Easy tips on how to verify tokens

The growing popularity of cryptocurrencies leads not only to the emergence of the new services but also contributes to the number of scammers that are trying to earn easy money. One of such scam types is creating a scam-token to attract investors in order to steal their funds later.

There are several kinds of scam-token fraudshere are the most common ones: "Rug pull" - a classic fraud scheme, when the creator of a scam-coin (token) actively pumps the price of the coin (even in several times), including buying it by himself. After the coin reaches a certain price threshold, the creator of the token sharply withdraws liquidity, the price of the coin drops almost to zero and the investors are left with nothing.

“Honey pot” is a cheating scheme under which the creator of a scam token initially includes in the smart contract the possibility only to buy such coin, but limits or excludes the possibility to sell it. In such case, those who invested their money in the token will not be able to get it back, with all coins going to the creator of such a token.

There can be also a mix of the 2 schemes mentioned above, for example, the creator/administrator of a scam-token can intentionally temporarily block the possibility of withdrawing funds when the token value reaches high values in order to provide a unique opportunity to sell the token at a profit to the creator himself.

In this review, we also would like to focus on the main attributes of a token, as well as related objects available for the non-professional cryptocurrency trader to study and verify. The TokenScope team has listed below main token criteria that you should pay attention to before buying it:

• Token existence time. Despite the fact that the scam of the token is possible even after several years of its creation, with 90% probability it will happen in the first months of its existence;

• Token capitalization. According to economic theory, this indicator shows the volume of funds invested in this token, but in practice it is far from the real figures, therefore, it is recommended to focus on the fact that the optimal figure of capitalization for a cryptocurrency project is from 10 to 250 million tokens;

• Presence on the exchanges. You also need to pay attention to what exchanges the token is listed on and what exchanges it is traded on. If a token is traded on a single exchange, it might pose some risks;

• Current and historical financial statistics of the coin. Studying the historical financial activity of the coin will allow to analyze the dynamics of the coin's activity in the long-term, medium-term and short-term retrospect;

• Website availability and activity. It is necessary to check how long the website exists, whether it is a professional website or a one-page site created by amateurs;

• The identity of the token's creator-investor and the experience of the development team that created the token. The study of the previous projects in which the project leader and his participants were involved through the popular Internet resources, including social networks, can tell a lot about their experience. If such projects were associated with a scam or had a negative result, it is necessary to take these risks into account;

• Official documents of the project. Studying the official documents of the token allows you to assess the level they are prepared. In case of a scam project, official documents are copied from the creators of other tokens, they even can include grammatical errors. In addition, you should pay attention to the contact information of the token creators;

• Actions in the source repository code. Most software projects written on blockchain are open sourced. Sometimes there are certain reasons why the code should remain closed. If the code is open, activity in the source code repository is usually a good indicator of how well development is going. You can read any open issues, see how many times a day the code is committed to the repository, and see how many people are contributing to the project;

• The mood of the community on social media regarding the coin in question. The easiest way to check the token remains the communication in social networks and thematic fora, there you can find both project participants and people who have already invested in the token;

• The information background around the token and related news articles from the media and news agencies, including the channels through which the token is promoted and advertised. It is also useful to look at the number and quality of the subscribers of the token project in social networks, such as Telegram or Twitter;

Of course, even if you check all items above it cannot guarantee you the reliability of a token, because bad guys are always inventing new schemes and methods of scams. Nevertheless taking into account these factors before investing is an important security component, which should not be neglected, in order to save and increase your funds in cryptocurrency.

It nis strongly recommended to treat all new coins with caution and, if possible, to check them on your own. Conduct your personal investigation or refer to the professionals.

TokenScope Platform will shortly launch the service for checking coins for scams, using certain algorythm and assigning the rating to the verified coins. Follow updates on TokenScope.com.