Scams to passively earn (but most probaly lose) money in crypto! 📉

Published in

Coinmonks

7 min readAug 29, 2022

The world of opportunities

(read for free through Ko-fi) The world of Blockchain is filled with opportunities. Receive some airdrops here, provide some liquidity there, do some yield-mining somewhere else, lend some crypto to that crazy trader... If you are familiar with web3 and DeFi you’ve probably heard of most of the above, and then some. Most of the projects built on the Blockchain are there to create value and add value to the Blockchain and the DeFi community, and they are usually incentivised in an either sustainable or unsustainable way. This is fine, as long as the project itself serves some broader goals than just to “make money”…

And this is where the apex of today’s post lies; whilst there are tons of legit projects out there that can make you sustainable passive-income, there are equally as many (maybe even more?) projects that are build just to rob you of your money. They will promise great returns, “and turn a millionaire in just 2 months!”, and tell you they now finally have a sustainable scheme to provide such wealth to you, all for the simple price a 100$ investment…

low and behold; almost anything above 20–30% apy is not sustainable! — Vitalik Buterik(Src)

Although most of the projects that give unrealistic projections are pretty clear from the beginning, still loads of money flows to them. Why, I hear you ask? As most people in crypto, everyone is out there to make a quick buck. Some of these projects give huge returns if you’re early or lucky, but almost always you will be paying for someone else’s profit when investing in these projects. I fell for it myself as well, even after being so convinced it wouldn’t work out. Surprise surprise; I got burned and lost my investment. Some projects even require you to lock your investment for eternity, so you’ll never be able to sell your holdings when the price skyrockets or, much more likely, falls to the ground.

I’m here to tell you about a couple of these projects, as they still can provide passive income. Be careful however, as they will most likely Rob you of your money. Anyway, here we go!

Arbitrage platforms

Risk: HIGH — Returns: -100% — First off, we have arbitrage platforms. Although there are certainly some legit ones out there, most arbitrage platforms are a hoax! Anyone telling you they got a working arbitrage bot/platform/server/website is aiming for your money. No reasonable developer or organization will give you access to a working and tested money-printer. I’ve seen arbitrage platforms offering a 45% APY, which can’t be as it is too consistent, too high, too good to be true! There have been multiple (COTP, for example) platforms offering arbitrage services, paying the profit of investors from investment with money from new investors, while eventually rug-pulling and disappearing. As the first person to join youll make some really nice rewards, but most likely you’ll and up with all your funds lost…

Arbitrage smart-contract

Risk: HIGH — Returns: -100% — Even more dangerous are the arbitrage smart-contract tutorials you’ll start to see everywhere when researching this topic. Don’t fall for them! These tutorials will tell you you’ll be able to automate arbitrage trading and reaping large amounts of profit, just by releasing your own smart contract. The only thing you’ll have to do after replying to the contract is to provide the contract with some tokens for gas. Sadly, this gas-money will immediately be sent to the scammer. It’s an easy way to lose small amounts of money if you don’t know any better.

Rebase tokens

Risk: HIGH — Returns: 1%+ daily — This one probably doesn’t even need an introduction if you are somewhat familiar with DeFi. Rebase tokens are tokens, most of the time without any utility, that use a lot of game-theory to create profit or losses. They promise a certain return (let’s say 1% a day) and use all kinds of taxes, rules and schemes to distribute the rewards. In the end, you’ll get the promised returns. Sadly, everyone else does as well.

Compounding, together with the game-theory means early investors will almost always win, and you’re only able to win if the price of the token keeps up. There is huge sell pressure on these tokens as everyone wants their return on investment (ROI) back as quickly as possible. Often, they even require you to lock your initial investment, so when the price plummets you can’t do anything about it either. Take a look at projects like Drip, Piston or Furio to figure out that investing in these types of projects isn’t a good idea, and whilst they promise passive income, they will only leave you with a bunch of useless tokens…

Nodes

Risk: HIGH — Returns: 1.5%+ daily — Next up we have nodes. Nodes are like rebase tokens, but do sometimes provide more utility with their token. When purchasing tokens, part of it goes to a treasury where it is invested in various DeFi projects and protocols. The returns are then used to pay their investors. More often than not, however, the projects use part of the newly received funds to pay the returns of older investors. Because of the high rewards the tokens experience immense inflation, making for a downfall of the tokens price. The $THOR token, for example, has seen a high of more than 320$ which now has plummeted to about 1,50$. This is more than a 99.5% downfall of the tokens price. If you would’ve bought the token, you’d have received a lot of interest on it, but it wouldn’t have made up for the immense price difference. In the end, all node-based projects will end up like this as the tokenomics are just not sustainable… you have been warned!

Miners

Risk: HIGH — Returns: 3%+ daily — On almost every chain that supports smart-contracts you’ll see so called “miner” projects. These miners work like the nodes, but they don’t even have any real utility or value going for them. They’re often the most classic-of-classic Ponzi schemes you’ll find out there, promising high returns which they are only able to provide by routing new money to the old money. Not much to say else then to stay far away from these schemes!

Passive income NFTs

Lastly, lets take a look at so called “passive income” NFTs. Projects that work like this offer passive rewards to their holders. You buy the NFT during the mint for an X amount of blue-chip crypto. After the mint you’ll then be able to stake the NFT to receive their native tokens. Most of the time, however, the tokens don’t hold any value and don’t hold any utility. You’ve started with buying a NFT that has “utility”, but ended up with a NFT that gets you worthless tokens. For passive income NFTs to succeed the tokens need to hae utility as well, which is up for the team or the DAO to create. Some projects use the gathered money from the mint to invest in blue-chip staking, which is one of the few ways real passive income can be made using NFTs. When you want to invest in these kinds of projects, very carefully research the tokenomics and utility the NFT and their token offers. As stated by Vitalik, anything above normal CeFi interest rates is almost impossible, so don’t ignore the red flags!

How to protect yourself?

The Blockchain is a scary place to be, and you should be very careful when interacting with any contract or project. If something seems out of place, check websites like Reddit to find other user-reviews before interacting with it. Don’t get too greedy when you see the price pump, as almost everything based on these types of projects is very short term and most likely results in a dead coin or project. Affiliate and guerilla marketing is their way to attract short-term investors. Websites like Youtube and Medium will be covered by praising content, just to attract more investors and pumping the price. Don’t get fooled!

Do your research very well before aping into any project, and remember that when something is too good to be true, it most of the time is!

If you have any ideas on other passive income streams, please let me know! I’m always interested in trying new options, and as I have a lot of time on my hands I’d love to explore!