How to Detect Scam coins in 13 Ways

Blockchain Apr 02, 2018

Initially written for a now-defunct cryptocurrency media website.

I am not a fan of shitcoins.

These are mostly altcoins or cryptocurrencies with an underlying motive, either a pump and dump scheme or a way for those in power to earn a profit off of deceived investors. Marketing themselves as the next bitcoin to reach $20,000, or a new blockchain platform like Ethereum only to disappear at the last minute, scam coins are not for anyone.

Tired of getting ripped off? Unsure if it’s a hit or shit? Look no further, your friendly neighbourhood crypto friend is here! Here are some of the ways to tell if a coin is a scam:

They suck at marketing.

If the coin only has 1 or 2 marketing channels (ie. Facebook ads, Twitter, and one landing page), it’s a red flag. If they rarely ever give updates as to what they are doing, or if they are not putting any effort in interacting with fans, how do you know if they’re a scam or not?

All their team members are anonymous

Who’s the CEO of the team? Who’s in charge of the developers? Do they even show their faces? There have been cases of fake profiles filling up the various positions of a cryptocurrency company. If the team is not transparent enough to show their experiences and background, it’s kind of difficult to trust your capital with them right?

There is no whitepaper.

Nothing. Zilch. Nada. Do you want to know what they will do with your money? Nope, there’s nothing to show this. A website that merely introduces the coin but does not lead you to their technical whitepaper already breeds suspicion.

There is a whitepaper, but it’s shit.

Did you know that you can get someone to write a $100 whitepaper for you? This can result in an otherwise pointless whitepaper, which can be a waste of time for potential investors. That means any scam can make a document to fake legitimacy. For you upcoming coin teams, make sure your whitepaper covers everything! For investors, make sure you read it thoroughly!

Their website is not protected.

If you look in the address bar of your browser, you might notice that every link starts off with either ‘http’ or ‘https’. If this new coin’s website is missing an ‘s’ in their link, it is not protected. Don’t try to pay for anything that isn’t SECURE!

Their website has HTTPS, but it’s free.

This one can be challenged as it depends on which stage the team is currently at. Most folks start off with the free Cloudflare HTTPS service, before moving on to premium (read: paid) services to serve their needs. You don’t want your coins to leak after all!

The website is poorly designed.

When you’ve looked at enough websites, you start to see recurring themes, free ones. Google ‘free website themes’ and you can sense a pattern, as nearly all of them look the same. If a coin dev team can’t afford to pay for a premium theme filled with proper designs, effective copy and detailed information, do you think they can handle an ICO? Play it safe guys, investment carries risk.

There hasn’t been a long build-up.

A new coin just came out of nowhere! Do they have a large following? Have they been in development for several years? Or did the ads just start on a friday night? Try and look back at the coin’s timeline: if all this supposed hype just started recently, how can you tell if it’s legitimate?

It doesn’t solve a justified issue.

Most effective cryptocurrenciies are made for a purpose. If it is an issue they are tackling, like the movement of privatised medical data for example, you can see the value they are trying to bring to the table. But, if it’s just a coin that is marketed everywhere to drive the price up, it can be just as easy for someone to do a pump and dump scheme and ruin your day!

If there’s nothing in the Roadmap.

Do they have a road map? Is it detailed? What kind of services? Barely anything, just promises of getting rich? Roadmaps are a way to visualise a coin’s purpose: if there is no roadmap, there is not telling what they will do with your money. You can’t invest into thin air!

There is a lack of transparency.

For some investors, they want to see the code and technology behind this upcoming coin: what blockchain platform is it based on? Where are the devs getting their experience from? Are they answering user questions properly, or are there secrets?

Coins are pre-mined.

We already have pre-mined coins, and we are doing a tokensale to fund our development. Wait a second. Pre-mined coins are coins that are sent to one address prior to releasing the rest for the public. They can easily drop pre-mined coins to abuse the price. When this abuse happens, the reasons for it are mostly associated with pump and dump schemes. Check the technical documentation so as to check where all the coins are going!

There’s not enough technical lingo.

The whitepaper tends to house a ton of technical details: time of transactions, incentives and proof concept for example. If the majority of the text they provide you is for marketing purposes, that’s not a good sign. You want to rest assure that the coin will go a long way: looking at the technical aspects is a good indicator of that. Without any, we’re at a loss.

What else should we consider if it’s a scam? Does it look like a pyramid scheme? Comment below, would love to see what you think!