Crypto Honeypot Scams: How to avoid them?

Crypto honeypot scams are one of the most prevalent strategies adopted by criminals

Crypto scammers are aplenty in the cryptocurrency sector. These con artists have deceived hundreds of thousands of investors over the course of their careers, costing them millions of dollars in losses. The sheer quantity of schemes they use to deceive investors is one factor in their success. It almost seems as though a new strategy is adopted each week of the year.

One of the most prevalent strategies employed by criminals is the crypto honeypot scams. They can use it to steal small amounts of cryptocurrency from several unsuspecting users, earning a substantial payout over time. However, what exactly is a honeypot con and how can you avoid it? Join us to find out.

Scam honeypots: What do they mean?

The name says a lot. Although these con schemes look like a large pot of honey, they are traps that are often discovered too late. Furthermore, in contrast to some of the complex schemes that a lot of con artists use, this one is fairly straightforward.

The con artist begins by contacting cryptocurrency users online. It could take place on Reddit, Twitter, Discord, or any other social media platform. The con artists will present themselves as crypto novices seeking assistance. Most of the time, they will claim to have received a substantial cryptocurrency payout and require assistance moving it to another crypto wallet or cashing it out for fiat currency. The con artist will even offer a substantial reward to the victim in return for their assistance.

They'll go so far as to give the victim access to their wallet's private keys. Most people are drawn to this. After all, you don't get the keys to someone else's cryptocurrency wallet every day. The majority of people, intrigued, typically take the bait and log into the wallet.

They will be surprised to find a large number of tokens in the wallet, typically in some obscure cryptocurrency. But it doesn't matter because the tokens are still very valuable. The issue is that this cryptocurrency cannot be used to pay the transaction fee. This is because the wallet typically only accepts fees for transactions in the native cryptocurrency of the blockchain on which it is hosted.

The victim will therefore need to contribute some funds to cover the transaction fees to assist this alleged "investor in distress." However, the majority of people choose to add some crypto to cover transaction costs because transaction fees are typically very low.

On the other hand, as soon as they send crypto to this person's wallet, the funds are automatically moved to another wallet that you can't access. This is because the con artist has created a bot that moves all new tokens to a different wallet. Even though the tokens that were stolen are only a few dollars, the con artists keep performing the trick, which leads to a rather substantial payout over time.

Using smart contracts, honeypot scams can also take on a more complex form. Contracts are made by fraudsters that appear to have a serious flaw. Other users will need to send a certain amount of crypto to the contract to take advantage of this flaw. However, once they do, a back door in the smart contract allows all of the funds to be withdrawn. It is somewhat more complicated than a social media-based honeypot scam. Additionally, because common users rarely possess the expertise necessary to identify a flawed smart contract, this strategy typically involves one con artist tricking another.

How can honeypot scams be avoided?

Now that you know how these con schemes start and end, you should be able to recognize one immediately. Additionally, if you employ a block scanner, you will be able to observe several incoming and outgoing transactions to a single wallet address. Furthermore, no reasonable person will hand over their private keys. As a result, if you find someone who does, it's usually a big red flag.