How to Avoid Scams: 8 Ways to Check if a Token Is a Fraud

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In the fast-evolving world of blockchain and cryptocurrencies, the promise of quick profits often comes hand-in-hand with significant risks. With countless new tokens launching every day, distinguishing between legitimate projects and scams has become more crucial than ever. This guide outlines eight practical methods to help you evaluate whether a token is trustworthy or a potential fraud.

Whether you're a beginner or an experienced trader, understanding these red flags can protect your investments and prevent irreversible losses. Let’s dive into the essential steps for due diligence in the decentralized space.

Start with the Basics: Research and Red Flags

Before diving into technical analysis, begin with fundamental research. Simple tools like Google searches and social media checks can reveal a lot about a project's legitimacy.

Check for Social Media Warning Signs

A verified X (formerly Twitter) account is often a good sign of authenticity. Engage with community discussions to gauge sentiment and detect any coordinated hype or suspicious behavior.

Be cautious of projects with large follower counts but low engagement. Automated comments like “This project will moon!” or “Buy now!” from generic accounts are strong indicators of bot activity. Authentic communities have diverse, thoughtful conversations—not repetitive, robotic praise.

Also, look for transparency. Are the team members publicly identifiable? Do they have verifiable LinkedIn profiles or previous work in the industry? Anonymous teams increase the risk of scams.

👉 Discover how to spot hidden risks before investing in new tokens.

Verify the Token Address via Google Search

Search the token’s contract address directly on Google. For any legitimate project, you should easily find:

If none of these appear—or worse, if scam warnings dominate the results—treat it as a major red flag.

Avoid clicking on Google ads at the top of search results. These are frequently used by malicious actors to promote fake websites or wallet drainers. Always verify the URL before connecting your wallet.

Verify Smart Contract Code on Etherscan

Head to the blockchain explorer relevant to the token’s network—such as Etherscan for Ethereum—and check if the smart contract code is verified.

Unverified contracts are a serious warning sign. When code isn’t public, there's no way to know what the contract actually does. Scammers often hide malicious functions, such as:

While not every unverified contract is a scam, it should raise immediate suspicion. Legitimate projects typically verify their code to build trust.

Read User Comments on Etherscan

Most blockchain explorers include a comment section where users share experiences. If a token is fraudulent, victims often leave warnings here.

Scroll through the comments. Are people reporting failed transactions? Are they saying they can’t sell or that funds were stolen?

One or two negative comments might not mean much, but a flood of similar complaints is a near-certain indicator of fraud. If you’ve been scammed, consider leaving your own review to warn others.

Cross-Check Against DappRadar’s Blacklist

DappRadar maintains a publicly available token blacklist on GitHub. This list includes known scam tokens and malicious contracts.

Before investing, search the token’s contract address in this repository. If it appears on the list, do not proceed—the token has already been flagged by security experts.

This simple step can save you from falling victim to well-documented scams.

Check Listings on Reputable Token Trackers

Platforms like CoinGecko and DappRadar only list tokens after some level of verification. If a token isn’t listed on any major tracker, proceed with caution.

Even if it eventually appears, look out for warnings such as:

These alerts are designed to warn users of potential risks. While new or niche projects may not be listed immediately, prolonged absence from all major platforms suggests lack of credibility.

Legitimate teams actively seek listings to gain visibility and trust.

Evaluate Exchange Listings: CEX vs DEX

Where a token is traded matters. Being listed on centralized exchanges (CEXs) like Binance or OKX requires KYC, audits, and compliance checks. These platforms have reputations to uphold, so they’re less likely to list obvious scams.

In contrast, decentralized exchanges (DEXs) allow anyone to launch a trading pair without approval. While this fosters innovation, it also opens the door to fraud.

A token available only on obscure DEXs—with no presence on established CEXs—is inherently riskier. That said, not all DEX-only tokens are scams; some serve niche utility purposes within specific ecosystems.

Still, limited exchange availability should prompt deeper investigation.

👉 Learn how trusted platforms verify digital assets before listing.

Analyze Liquidity and On-Chain Activity

Liquidity reflects market confidence. Use tools like Uniswap Info or DEXTools to check how much value is locked in the token’s liquidity pool.

As a rule of thumb:

Additionally, examine key on-chain metrics:

Low activity despite heavy marketing is suspicious. Real demand generates real usage—not just hype.

Use Third-Party Analysis Tools

Several tools offer automated audits and risk scoring:

These tools can’t catch every scam, but they add an extra layer of protection when used together.

Frequently Asked Questions (FAQ)

How can I tell if a token is a honeypot?

Use Honeypot.is to test the contract. If you’re allowed to buy but not sell, it’s a honeypot—a guaranteed scam.

Is unverified code always a scam?

Not always, but it’s a major red flag. Without verified code, you can’t audit for malicious functions.

What does low liquidity mean for a token?

It means few people are trading it, making price manipulation easy. You may not be able to sell when you want.

Can a token be safe if it’s only on DEXs?

Possibly, especially if it serves a specific DeFi or NFT ecosystem. But DEX-only tokens carry higher risk due to lack of oversight.

Why do scammers avoid big exchanges?

Because centralized exchanges require due diligence, including audits and team verification—barriers scammers can’t pass.

What should I do if I’ve been scammed?

Report the token on Etherscan, notify platforms like DappRadar, and warn others online. Unfortunately, fund recovery is rarely possible.

Final Thoughts: Stay Vigilant

The decentralized web offers incredible opportunities—but also attracts bad actors. By applying these eight verification steps, you significantly reduce your chances of falling for a scam.

Always remember:

"If it sounds too good to be true, it probably is."

Do your own research, use trusted tools, and never invest more than you can afford to lose.

👉 Access advanced tools to analyze token safety and market trends instantly.

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By integrating these practices into your investment routine, you empower yourself to navigate the crypto landscape safely and confidently.