Scam Alerts in DeFi
This guide will help you identify possible scams in the DeFi industry. It is not intended to be an exhaustive guide, but it is basic to the analysis that I suggest you carry out, before making an investment in any proposal in the decentralized finance ecosystem.
Always DYOR (Do Your Own Research).
It is likely to be a fraud , if you have at least 1 clue (in numbers) of 4 different themes (in letters) . The risk increases if more are fulfilled.
A. White paper
- does not have a detailed plan.
- it does not have a roadmap with clear dates.
- did not meet the above deadlines.
- does not identify its founders
- does not have a website, or is under construction
- it does not update or display progress reports.
- only trades on AMM platforms
- has no demonstrable external audit
- does not have DAO (decentralized governance)
C. The team
- does not show knowledge.
- it has no proven track record.
- some member of the team was involved in a proven scam.
- it is not endorsed by community references
- it is not clear what problem you are trying to solve.
- the proposed solution makes no sense.
- it is a clone of a successful project that exists in the market
- no social media on Reddit, Telegram, Discord, Twitter, Facebook, Instagram
- their community is not large, or if it is large, you detect that their users have no activity, so they turn out to be bots.
- has no publicity from recognized media outlets, or has poor reviews
- few people doing hype
- ensures profitability
- promises high profitability
- promises short terms to recover investment
- low liquidity, low volumes, or low transactions, the last 24 hours.
F. ICO, IDO, ISO
- has initial launch with presale and urgent deadlines
- private pre-sale with great discounts to the first participants
- presale with distribution of large amount of your tokens
G. Monetary policy
- has no planning in the issuance of tokens
- founders hold less than 10% of tokens
- founders hold more than 80% of tokens
H. Source code
- its source code is not published on GitHub, (it is not open source)
- the source code was criticized for bugs or flawed design
- does not present external audits
- presents external audits prior to changes in the protocol
I. Airdrops, Giveaways
- too much emphasis on promotion relative to project content
- too much in relation to your tokens.
- advertising with the image and name of media celebrities
- they ask for the public keys of your wallet to deposit money