In this tutorial we’re diving deep into rug pulls, honey pots, smart contract dogyness & liquidity pool manipulation. So hold on tight… because I’m going to teach you how to not get scammed.

Honeypots

What it is overview: Honeypots are when the token creators bait traders into a seemingly attractive token opportunity. It’s called a honey pot because the scammers are using the token as bait to lure bees into their trap. But once the bees land, they can’t escape.

Let’s look at a honeypot memecoin scam to see how they look. Here is a honey pot called bobo the bear.

Bobo Eg: https://dexscreener.com/bsc/0x735713ead3ff6d94741f04ccb7eab8846af7c684

In order to understand how honey pots work, try to put yourself in the mind of a honeypot token creator. They are trying to create an offer which looks so irresistible that buyers can’t help but put their money into the pot.

Notice that this honey pot has a paid listing, they have some project art, a social channel and so on.

They also have relatively organic looking chart here with both buying and selling activity early on.

What’s most attractive about this listing however, is that they have locked their liquidity. It’s their way of saying “hey look, we’re low market cap, we’re super risky and understand your concerns. So to help you trust us, we’ll lock our liquidity as a way of promising you that we won’t rug you”.

And on the surface, this might seem like a fair deal. I’ll take a risk on your project and you promise not to intentionally hurt me. Not bad right?

Mmm… not so much. You see, you have to dig below the surface here, because the way the honeypot trap works is that once you put your money in, you can’t get it back out again.

But rather than being honey it’s a smart contract function that scammers use to steal your crypto.

Essentially there is some type of ‘blacklist” feature built into the smart contract which disallows buyers from selling their tokens. So you can get in… but you can’t get out.

Let’s go to bnb scan here, to have a look at this contract address. Normally, smart contract creators try to hide the blacklist function. It’s not something they often call “blacklist”, “scam” or “gothcha”, but here, you’ll see this option for “is bot”. On the surface, this, to me, looks like a blacklist feature, or a honeypot function. WE could grab any legitimate buying address from dexscreener, put it in here, run it and you’ll see the boolean spits out a value of “true”, essentially classifying all legitimate buyers as bots and blacklisting them from being able to sell. And that’s why we see a little price run up here and then no selling. Here the price action ends on a high, And that’s because the scam is over and nobody can sell.

Some scams like this just pump the token and then blacklist all buyers. Others are more creative and instead of blacklisting everyone, what they might do is blacklist legitimate whales. This stops any major selling opportunities and keeps the price running high with smaller trades.

On dexscreener always look down here to see if you see any blacklist warnings and always run any memecoin you’re interested in through smart contract checkers.

But it’s not just about knowing how to protect yourself. It’s also about learning how to benefit from the data that exists but is just not visible. For example, we recently published a tutorial on how to use dex screener, which I’ve linked to below and in the video card up here somewhere. In that video I show you how token creators who don’t pay, don’t have their token logo or socials show up. So any trading is pure speculation. However in that video, I show you how to find the token URI which will show you that data. This gives you a huge advantage, so I encourage you to check that out.

Also, if you’re interested in learning how to create web3 apps like dexscreener that will allow to to generate crypto on auto-pilot without you having to know how to ho code, then be sure to check out the link in the description to learn more about our no-code blockchain development course. In our course, you’ll learn how to find hidden memecoin opportunities in dexscreener, how to create dapps, how to create crypto trading bots and much more. The course link and a coupon code can be found below.

Rug Pulls

Now, let’s talk about rubs. There are what’s known as soft rugs where the developers of a project abandon it, leaving token holders with worthless tokens. And then there are hard rugs…. Which are fast and painful.

Fast Rugs take place when the liquidity is removed from a memecoin’s liquidity pool.

If you’re looking at a token, and there is no lock symbol here… that means that the liquidity pool creator can remove all of this liquidity with the click of a button. When that happens you’ll see “remove” in the type column and you’ll see this dreaded sign under liquidity.

If a token’s liquidity is locked, an icon will show up here showing you the locked percentage of the token. This is no guarantee that you won’t lose your money another way, as we saw in the last example which had locked in liquidity, but it is a signal that the initial liquidity provider can’t easily rug you. Without locked liquidity and only one liquidity provider, just know that you’re standing on a rug that will be pulled out from you. It’s not a matter of if, it’s likely more a matter of when.

Here is a rug play with about 30 minutes of trading action before the rug got pulled. If we look at the transactions logs we can see that the liquidity provider put in roughly 9 wrapped eth and then, then they removed the liquidity up here, they took out roughly 16 wrapped eth.

SIOS EG: https://dexscreener.com/base/0xb70094d964ce92fb1649f8698adf9dda86756b7f

This is not a very clever rug pull, but it still worked.

But as you can see, the creator of this token added liquidity here. Then we see 3 one cent buys from 3 different addresses at the same time.

Due to how liquidity works, this will immediately start to inflate the price of this token.

This is fundamental to understand when you’re trading meme coins. If you create a token and then you buy the token for 1 cent three times, it will increase the price of the token on dexscreener automatically. This is because the underlying algorithm for most liquidity pools is an algorithm called “constant product automated market maker” which is trying to maintain an equal ratio of tokens in the pool. In this case, the price increase will be small, but it will look huge on the chart in front of you.

