Crypto is synonymous with tech, innovation, and being fast-moving and volatile. However, we sometimes neglect the bad actors in the industry. Crypto fraud and scams are an ever-growing problem, and everyone should be vigilant to protect their funds in their wallets. I've also encountered many crypto scams. Here's my story...
The story takes us back 4 years to 2020. I had just graduated and started learning about crypto, particularly trading. Setting up my wallet for the first time was an amazing experience. I carefully copied my seed phrase and began exploring DeFi apps. It was actually the start of the bull run, when every coin was pumping out of nowhere.
Though I had accounts on many "CEXs" (centralized exchanges), the "DEXs" (decentralized exchanges) were where we saw crazy pumps. Unknown coins listed on PancakeSwap or Uniswap pumped 3-4 times in just a few hours. And the biggest attraction was NFTs (non-fungible tokens). A few unique images on the internet reshaped how we see and collect art. Digital collectibles were peak performers then.
โกHow I Got Trapped?ย
And that's where the problem started when I was frequently using my wallet for interacting with lots of Dapps for trading and collecting NFTs. I became careless and paid the price.
I faced my biggest scam with Stablemagnet, a DEX on BNB Chain. It was famous for 10-20x coin pumps back in the day, but wasn't as popular as other DEXes. The StableMagnet team built a backdoor into their smart contract that allowed them to drain the funds in liquidity pools and from users with active approvals. I connected my wallet to the DEX and it drained all my assets (about $2000)
๐ How They Scammed?ย
Scammers deployed the code library different than the one cited in the source code. Neither Etherscan nor BscScan could verify the library source code. Users were granting permissions to StableMagnet and thereby allowed scammers to drain pairs.
The back door in the smart contract allowed scammers to transfer more tokens to all wallets that previously approved StableMagnet. And most users who didn't revoke their accessย after use like me were affected badly. The scam was about $27M in total.ย
๐ก How To Avoid These Incidents?ย
Those were really tough times for me. $2000 back then was almost my entire portfolio, and losing it completely was a dreadful experience. So, I studied afterward and stayed in the market to understand various security measures to tackle these kinds of situations. Here are some tips you should follow to avoid these incidents:
1. Never interact with unknown Dapps with your main wallet. Always interact with reputable sites.
2. Use a burner wallet for DeFi exploration and NFT trading. Your main wallet should only be used for long-term holdings.ย
3. Don't chase unrealistic promises like 50%-100% APR on ETH on XYZ platform. First, learn and understand what they are offering before proceeding.
4. Most drains are actually the user's fault. Read what you are approving. Infinite permissions are just a trap to drain your entire wallet.
5. Always revoke permissions after using any Dapp. Never let it continue to access your wallet.
๐ฅ Great applause for Binance's initiative! To build a scam-free Web3, we need to educate and inform users about the different types of scams and how to combat them. This campaign is a great example of how to do that.
โก ๐ ๐ผ๐ฟ๐ฒ ๐๐น๐ฝ๐ต๐ฎ, ๐๐ผ๐ถ๐ป ๐จ๐, ๐๐ผ๐น๐น๐ผ๐ ๐จ๐, ๐ฆ๐ต๐ฎ๐ฟ๐ฒ ๐จ๐ โก @Techandtips123