Scammers in the crypto industry are increasingly using a scheme known as a «honeypot,» which allows investors to easily purchase a token but makes it impossible to sell, Binance Kazakhstan told Kursiv.media. As a result, the asset’s value appears to rise on the investor’s screen, but the investor can no longer withdraw the money.
The scheme works by embedding restrictions in a token’s smart contract in advance. While the asset can be purchased without difficulty, attempts to sell it are either blocked entirely or result in the investor losing nearly all of the funds because of an exorbitant fee.
How the «tax trap» works
One common tactic is known as a «tax trap.» Although a sale may technically go through, the transaction fee can reach 95% or more. For example, if an investor expects to withdraw $1,000 in profit, they may receive only about $20 after fees.
These schemes exploit investor psychology. Because most token holders cannot sell their tokens, there is virtually no selling pressure in the market. This allows the token’s price to continue rising, creating the impression that the asset is in high demand.
As the price steadily increases and the token generates discussion on social media, new investors may continue buying it and adding liquidity to the pool. That liquidity can later be withdrawn by the project’s creators.
Smart contracts can add another layer of risk
Another risk stems from smart contracts whose owners retain the ability to change the rules after trading begins. For example, a developer may later prohibit sales from certain addresses or blacklist a liquidity pool address.
A lack of publicly available source code or the retention of unlimited administrative rights by the contract owner are also considered serious warning signs.
Automated checks can help detect suspicious tokens
To identify such threats, crypto wallets are increasingly using automated verification systems. However, automated checks do not guarantee complete protection; they can only help identify suspicious characteristics.
The final decision rests with the investor. Before purchasing a token, investors should research the project’s reputation and verify that its smart contract is transparent and does not contain unusual restrictions.
