of the transactions, as well as the supply and distribution of the coins. This creates a high level of trust and accountability among the users and prevents double-spending, counterfeiting and fraud.
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Cryptocurrencies are not created to ease scam, but to empower people with more freedom, privacy and control over their own money. They offer a new way of exchanging value that is more efficient, inclusive and innovative than the traditional financial system. They also have the potential to transform various sectors and industries, such as e-commerce, remittances, gaming, social media and more.
However, like any new technology, cryptocurrencies also come with some challenges and risks. They are still in their early stages of development and adoption, and they face various technical, regulatory and social hurdles. They also require a certain level of knowledge and responsibility from the users, who need to understand how they work and how to protect their funds.
The vast majority of Crypto scams can be divided into either Rugpulls or Honeypots. So let’s start with
Rug-pulls
Why are they called rugpulls? Imagine you’re standing on a carpet. You’re safe because the carpet is your support. Now, this evil guy comes along and pulls out the rug underneath your feet. That’s a rugpull. You lost your support. It works the same way with coins. When you buy a coin, it is usually supported by a Liquidity Pool. It’s a collection of funds which are locked in the contract and provide a “pool” for you to buy and sell coins. Rather than waiting for someone to come along to match your buying or selling, you use the pool to trade faster.
What the scammers do is they launch a new coin, attach a liquidity pool to it and wait for people to start buying coins. Once enough people have bought the coin, the scammer will pull the liquidity pool, run off with the money and leave you with a worthless coin.
You won’t find out until it’s too late. It’s usually that moment when your coin’s value drops from maybe $0.0034823 down to $0.0000000 or $0.0000002.
Honeypots
To be honest, I never found an explanation as to why they are called honeypots, but you can pretty much figure out why on your own. It’s basically a pot of honey where your money gets stuck and can’t leave. They are often less obvious to the untrained eye and therefor also often more difficult to detect, even for people who trade smaller coins on a daily basis. Experienced traders routinely fall victim to honeypots because they see a coin pumping and jump in without verifying everything first.
What the scammers do is basically insert a piece of code into the contract which allows only their own wallets to withdraw from the coin. They launch the coin and people start buying. You see the coin pumping and think wow, this is amazing. It’s just going up and up. There’s little or no red candles on the chart. You will likely stay for a while until you think it’s enough and try to cash out.
And that’s when you notice that you can’t, because the contract says nobody except specific wallets can cash out. Your money is stuck forever and there is nothing you can do about it. The scammer can withdraw any time, though. Some of these scams go on for days or weeks and people think they found a real gem of a coin that is going to the moon and will keep buying.
Therefore, it is important to educate yourself before investing or using cryptocurrencies. Do your own research, learn from reputable sources, and be aware of the potential scams and pitfalls that may arise. Always use trusted platforms and wallets, and never share your private keys or passwords with anyone. And remember: if something sounds too good to be true, it probably is.