What is a scam? A guide to recognizing fraudulent schemes to protect your digital assets

What is Scam? From Traditional Fraud to Sophisticated Tactics in the Cryptocurrency World

Scam is a term derived from English meaning “fraud” – describing actions by individuals or organizations aimed at stealing assets from others, especially cryptocurrencies. Those who carry out these acts are called scammers, and they face legal penalties if caught.

In the past, scams mainly occurred through traditional methods. However, the explosion of the internet and digital platforms has significantly transformed how these schemes operate. Today, scams are more complex and sophisticated, with the ability to spread globally, affecting millions of potential victims across different countries.

Experiencing a scam is common: Why do investors still participate despite the risks?

The phrase “being scammed” has become familiar in the crypto community, describing situations where an investor falls into a trap. Notably, most victims do not realize they are being deceived, or even if they do, they still participate hoping for high returns.

A typical example is Ponzi schemes, where new participants’ money pays earlier investors. This creates a “the earlier you join, the more profit” feeling, encouraging risk-taking. However, when new member growth stalls or becomes unsustainable, the entire system collapses, causing significant losses for investors.

ICO Scam: From the 2017 Boom to Today’s Variations

ICO (Initial Coin Offering) scams are among the most common, booming in 2017 when the ICO wave swept through the crypto market. The mechanism is simple yet effective: scammers design a new cryptocurrency project, then heavily promote it with exaggerated promises or hire famous KOLs to amplify the message. The goal is to attract community interest and quickly build credibility.

Once investors trust and transfer funds during the ICO, scammers abandon the project, steal the money, and disappear without a trace. To identify a scam ICO, watch out for warning signs such as:

• The project lacks clear solutions or practical applications
• It doesn’t genuinely require blockchain technology
• The development team is anonymous, inexperienced, or has a history of scams
• The website or whitepaper is poorly constructed and unprofessional
• The roadmap is incomplete, vague, or lacks specific timelines
• The project shows little community engagement or interaction

Rug Pulls: Sophisticated DeFi Exchange Scams

Besides ICO scams, another rising scam method is liquidity withdrawal (Rug Pull), often occurring on decentralized exchanges (DEX) like Uniswap, PancakeSwap, and Sushiswap. Projects typically start by building a comprehensive and professional-looking product to gain investor trust.

They then issue tokens and list them on large DEX liquidity pools. Instead of continuing development, they withdraw all liquidity from the pool, making it impossible for investors to sell their tokens—effectively rendering the funds worthless.

Signs of a rug pull include extremely low liquidity relative to the project size, unlocked liquidity that can be withdrawn at any time, or promises of unrealistically high APY returns. Other variants include locking buy/sell functions or even hacking the project itself to dump large amounts of coins into the market, causing prices to plummet.

How to Protect Yourself: Essential Checks Before Investing

To avoid falling into scams, conduct thorough research before transferring funds. Ask basic questions: What problem does this project solve? Is blockchain technology truly necessary? How is the community built? What does the tokenomics look like?

Today, many tools and websites help verify projects, helping you avoid common risks. An important step is checking the smart contract to see if major holders or founders have any unusual holdings. Also verify whether the founders are reputable or have a scam history.

When connecting your crypto wallet to any website, ensure that the site is trustworthy and secure for your assets. After completing transactions or if you no longer need the site, revoke permissions to prevent malicious actors from exploiting your wallet and stealing your funds without your knowledge.

Conclusion: Protect Your Assets from Scams

What is a scam? The answer varies widely, from simple schemes to highly sophisticated tricks. Through this article, I hope you now better understand common types of scams in the crypto market and how to protect yourself. The key is always staying alert, conducting thorough research, and not letting greed for quick profits override your rational judgment. Share this article with others interested in cryptocurrencies to help build a safer community!