According to data provided by The Federal Trade Commission (FTC), more than $ 1 billion has been lost to crypto scams since 2021.
The statistic above is quite a bad one, and it could be on its way to $2 billion if crypto users remain ignorant of how to identify good crypto projects.
So here, I will discuss with you how you can identify scam tokens and projects and the features of a good crypto project.
Overview of Scam Crypto Projects
The amount of money stolen from people by scam crypto projects is overwhelming. This has led to questions like "is crypto a scam?"
Crypto is not a scam, but the reality is that there are so many bad projects and scam tokens in the industry.
According to data that was released by FTC, $133 million has been stolen by scammers who impersonate the government from 2021 to 2022.
Not only that, investment-related fraud from 2021 to 2022 is valued at around $575 million.
A very good example of projects that fell off after investors had high hopes of making a profit is the case of One coin.
Onecoin is arguably one of the greatest crypto scams that have happened, and it took more than $4 Billion from its victims.
Cases like this should give crypto users and those interested in the industry a clear overview of what to expect.
Scam tokens exist in large quantities on the blockchain, so as good crypto projects.
How to Know if a Crypto Project is a Scam
Below, I will discuss some of the red flags you should look out for before investing in any crypto project.
Lack of Solid Team
Although most crypto users overlook those behind a token or project, it is very vital you look at the team pushing the project you want to invest in.
Those behind a good crypto project should have verifiable information about themselves and their contributions to the crypto space.
I will give a good example of why a solid team is essential to any great crypto project.
CZ Binance is the founder of one of the biggest crypto exchanges in the world, Binance.
If he should be part of those pushing a crypto project, many users would be relaxed as they could verify his contributions to the crypto industry.
However, this doesn't mean you should invest what you cannot afford to lose in any crypto project.
Apart from the crypto industry, an audit is an important factor when considering assets in other financial markets.
As a crypto user or investor, I wouldn’t recommend investing in a crypto project that has not been audited. Most unaudited crypto projects are scam tokens waiting for unsuspecting users to invest in them.
An audit is a third-party assessment of a crypto asset and its smart contract code, which reveals issues and security vulnerabilities.
With an audited asset, you can assess if investing in a cryptocurrency is safe and profitable.
To avoid asking questions like "is crypto a scam," don't invest in projects that make unreal promises.
Often, scam tokens promise their investors 100% returns within a short period. This is mostly what attracts people to scam crypto projects.
No one controls the crypto market, so don't be deceived when leaders of a project make big promises.
A crypto project which has a solid team, strong community, and realistic promises is less likely to be a scam.
Given the right metrics, you can easily detect if a project will scam users with their internet activity.
When you visit a crypto project website and it has poor designs, it is probably going to be a scam.
Some creators of these scam tokens have gotten wiser and they now create high-quality websites to carry out their illegal deeds.
Even with a top-notch website, reviewing the content of the website can give you a hint on the legality of a crypto project. Their whitepaper, blog posts, external links, and roadmap can tell a lot about a crypto project.
False references, endorsements, and testimonials are usually found on the website of scam crypto projects.
When you go through their social media channels and community groups, you can tell with less difficulty how legit a project is.
Unverified Token Code
If the video of a cryptocurrency is not verified on platforms like Etherscan, then you should have suspicions about the project.
Most times, owners of scam tokens don't verify their token code because it has problems.
Other things to look out for in a crypto project are their whitepaper, roadmap, and their liquidity.
In the crypto industry, there is a massive number of successful and great projects you can invest in, and the same with scams.
Above, I discussed how you could detect good crypto projects from bad ones. Lack of a solid team, unverified token code, and unrealistic promises are examples.