The blockchain is now flooded with ways to make quick and easy money, but do you know how to screen the tokens and determine if they are safe?
In this article, we will discuss how to check if your tokens and projects are valid. We hope this will help you increase your chances of achieving profitable growth.
To check the legitimacy of a token, you can follow the most primitive method of searching on Google and Twitter. This includes researching the token and its team, checking for red flags, such as official websites, news and verified social media accounts, etc.
Check the token on Twitter and Telegram
You can participate in token discussions to understand the community's views and opinions. But don't add strangers at random.
Be cautious of projects with lots of social media followers but little activity. Automated comments from spam accounts should also be a cause for concern. If all the comments are “this is a great project” and “the moon is coming soon”, be wary.
To view token information on Twitter, type: $TICKER in the search bar.
Or use#TOKEN_NAMEto find out more about the project.
If the token was recently launched, check for the first news about the token first. To do this, type $TICKER in the search bar and scroll to the bottom of the feed.
Usually, the first news about a coin comes from news bots or influencers, such as in the following cases:
Generally, you can see the introduction on Twitter. If you see repeated news and the same words calling for buying, then you should be careful, the possibility of a scam is very high.
To find token projects on Twitter, go to DexScreener and insert the contract of the token (for example, Ponke - Non-Financial Advice):
In the upper right corner you will see the project's website, Twitter and Telegram. By visiting these links you can research the project:
If you can’t find any project links, i.e. no Twitter or Telegram, etc., this is also a red flag.
Check the token address in Google Search
Of course, you can also use Google to search online to find white papers or related information about tokens. It is basically easy to find. If you don’t have it, it must be regarded as a danger signal. Also remember not to open the ads at the top of Google at will, as they can easily link to your wallet. By the way, remember to use another website for searching, and don’t open it together with the website of the wallet with assets. I mean, in case you accidentally click on something or browse to a phishing website, you will be hacked. Of course, this possibility is not very high, so just in case.
Check in Explorer
Visit the block explorer of your chosen chain and see if the source code is verified. For example, on Ethereum’s block explorer Etherscan, it looks like this. The code shown below is unverified, which should be a clear warning sign. If the code is unverified, you may be dealing with a scam.
View the comments section
Most of the time there are no reviews, but if the project is a scam you will most likely find an angry mob in the comments section. So be sure to check it out. If someone calls it a scam, 99% of the time it is. Also don't hesitate to leave a review if you have fallen victim to such activity.
When analyzing a coin, the comment section can be found on this line (example on Etherscan), but for most coins it is hidden.
Check DappRadar blacklist
DappRadar allows the community to help identify scam tokens. Once found, you can add it to the token blacklist on GitHub.
Also, if you are researching coins, you can check the blacklist to see if your coin is on the list. If the coin address is on the list, then the coin is definitely a scam.
Check how many exchanges the token is listed on
If a token is only traded on a few decentralized exchanges (DEX), it is almost certainly a scam. Listing on a centralized exchange requires KYC and additional trust, and the larger the exchange, the better the reputation of the listed token.
Does this mean that a token that is only listed on a decentralized exchange is necessarily a scam? No. Some projects do not need a large amount of trading volume, and other projects may only offer tokens to Web3 users and not to token traders.
Since most meme coins show significant gains before appearing on CEXs, having a coin on a CEX is not a strict criterion for coin analysis.
However, cryptocurrencies listed only on decentralized exchanges represent a riskier investment.
To find which exchanges list the token, go to Coingecko, enter the token address in the Search bar, and select Markets.
If the token is listed on at least one CEX, it is a green signal. In this case, the token is listed on CEXs: Bybit, BingX, Bitget, Gate.io:
Check the liquidity of the token
It is very easy to check the liquidity of a token on platforms like Uniswap V2 or other decentralized exchanges.
Liquidity refers to the amount of cryptocurrency or tokens locked in a smart contract, and if liquidity is below $100,000 or drops significantly, you are most likely dealing with a scam.
You can check the liquidity on the well-known DexScreener. After entering the token contract, you can see the liquidity in the middle of the right side:
If a lock symbol inside a green circle appears next to the liquidity amount, it means that the liquidity has been locked - another green sign for the project.
Additionally, it is important to consider the fully diluted valuation (FDV) or market cap. The larger these numbers are, the more buying volume is required for the token price to increase.
Good indicators for such tokens are liquidity volume starting from $1 million, token age more than 2 days, and a liquidity/FDV ratio of about 1:10.
Check third-party analytics tools
Here are some token analysis tools:
Smell test — an automated audit of a token. The lower its score (out of 100), the more likely it is that the token is a scam.
Check your coins on honeypots. Honeypots are smart contracts that intentionally create obvious software flaws. When an attacker attempts to exploit the flaw, another hidden piece of code is triggered that essentially attacks the attacker. Whether you intend to be a crypto hacker or not, you should always avoid honeypots.
Learn the basics of DEXScreener
To identify users who have recently purchased tokens for more than $5,000, click on “USD” at the bottom of the DEXScreener
Enter the amount of $5,000 (optionally, you can specify a maximum token purchase amount) and press “Enter” or “Apply”:
After this, all recent buyers of tokens at a price of $5,000 or more will be shown:
You can also view the buy zones for certain wallets. To do this, click on the cup icon next to the desired wallet and view all buy zones and token purchase levels on the wallet chart:
Analyzing Tokens Using De.Fi Antivirus
De.Fi, a project that recently distributed an airdrop to its community, acts as an antivirus by evaluating token contracts based on various parameters and providing an estimated security balance for the token:
Using TTF Bot
This versatile bot can quickly and automatically analyze coins, which is very convenient for coin hunters. Pay special attention to the amount of liquidity locked or destroyed. If liquidity is destroyed, it is a green signal.
Also, pay attention to the size of the tax on the token. If the tax is zero, then this is a sure thing.
Also, pay attention to the number of holders and their share of supply:
If the top 10 holders hold more than 30-50% of the token supply, the likelihood of encountering a scam is higher.
in conclusion
By using the above analysis tools, you can learn how to avoid scam coins and profit from legitimate coins. However, always remember to do your own research (DYOR).