So if you’re an observer of this, you’ll see a token price rising and perhaps start to get excited, when in fact, there is nothing to get excited about.

Then, what you’ll notice after these bot buys, all coming from different addresses, is that we see a fast series of buy orders, again all coming from different wallet addresses to try to trick you, start coming in. What’s suspicious here is that the buy orders all come in at regular intervals and they all are buy orders for between roughly $80 to $200. All very botty behavior. However during this time, as a passive observer you’ll notice the transactions, makers, liquidity pool and market cap increasing rapidly. YOu might scroll down here and see the contract has a clean bill of health in terms of security, and you might think you’ve just discovered the next pepe before anyone else in teh world has.

But then, after 30 minutes of increased action, you see this “remove” transaction come in and you’ve officially lost every penny you put in.

Welcome to the world of rugs.

Pump & dumps

Now let’s talk about pump and dumps. This is not the same as a rug pull as liquidity is not removed, but the outcome for buyers is mostly the same. Essentially, the token holders pump the token to a certain market cap, and then quickly sell off (or dump their tokens) leaving everyone else with nothing. Here is an example of a pump and dump.

Doom: https://dexscreener.com/bsc/0xc4bd98a60e7075fcd4c88aabce9352648f5a6b59

This pump is clearly designed to take advantage of traders who are trading in the early token launch space. In this space, which is the most risky and most volatile, there are certain things that many traders look for. They often want to see a website, good art, a presence on twitter. This project ticked all of those boxes. Then in terms of the chart, early numbers looked decent, a bit botty but nothing too strange in the world of low market cap memecoin trading. Then early on, we see some selling activity and some back and forth battling between buyers and sellers. This is designed to create a more organic looking and natural chart. But to me, the blocks of buys and sells are suspicious. It’s only blocks of buys, then only blocks of sells. A huge flag. Their twitter and website were up a bit early and looked great. They put a huge amount of work into their website design. But both website and twitter accounts were taken down after the scam ran its course. AGain, these people are calculated. They are spending a couple hundred dollars to buy twitter followers. And they are giving dexscreener a few hundred to promote their socials. They’ve also spent some money on website design & art. So of course, they’ll have intentions to make a solid ROI on this scam.

Now from the outside, to many while this is still going up, this looks like a legit memecoin. For many people it ticks a lot of boxes. However, at the peak of around 2 million in market cap the token launchers stopped posting on twitter and sold out. This was a three hour pump and a three hour dump.

So that’s pump and dumps for you

Minting

Another common scam is a minting scam, where the token creators keep open minting functionality within their smart contract. This means that a token’s creator can add more tokens to their supply.

For example, you might see early on that the token creators hold a small percentage of tokens, giving the impression that this is more of a community coin. Perhaps the liquidity pool currently holds 90% of the contract tokens. This will send a positive signal to potential buyers, but this means nothing if the contract creator can simply mint more tokens.

Here is an example. Notice there that the contract owner can change token holders balances and mint more tokens

Soso value: Eg: https://dexscreener.com/base/0x9bfd348fb5b68b3cc2423fd647c2eeab6ab4ac46

This is a very common scam, and you should alway double check to make sure that “mintable” is set to “no” in dexscreener.

Taxes

Another common scam on dexscreener are token tax or royalty scams. They work like this. Contract creators create their contracts to include a small fee during the token buying or selling process. These taxes generally go to the token creator’s account. However, the problem with this is that it’s normally an unnecessary fee and the other issue is that token creators also tend to set their smart contract up so that the tax is modifiable. For example, you might think it’s not a big deal to pay a 2% fee to buy a token. The issue is that the token creator will often change the tax for selling your tokens to 99%. It’s common to see this set to 0.01 or something negligible early on, only to have the sell tax increased to 99% once they have enough people trapped.

LOok at this example: Baron: Eg: https://dexscreener.com/base/0x9be22ded19368f6959e954268b43e4fa74fa25d0

So again, it’s another way to make your tokens worthless. So always check the tax settings down here in contract health.

Whales, Presales & Airdrops

Now, let’s talk about Whales, pre-sales and airdrops, and while none of these are technically scams, they can result in you losing all of your money.

Eg: https://cointelegraph.com/news/friend-tech-airdrop-largest-recipient-sells-tokens

They can be solid strategies to build a community around a project. However, if a project has given its token supply for discounted prices or for free, you can be sure that a large number of those holders will start dumping the coin once it becomes tradable.

So if you’re trading project based tokens, always check their token distribution data to ensure that you’re playing on a level playing field.

Conclusion.

This is by no means an exhaustive list of all of the scams you’ll find in the crypt space or on dexscreener. These are just some of the more common ones. So be careful out there.

And if you want to win, rather than lose in the memecoin space, then check out our no-code crypto development course, where you’ll learn how to do things like build bots and automation that can monitor dexscreener for data that others simply don’t have access to. In our course you’ll learn how to monitor for data lags and uncover smart contract insights that dexscreener keeps invisible by default to incentive tokens to buy a paid listing, but in our course you’ll learn how to uncover that hidden data with a bit of tech wizardry that 99% of people don’t know about.

A link to our course and a coupon code can be found below.