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What is a honeypot?

You are on a nice Discord group about the latest crypto projects and someone shills a new crypto token project that is going to take over the world!

It's very cheap, looks interesting, so why not? You buy a little bit in the hope that you will to resell it later for more than you bought it for. Unlike many other people in crypto you know the ancient magic: buy low, sell high!
Then one day you want to sell the token and get back your funds (plus the eventual bonus). Except that... it is not working? You try again... still not working... you cannot sell the token, you cannot get your money back.
Your money is stuck in a honeypot!

A honeypot is a type of crypto investment scam where scammers attract money from investors to buy a token or any kind of crypto asset expecting to resell it later on for profit; then the trap closes and the investors can no longer sell the asset, their investment money is gone.

Honeypots galore!

Everyday, dozens of crypto projects are released and most of them are just scams, a lot of the the scams are honeypots. Some analyses say that up to 90% of the projects are just honeypots.
While exploring the cryptoverse we have seen some of them with very nice websites, active Telegram groups, some even have a proposed future utility.

Some of them have a Telegram group with 10 million bots all only saying "Hi", "Hello", "Good project, I bought right now!", all at once, at the same time of the day, everyday.

Other times it's just the opposite, they have a very ugly website where they will even ask you to write your crypto wallet passphrase to "verify" your account.

- By the way what do you think of the design of our website? Let us know

In any case, the goal is simple: to trap your money!

How does it work? The different types of honeypots

The diversity of methods the honeypot scammers use is phenomenal, every month they have new tricks to dupe honeypot detection tools and try to pass as legit projects.

Some honeypots are like bear traps, as soon as you put your money in it, it closes instantly and you cannot get money back. These are what we call bear trap honepots.

Some others have a controllable trigger that the scammers can turn on or when they want to close the trap. We will call them on/off honepots.

The bear trap honeypots can be easily detected via honeypot detection tools, they check if right now someone can buy the token and then sell it. The tools cannot guarantee that the token will not become a honeypot in the future. That is why the checks often emphasise that *right now* this is not a honeypot. These days there are less bear traps because people tend to complain immediately on the social networks and the honeypot detection tools will easily flag them. The scammers moved on to on/off honeypots.

It is more difficult to automatically detect the on/off honeypots because without manual code analysis it is not easy to find if the developers of a token have kept for themselves a way to stop the trading and turn the project into a honeypot.

Among the on/off honeypots, some will affect all the users at once like a closed door behind all of them some none of them can sell the tokens . Others will blacklist more and and more users while the non-blacklisted users will still be able to trade. This creates confusion and allows the scammers to ban the blacklisted people out of the Discord/Telegram groups when they complain, saying that they are just FUDers.
What should we do then?

How to avoid crypto honeypots?

The best way to avoid honeypot scams (and other kind of crypto scams) is to use the Speculoos Finance token research platform. - unbiased opinion XD -

Why? Because Speculoos Finance is the only platform that can detect most of the different kinds of honeypot scams on the market (bear traps, closing doors, blacklists, etc).

The bonus is that if you reach out to us we could do a manual review of your favorite projects. It's free and there is no engagement from you or us. As always it's not financial advice.

You can already explore in this blog some project reviews that we did.

How does the Speculoos Finance token research detect all these crypto honeypots?

The Speculoos Finance token research tool detects the bear traps and closed doors when they are triggered so you can avoid them. It also detects blacklist honeypots by checking what happened to the holders of the token.

Where they able to sell when they wanted to? This is one of the many secret ingredients in the sauce of the token research that we do to protect our users and we are the only platform where you can have this kind of protection and care.

Let's take the example of a scam we saw recently. It looked like a normal and good token, it was passing all the honeypot checks on all the honeypot detectors...

Except that we kept getting reports that people were not able to sell!

They bought the tokens and a few ours later they tried to sell and nope, they could not sell. They even retried all the honeypot detectors but nope, it was still not detected as a honeypot.

What was happening? It turns out that the devs on the project were monitoring the wallets buying the token and a few minutes after the trade they blacklisted the investors' wallets. The honeypot detectors check if anyone can buy and sell the token, immediately, most do not check what happened to the previous buyers.

This is one of the many cases where the Speculoos Finance token research will help you avoid scams and focus on the great projects better than anything else.