Article 6.1: Avoiding Scams, Hacks & Rug Pulls
Stay Safe – How to Spot Crypto Scams & Protect Your Assets
Every year, millions of dollars in crypto are lost to scams, phishing attacks, and rug pulls. The worst part? Most victims don’t even realize they’re at risk until it’s too late.
This article will teach you how to recognize red flags, avoid common DeFi risks, and keep your funds secure in the wild world of crypto.
1. The Most Common Crypto Scams & How to Avoid Them
1.1 Phishing Attacks – Fake Websites & Wallet Drainers
How It Works:
🔹 Scammers create fake versions of legit websites (e.g., Uniswap, MetaMask).
🔹 They trick you into entering your seed phrase or private key.
🔹 Once you do, they drain your wallet instantly.
🚨 Example:
A trader visits uniwsap.org instead of uniswap.org (typo).
The fake site asks them to “connect wallet” and enter seed phrase.”
Their funds disappear within minutes.
🛠 How to Avoid:
✔ Always verify the website URL before connecting your wallet.
✔ Use a hardware wallet (Ledger, Trezor) to approve transactions securely.
✔ Never enter your seed phrase anywhere online—not even on “official” websites.
1.2 Fake Airdrops & Approval Scams
How It Works:
🔹 Scammers send free tokens to your wallet (usually unknown projects).
🔹 If you try to “claim” or “sell” them, the site asks for token approvals.
🔹 Approving gives them access to your wallet, and they steal your funds.
🚨 Example:
You receive 100,000 “FREE AIRDROP” tokens in your wallet.
The project tells you to visit their site and “approve” them for swapping.
The approval gives them access to all your funds, not just the airdrop.
🛠 How to Avoid:
✔ Ignore random airdrops—never interact with them.
✔ Check token approvals using Revoke.cash and remove risky permissions.
✔ Use a burner wallet for testing unknown DeFi protocols.
1.3 Ponzi Schemes & High-Yield Farming Scams
How It Works:
🔹 Projects promise insanely high APYs (10,000%+) to attract deposits.
🔹 Early users get paid from new investors’ money (Ponzi structure).
🔹 Once new investors stop joining, the founders disappear, and liquidity vanishes.
🚨 Example:
A DeFi project offers 500% APY “risk-free.”
You deposit funds, and rewards seem great for a few weeks.
The developers rug pull, withdrawing all liquidity and crashing the token price to $0.
🛠 How to Avoid:
✔ If it sounds too good to be true, it is.
✔ Research the team & tokenomics—if it’s anonymous or lacks transparency, avoid it.
✔ Use trusted DeFi platforms (Uniswap, Aave, Curve, GMX) rather than unknown protocols.
2. How to Spot a Rug Pull Before It Happens
A rug pull is when developers abandon a project and steal investors’ funds. Some are obvious scams, while others appear legit before suddenly collapsing.
🚩 Red Flags That a Crypto Project Might Be a Rug Pull:
🔴 Anonymous Developers: If the team is unknown, they can disappear overnight.
🔴 No Locked Liquidity: If liquidity isn’t locked, founders can withdraw it all at any time.
🔴 Sky-High Returns: If a DeFi farm promises 1000% APY, it’s likely a scam.
🔴 Smart Contract Backdoors: If the devs control the contract, they can mint unlimited tokens or drain funds.
🛠 How to Protect Yourself:
✔ Check liquidity lock on platforms like DexTools or TokenSniffer.
✔ Read smart contract audits—if none exist, it’s high risk.
✔ Only invest in projects with a transparent team & real use case.
Key Takeaways from Article 6.1
✔ Phishing scams target careless traders—always double-check URLs.
✔ Airdrop scams drain wallets—never interact with unknown tokens.
✔ Ponzi schemes promise unrealistic yields—avoid unsustainable projects.
✔ Rug pulls happen when liquidity isn’t locked—verify projects before investing.