3 Crypto scams on Medium you need to watch out for!
Introduction
(Scroll down to see the scams and ponzis) As I've been scouring the internet looking for passive income strategies, I have come across many posts, websites and apps that claim to be the next moonshot, make you rich fast or promise immense APY’s for almost no risks. I have fallen for these tricks, and although I haven't lost a lot of money (luckily) I want to warn anyone who might fall for these “too good to be true” promises and lose their investments. If you want to look at my sustainable passive income streams, take a look at my other stories or click here!
If you ever find yourself wondering if the project you are researching is a scam or a Ponzi, ask yourself the following questions about the project;
- High returns with little or no risk. (“1% Daily profit!”)
- Overly consistent returns. (“3,876% a year!”)
- Unregistered investments. (you have no idea where your money goes)
- Unlicensed sellers. (Unaudited or unknown team/project)
- Secretive, complex strategies. (Unclear tokenomics/heavy tax systems)
- Issues with paperwork. (Unlogical updates from team or project)
- Difficulty receiving payments. (difficult to get your investment out)
In this article, I will talk about 3 Ponzi's and scams that I have found on Medium and the internet that you should be aware of!
Rebase tokens
With the introduction of OlympusDAO and Wonderland TIME a new hype around rebase tokens has been introduced, and with the project forked many times on different chains its almost impossible to have not noticed these projects pop up left and right in the DeFi scene.
Rebase tokens are a little bit of a hidden ponzi scheme. They promise a very high APY (1), and compound it daily or hourly to increase it even more (2). Sometimes the people behind these projects are unknown, which backfired with Wonderland TIME (4). The tokenomics and strategies are often pretty clear, but the problem with these projects are that they reward early adopters/long term holders. Early buyers and long term holders will win, as their tokens go parabolic. Making this problem even worse, most of these projects offer ways to mint new tokens at a discount, increasing their stake of coins over yours. You will lose both ways…
An example; The person who bought 1(!) OHM at launch at a price of about 384 dollars would now still have a value of over $6.000, even now the price of the token has tanked. It would be almost impossible to outgrow the early investors and long-time hodlers..
Frontrun/Sniper bots
As I am currently learning the Solidity smart contract language I have come across many posts on Medium and Youtube where people offer their “super successful bot” that will make you immense profits without any effort. The scammers make you deploy a smart contract that is running a bot and looks for frontrun opportunities or liquidity snipes, and promises 10x on your investment within a very short time (1).
Often times, the posts or videos have thousands of views (some over 30k), many likes and loads of comments telling you how great the bot has been working for them. Without the dislike counter, its hard to not think this would be legit! The videos and posts include easy to follow tutorials that helps you deploy your own smart contract to a chain of choice, and to start the bot you need to send some funds to the contract to cover base gas fees.
The problem here is that the contract you upload is infected, and the code in the contract is a decoy. Hidden in the large contract is code that automatically send the received funds to the wallet of the scammer (5), and you will lose all the funds you send to the contract. Even if the contract seems to be legit and no funds are being send to an unknown wallet, every sensible trader would keep a good working bot a secret, as publishing it would only disadvantage his own position.
DRIP
Lastly, I want to talk about the DRIP network. This will probably make a lot of people angry, but Drip would probably be the most obvious Ponzi in this article. Drip is a network that promises a return of 1% Daily (1) and promising 365% a year (not compounded)(2). Even more so, Drip relies heavily on affiliate marketing, promising higher returns for people on top of the pyramid if they bring in more people. You can ignore the affiliate marketing, but to stay competitive and receive bigger rewards affiliate marketing is a big part of the ecosystem.
Next to the problem that rebase tokens have with their index increasing, only rewarding early investors and long-time holders, Drip also relies solely on their taxes to pay out rewards. Every action you do in their faucet takes a portion of your drip, and uses that to pay the rewards to the holders. When people would stop to airdrop, compound, stake or unstake their Drip the rewards and network would collapse. (5)
The last massive red flag is the fact that you cannot withdraw your deposited Drip! (7) You are only able to remove 1% of your investment daily, so even if you wanted to withdraw your money it would be almost impossible. All transactions you do on the Drip network are heavily taxed, even up to 50% for bigger transactions, meaning you never can withdraw all your rewards.
Conclusion
There are, of-course, many other scams that exist in the crypto space. In this article I want to warn for the scams and Ponzi’s I almost fell for, so you will most likely encounter these at some point or another as well. This is by no means financial advice, and feel free to put your money where-ever you want. I merely wrote this article as a warning to people who might not know what these projects are or do.
Feel free to contact me for ideas, feedback or discussions!
Stay safe
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