LATOKEN Blog

How to distinguish a promising project from a scam? Tips from LATOKEN

The cryptocurrency market is attractive to investors not only for its extremely high volatility but also for periodically emerging projects that can bring incredible profits. Or… completely deprive all investments, and we are not exaggerating.

The question of how to distinguish a promising project from a scam and how not to lose your funds by investing in a dubious cryptocurrency is one of the most important, popular, and relevant ones. Decentralized finance (DeFi) is now extremely popular. The tokens related to it have already shown growth by thousands of percent. This is used by scammers trying to sell their coins to inexperienced users.

LATOKEN experts would like to share the main steps that need to be taken to understand whether it is worth investing in a particular project or not.

Evaluate the project’s team

First of all, you should check the people who are behind the project and who develop it. If this information is not on the project website and it is impossible to find it, it is a “bright red flag,” and it is better not to invest in such a project.

Find out if the information about the team is real

Is there any information on the website? Don’t get too comfortable. Sometimes photos and other images can simply be taken from the Internet. You can check them by downloading a photo and uploading it to any search engine. If there are matches, it is definitely a bad sign. You should also pay attention to the image format.

Explore possible celebrities

When examining the project team, it is important to check everything for fake information. If the data is unreliable, or the project is attributed to a famous person without their knowledge, it is a very serious reason not to invest.

Check out the social media of the developers. If there is no mention of the project, it will most likely be a fraud and a scam. What is more, if large media personalities promote the project, it is worth giving up investments, especially if the celebrities are not from the fintech sphere. This does not clearly indicate fraud, but it does increase the risks.

Study the startup website thoroughly

LATOKEN experts highly recommend that you study the startup site for promises of profit or statements about the absence of risks. If there are such promises, an investment in a project can lead to your money loss.

It would be best if you also were wary of projects that promise guaranteed returns or have other signs of a financial pyramid. Some of them include:

  • stable and high-profit guarantee;
  • referral schemes;
  • obscure details of the system.

If the proposal looks too good to be true, it is a reason to think seriously. Anyone who says “easy,” “guaranteed,” or “you don’t have to do anything” is most likely to be a scammer. It is worth staying away from such projects.

Learn about blockchain and code management

First of all, make sure the startup is using blockchain. For example, the OneCoin financial pyramid offered to invest in a cryptocurrency of the same name, which in fact was not. Secondly, make sure that the person behind the startup doesn’t have the ability to run it alone.

Evaluate the transparency of the project

Another significant point is the opacity of the project. Reliable startups tend to have open-source code and public domain.

Learn the history of a startup

It is important to check the history of a startup. Reliable startups immediately start posting on social media about their activities long before the token sale. If the Twitter account appeared a few days before the ICO date, this project will probably turn out to be a flop and won’t bring any profit.

Analyze the project’s chats

Be sure to check the startup chats in different messengers. Scam projects can create the illusion of a large number of users, for example, using bots. This can be easily indicated by the same type of repetitive messages, pictures, or gif-animations.

Find out the number of exchanges where tokens are listed

Another important indicator of a token’s reliability is the number of platforms it is listed on. If there are few exchanges and they are unknown, it is definitely a bad sign. Experts from LATOKEN highly recommend checking the liquidity of trading with an asset: it should be high. If this indicator is low, it won’t be easy to sell such a project’s coins.

Check the address on the blockchain

When choosing tokens among those related to the DeFi sphere, it is essential to check their address in the blockchain with the one indicated on the project website. Based on Ethereum and other cryptocurrencies, you can create coins with the same names, and it is exactly what scammers do.

By following these tips from LATOKEN specialists, you’ll easily distinguish a promising project from a scam and won’t go wrong with your investment.