New platforms and technologies are constantly being developed in the quickly changing world of cryptocurrencies with…
Scamcoin is another type of coin but one that is highly negative. It doesn’t benefit users in any way and even causes loss of money.
We all know that there are different types of coins and tokens that exist in the cryptocurrency space. Each of those tokens has a special purpose. The only exception to that would be scamcoins.
Let’s learn more in this blog post.
A scamcoin is a fake cryptocurrency that steals money from people who will invest in the coins.
Liekwise, these coins often become a get rich quick scheme for the scammers. It has become widespread. Moreover it easily deceives people because of its disguise as a legitimate cryptocurrency and appeals strongly to those who are seeking to make quick and huge profits.
Not to mention, scammers can be very creative and they often devise new ways to trick people into investing their money in set-ups that promise them fast returns of investment over a short period of time.
Uniformed and novice investors are the target of scamcoins. There is aggressive marketing and coercion from the side of the scammers. They have statements that are too good to be true. Unfortunately, the astounding profits sway the new investors who believe it and fall for this crypto scam.
Different Kinds of Scamcoin
Here are the three types of scamcoins everyone should be aware of.
A Ponzi scheme siphons money from its new investors to distribute among the initial groups that gave their money to the scammers. This is a vicious cycle that continues until the new investors can no longer give money or if the scammers have accumulated enough for them to disappear.
Correspondingly, this type of scheme relies on a lot of hype and pledges incredible profit. In addition, some of them have an exclusive community in Telegram where fake testimonies are published to further entice people to join.
Rug pulls happen when the team of developers behind a new crypto coin or token abandons their project and takes the investors’ money with them. Also, this kind scammers usually hold their scams in decentralized exchanges (DEX) because they can liquidate all the assets that render the coin non-functional.
First, scamcoin developers promote the coin on Twitter and Tiktok. Then, they raise the liquidity by themselves to attract investors. Hence, people will invest the token and ETH in a liquidity pool hoping that the price will increase.
Nevertheless, these developers already have backdoor codes in their smart contracts that will allow them to deplete the liquidity from the pooled assets. Once it is completely depleted, investors are left with worthless coins.
Initial Coin Offerings
Initial coin offerings operate by pre-selling a token that will supposedly give access to special products or services in the future. But in reality, there is no real project. There is no blockchain behind these new coins.
ICO scammers just promote the coins to amass money from the investors excited about the new innovation in cryptocurrency.
Read The Whitepaper and Website
Authentic crypto projects have a comprehensive whitepaper and well-designed website. The whitepaper should also reflect the tokenomics and goals of their project. One red flag you need to consider is when their paper is full of technological jargon that does not make sense.
Do background checks on the team members. Immediately search for the developers’ names that are listed on their website. Look up their work history and their track record in cryptocurrency projects.
Get a Second Opinion
When you become interested in a crypto coin or token, look at its projected return of investment. You can re-calculate it by yourself or ask a friend with more experience in cryptocurrencies. That way, you can decide if the promised profits are realistic or not.
All in all, we always need to be careful when investing in cryptocurrencies. We need to protect ourselves from being lured in by these scammers.
As has been noted, investing is not just a hobby. It is a commitment that needs to be taken seriously. Practice Do Your Own Research (DYOR) to prevent financial losses.