Web3 scams - what to be aware of?
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In the Web3 ecosystem, anyone can initiate a project and begin vending tokens without undergoing any business screening, regulatory oversight, or adhering to a crypto project code of conduct.
Furthermore, owing to the immutable nature of blockchain transactions, it's impossible to retrieve your crypto in the event of a misjudgment. Once it's gone, it's gone for good. Consequently, it's crucial to be cognizant of the various Web3 scams and learn how to detect them before falling prey to them.
In the unregulated world of cryptocurrency, where anyone can create and promote a project, it's essential to be able to identify shilling.
A bit of exaggeration can have a significant impact. Even a small influx of investors can cause an uptick in the demand for a project's token. As the price surges with the increase in demand, the overall value of the project skyrockets. Therefore, it's quite tempting for someone to shill a project, particularly if they have a personal stake in it.
Crypto shilling can be difficult to detect at times. It might not always manifest as someone explicitly stating, "Hey, you should invest in this fantastic token right now if you want to make money and save the world."
Instead, it may take on the guise of a celebrity influencer or high-profile business person endorsing a project in the cryptocurrency space. However, keep in mind that they may be receiving payment for that endorsement or hold shares in the project themselves. Therefore, their guidance isn't impartial and won't benefit you since it's motivated by self-interest.
The takeaway from this is to always ask why. When an influential individual abruptly shifts their attention and advocacy to a cryptocurrency or crypto project - particularly if they displayed little interest in the market previously - there's a high probability that they're prioritizing themselves over you.
It's reasonable to assume that cryptocurrency project teams want their project to thrive, as they probably hold significant shares in it themselves. As a result, they may exaggerate its potential to generate interest and, ultimately, investment.
However, since they are both the project's team and investors, their advice is unlikely to be unbiased.
The key takeaway is to conduct your own research. If a team pledges to achieve the impossible, it's important to corroborate it with their roadmap, white paper, and other sources like Etherscan.
That's a different type of scam that you'll probably encounter in the Web3 space. Rugpulls are precisely what the name implies: someone pulling the rug from under you. In the context of cryptocurrency, a rug pull occurs when a fraudulent project vends crypto or NFTs, assuring a lucrative future.
In anticipation of missing out on this chance to invest before the prices skyrocket, prospective buyers purchase some of the project's assets. The catch is that the project has no future, and the creators are aware of this even as they accept your money.
After you and other investors have invested your money into the project, the demand and price of the tokens surge. The creators or founders then sell (dump) their own shares, which are now inflated in price due to the demand created by you and other unsuspecting investors.
While there is a subtle distinction between simple crypto shilling and a complete rug pull, the project endorsed by a crypto shill may still be genuine, but the shill's endorsement can never be entirely impartial. In comparison, a rug pull is characterized by the project's creators having no intention of following through with it and always intended to abandon it after selling their shares. The project underlying a rug pull is inherently valueless; it's a facade. Ultimately, you and other investors are left holding tokens from a project that no longer exists.
Below are a few essential pointers that can assist you:
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