Despite the recent downturn in the cryptocurrency market, investor interest in high-risk investments remains strong. MEME tokens, highly volatile digital assets based on internet memes, appear to lack practical applications. Their prices can skyrocket suddenly, offering significant returns to some lucky holders. However, trading MEME tokens can be a perilous journey fraught with risks such as rug pulls, pump and dump schemes, and price manipulation, which have caused substantial losses for many users. One user humorously described their misfortune as getting “an arrow to the knee” during this adventurous quest.
PandaLY’s security team aims to share common on-chain trading security risks and preventive measures from a practical perspective to help MEME token users navigate these dangers effectively.
Case Studies of User Risks
Case 1: Pixiu plate
User A discovered a popular MEME token on Twitter and made a purchase. When the price rose, they attempted to sell but were unable to do so.
Our team found that the token was part of a pump and dump scheme, where the user’s address was blacklisted, preventing them from completing the transaction.
Case 2: Malicious Rug Pull
User B was recommended to buy a MEME token on a Telegram group. After an initial assessment of liquidity and holdings, they deemed the project reliable and invested. The next day, the token’s liquidity was drained.
We discovered the project had hidden issuance logic, making it a malicious rug pull.
These cases underscore the importance of understanding and learning from risks, as highlighted by our security team at PandaLY
Risks of MEME Trading on EVM and Solana Networks
Common Risks:
- Low Issuance Cost: The technical development threshold for MEME projects is low, leading to potential large-scale sell-offs that harm investors.
- Price Manipulation: Without technical support and intrinsic value, prices are easily manipulated by a few individuals.
- Project Centralization: Decision-making power is often concentrated, driven by personal interests, increasing risk.
- Trading Friction: Poor liquidity and high transaction taxes increase trading costs.
- Rugpull Scams: High anonymity and lack of regulation facilitate fraud.
On-chain Risks:
- EVM-based Chains: These include malicious logic MEMEs (pump and dump schemes, malicious rug pull tokens) and malicious actions by project teams (special permissions, etc.).
- Solana Chain: Malicious actions by project teams (special issuance permissions, freezing user addresses, direct market dumps).
Preliminary Screening of High-Risk MEME Projects
Although there is no foolproof method to avoid risks, the following tools and criteria can help users make preliminary assessments:
- dune.com: Custom queries to analyze and monitor on-chain data.
- Dextools.io: Basic token information and simple security screening.
- Skyknight MemScan: Real-time contract security and on-chain behavior analysis.
Additionally, evaluating the security of smart contracts, token distribution, liquidity, trading activity, and project team transparency can provide further insights.
Limitations and Risks of Launchpad and DEX Platforms
Launchpad Platforms:
- Project Quality: Varies greatly; insufficient review processes can introduce risks.
- Centralized Fund Management: Increases management and operational risks.
- Market Manipulation: Project teams or large investors may manipulate the market.
DEX Platforms:
- Liquidity Issues: New MEMEs often have poor liquidity, leading to slippage and volatile prices.
- Smart Contract Vulnerabilities: Potentially exploitable by malicious actors.
- High Transaction Fees: Particularly on networks like Ethereum.
- Malicious Backdoor Code: Can be deployed by project teams to manipulate tokens.
- User Experience: May be less user-friendly compared to centralized exchanges.
Disclaimer：This article is for reference only and does not constitute investment advice or an offer. Digital asset trading involves high risks. PandaLY advises users to carefully consider their financial situation and understand and comply with relevant laws and regulations.
About PandaLY
PandaLY is a company focused on blockchain security. Our core work includes blockchain security research, on-chain data analysis, and asset and contract vulnerability recovery, successfully retrieving stolen digital assets for individuals and institutions. We also provide project security analysis reports, on-chain tracing, and technical consulting/support services for industry institutions.
Thank you for reading. We will continue to focus on and share blockchain security content.
