What does Scam mean? How to Recognize Types of Crypto Scams to Protect Assets

When entering the cryptocurrency market, you’re sure to hear about the concept of “scam” – an English word that means scam. This is a bad act that individuals or organizations carry out in order to appropriate the assets of investors. What does a scam mean in today’s crypto market landscape? It is not only the usual form of scam, but also a danger that always lurks among unwarned investors.

Those who commit scams are called “scammers” and will be subject to legal penalties if caught. However, the scale of today’s crypto scams can spread to many countries with millions of victims affected. With the development of the internet and networked devices, phishing methods are becoming more and more sophisticated and sophisticated.

Understanding Scams and Scams in Crypto

When you are “scammed”, it means that you have fallen into the trap of scammers with bad intentions. Most victims don’t realize they’ve been scammed until it’s too late, or they even know it’s a scam but still prefer to participate in the hopes of making a quick profit.

A good example is the Ponzi scheme, where the latter investor pays the former investor. This model promises high profits, making many people still accept to participate even though they know it is a scam. However, when there are no new members joining or the number of people is overcrowded, the model will collapse and leave unpredictable losses for investors.

Common types of scams that investors need to know

ICO Scam: Cryptocurrency Issuance Scam

ICO scams became especially popular in 2017 when the ICO wave exploded around the world. The way it works is simple: scammers will initiate a new cryptocurrency project, then conduct aggressive advertising, hire KOLs to promote it, or make big promises to attract interest from the community.

Next, the project issues coins or tokens through an ICO to raise capital. Upon successful collection of a large sum of money, the scammers disappear along with all the investor’s capital.

To recognize ICO scam projects, pay attention to these signs:

• The project does not have a clear solution or practical application
• Doesn’t really need Blockchain technology
• Anonymous or inexperienced development team, even with fraudulent criminal records
• The website or whitepaper is poorly built and unprofessional
• Vague and unclear roadmap of development plans
• The project lacks community interest and no engagement

Liquidity Pull Scam

Another form of scam often occurs on decentralized exchanges (DEXs) such as Uniswap, Sushiswap or PancakeSwap. In the early stages, these projects often build very high-quality and methodical products to create trust. They then issue tokens and list them on liquidity pools.

Warning signs of this type of scam include:

• Very low liquidity, easy to manipulate
• “Floating” liquidity (can be withdrawn at any time)
• Promises unusually high APY rates
• No liquidity lock (LP lock) or vesting lock for the team

In addition, there are other variations such as locking the token buy/sell function or the project hacking itself to release large amounts of coins into the market, causing a price drop.

How to Prevent and Protect Assets from Scams

Before investing in any project, you need to do thorough research. Ask yourself: does this project have a clear solution? Is Blockchain Technology Really Needed? What is the community of the project? Is Tokenomic Reasonable?

There are now many websites and tools that help you test a project to avoid scams. You can check the smart contract to see if the main holders or founders have bad signs affecting the project.

It is very important that when connecting your wallet to any website, make sure that the website is official, reputable, and ensures the safety of your assets. Once you don’t need it anymore, you must revoke access to avoid being misused or misappropriated assets.

Besides, always be warned, do not blindly invest for the sake of potential profits. Remember, “high risk – high return” can lead you to scam traps. Whatever a scam means is just a starting point – protecting your assets depends on your warning and knowledge.

Hopefully, this article has helped you better understand the types of scams in the crypto market and how to protect yourself. Wish you make smart investment decisions!