What is a scam? How to identify each type of fraud to protect your assets

When stepping into the cryptocurrency world, investors often hear the term “Scam” — a word used to describe fraudulent activities aimed at stealing digital assets. Understanding what a scam is and its various forms will help you navigate the sophisticated traps set by scammers. This article will serve as a comprehensive guide to help you protect your assets from these dangers.

Understanding Scam - From Definition to Impact

What exactly is a Scam?

A scam, also known as fraud in English, describes malicious actions by individuals or organizations to seize assets through deceitful methods. Those who carry out these activities are called Scammers and will face legal penalties when caught.

The internet has opened opportunities for scams to become increasingly complex and sophisticated. The scale of scams in the cryptocurrency sector can spread across many countries, affecting millions of potential victims.

What does being Scammed mean — The truth investors need to know

In the crypto community, the phrase “being Scam” has become very familiar. It refers to the situation where an investor falls into a trap of deception. The danger is that many victims do not realize they are being scammed; even after recognizing the risk, they continue to invest for quick profits.

A typical example is Ponzi schemes — where participants pay returns to earlier investors using the capital of new entrants. The more you invest early, the more profit you can make, but once the system no longer attracts new members or the number of participants becomes too large, the scheme collapses completely, leading to significant losses.

Ponzi vs. ICO Scam? Differentiating Common Fraud Types

ICO Scam — Tactics from the 2017 Boom

Since the ICO boom of 2017, ICO scams remain the most common fraudulent activity. The method is straightforward: scammers launch a new cryptocurrency project, then heavily promote it with persuasive promises or hire well-known KOLs to build credibility. The sole goal is to raise funds from the community through an ICO.

After collecting a large sum, the scammers abandon the project, taking the money and disappearing. To identify this type of scam, watch out for:

• Projects lacking clear solutions or practical features
• Projects with no real need for blockchain technology
• Development teams anonymous, inexperienced, or with a history of scams
• Websites or Whitepapers poorly designed, unprofessional
• Roadmaps incomplete, vague, or unclear
• Projects that are sloppy, with little community engagement

Liquidity Withdrawal — Tactics on Decentralized Exchanges (DEX)

Besides ICO scams, liquidity withdrawal schemes often occur on decentralized exchanges (DEX). Initially, these projects develop very polished and professional products. They issue tokens and list them on liquidity pools like Sushiswap, Uniswap, PancakeSwap, and similar platforms.

Warning signs of this scam include:

• Low liquidity, easily manipulated
• Floating liquidity (owners can withdraw at any time)
• Promising abnormally high APY

Additionally, other sophisticated scam methods include locking buy/sell functions or hacking the project to dump large amounts of coins into the community, causing price crashes.

Prevention Techniques: How to Avoid Being Scammed?

Before investing in any project, perform basic research steps:

Conduct comprehensive project analysis:

• What problem does the project solve? Is the solution practical?
• Is blockchain technology genuinely necessary for this project?
• How is the community around the project? Is there real engagement?
• What does the tokenomics look like? Are there clear benefits for investors?

Fortunately, many websites and tools now support project verification to minimize scam risks. You can easily check smart contracts for signs of malicious holders or founders that could harm the project.

Protect your wallet and assets — Final crucial steps

When connecting your wallet to a website, ensure it is reputable and secure. Carefully verify the URL, look for community reviews, and confirm SSL certificates.

Once no longer needed, use the revoke function to revoke permissions, preventing malicious actors from exploiting your wallet and stealing your assets. This is a final but extremely important step in safeguarding your digital assets.

Conclusion

What is a scam is not just a definition but a real threat in the cryptocurrency world. By understanding the various forms of fraud, recognizing warning signs, and applying basic preventive measures, you can effectively protect your assets and investments.

We hope the knowledge in this article will be helpful on your investment journey. Stay vigilant and invest successfully! If you have any questions, leave a comment below to discuss together.