This guide will help you identify possible scams in the DeFi industry. It is not intended to be an exhaustive guide, but it is basic to the analysis that I suggest you carry out, before making an investment in any proposal in the decentralized finance ecosystem.
Always DYOR (Do Your Own Research).
It is likely to be a fraud , if you have at least 1 clue (in numbers) of 4 different themes (in letters) . The risk increases if more are fulfilled.
A. White paper
- does not have a detailed plan.
- it does not have a roadmap with clear dates.
- did not meet the above deadlines.
- does not identify its founders
B. Platform
- does not have a website, or is under construction
- it does not update or display progress reports.
- only trades on AMM platforms
- has no demonstrable external audit
- does not have DAO (decentralized governance)
C. The team
- does not show knowledge.
- it has no proven track record.
- some member of the team was involved in a proven scam.
- it is not endorsed by community references
D. Object
- it is not clear what problem you are trying to solve.
- the proposed solution makes no sense.
- it is a clone of a successful project that exists in the market
E. Community
- no social media on Reddit, Telegram, Discord, Twitter, Facebook, Instagram
- their community is not large, or if it is large, you detect that their users have no activity, so they turn out to be bots.
- has no publicity from recognized media outlets, or has poor reviews
- few people doing hype
F. Market
- ensures profitability
- promises high profitability
- promises short terms to recover investment
- low liquidity, low volumes, or low transactions, the last 24 hours.
F. ICO, IDO, ISO
- has initial launch with presale and urgent deadlines
- private pre-sale with great discounts to the first participants
- presale with distribution of large amount of your tokens
G. Monetary policy
- has no planning in the issuance of tokens
- founders hold less than 10% of tokens
- founders hold more than 80% of tokens
H. Source code
- its source code is not published on GitHub, (it is not open source)
- the source code was criticized for bugs or flawed design
- does not present external audits
- presents external audits prior to changes in the protocol
I. Airdrops, Giveaways
- too much emphasis on promotion relative to project content
- too much in relation to your tokens.
- advertising with the image and name of media celebrities
- they ask for the public keys of your wallet to deposit money