What is a Honeypot in The Cryptocurrency Space?

Have you heard of honeypot in crypto? If you not, then read this guide to understand how it works and how to get out of honeypot crypto scams.

By The 'Staunch

Honeypot in crypto is a scam used in the industry to trap victims and steal their assets or sensitive information.

It involves setting up a fake website or wallet that appears legitimate, but is designed to lure in and deceive unwary users.

A scammer may create a fake wallet or manipulated smart contract to steal crypto assets once a victim provides a personal information.

The website used to lure a victim to the fake wallet or smart contract is the honeypot.

6 Types of honeypot in crypto

Here are different types of crypto honeypot scams in the ecosystem used by scammers to swindle investments from people.

1. Fake websites

Fraudsters often create elaborate fake websites for crypto exchanges, wallets or investment platforms that closely resemble popular services.

They use similar names, logos, web design and layouts to make the sites look credible.

The sites encourage users to create accounts, link bank details and deposit funds, which the scammers can steal.

2. Phising emails

Scammers send fake emails that appear to come from well-known cryptocurrency companies or services, such as crypto exchanges.

The emails include official logos and content of the organization they’re faking to make them seem trustworthy to individuals.

They may claim there is an issue with your account and request login details to resolve it.

Other times, they instruct the user to deposit funds into a fake wallet address controlled by the scammer.

3. Social media scams

Fraudsters mostly promote ‘investment opportunities’ on social media platforms through fake celebrity endorsements, paid ads or imposter accounts.

For example, they may hack or create a fake celebrity profile promoting a cryptocurrency ICO (Initial Coin Offering) to their victims.

Once users are enticed to send crypto deposits to participate, the scammer steal their invested funds and run away.

4. Manipulated coins

Honeypot cryptocurrency project use smart contracts to lure investors, while giving them fake hope of astronomical returns that are unable to withdraw.

When the scammers have collected enough crypto funds, they can disappear by following a rug pull on the smart contract.

5. Malware attacks

Malware is a malicious software or script downloaded to crypto victim’s device, often through phishing links or attachments.

It infects the system and runs in the background without the user’s knowledge, while stealing wallet private keys, passwords and other data to siphon crypto investment.

Anti-virus software can sometimes detect and remove the malware if the attack is identified.

6. Fake crypto airdrops

Scammers entice users by offering free cryptocurrency through airdrops, in-which they instruct the recipient to provide private key to their wallet to receive the funds.

Legitimate airdrop will never require sensitive details to your digital asset wallet.

However, this will give the fraudster an access to the crypto wallet, allowing them to steal any cryptocurrency within it.

How to avoid crypto honeypots

Below are some of the best practices to identify and avoid getting scammed using honeypots in crypto…

  1. Research before investing
  2. Check crypto whitepapers
  3. Check certificate
  4. Confirm liquidity
  5. Avoid celebrity endorsements
  6. Turn off permissions
  7. Use cold storage wallets
  8. Enable 2-FA Authentication

Research before investing: Thoroughly research any investment opportunity before providing funds or data.

Search for reviews, complaints and confirmation of legal registration from other people who’s been invested into the project before you.

Check whitepapers: Always cross-check the whitepaper of any crypto-coin project you want to invest in.

These whitepapers always shows their current progress, achievements and how long long they intend to stay afloat in the market.

Check certificate validity: Use tools to verify the SSL certificate on websites, as fraudulent sites often have invalid certificates.

Monitor liquidity: Avoid tokens or coins that appear illiquid or difficult to cash out, as it signals a potential honeypot.

Avoid celebrity endorsements: These are often fabricated to pump cryptocurrency scam coins or projects.

If you must invest in such crypto projects recommended by a celebrity account, please verify its legitimacy towards the endorsements.

Moreover, original celebrity social media accounts do get hacked briefly to trap followers to a scam coin sometimes.

Turn off automatic permissions: When connecting applications to your wallets, you should try to enable permissions manually.

Use cold storage wallet: Keep the majority of funds in cold storage to limit losses in the event of a scam.

These cold storage wallets are hardware wallets, and they do not need any form of internet to store your cryptocurrency asset.

Enable 2FA: Two-factor authentication is also one of the best strategies in keeping your crypto wallet safe, by adding extra layer of security to accounts.

What are honeypots generally?

Honeypot is a type of computer security mechanism that can detect malicious actors and collect their information.

It acts as a lure for cyber-criminals and can distract them from trying to victimize real people.

Unfortunately, this mechanism is now being used by scammers to lure individuals to crypto investment scams.

Can you get out of a honeypot crypto?

Unlike legitimate tokens, honeypot tokens have a devious catch, and that means – there’s no way out.

Scammers design honeypot smart contracts in such a way that your funds are essentially trapped.

Trading these tokens is impossible due to their design, which leaves your crypto investment stuck indefinitely.

How do I avoid crypto honeypot scams?

To avoid getting into a honeypot crypto scam, is simply to be very careful and aware of any project or asset you want to invest in.

Always do your own necessary research on any cryptocurrency asset you wish to buy, before getting your funds involved.

What does it mean when a coin is honeypot?

Honeypot is a smart contract deliberately created as a virtual bait or trap aiming to trick hacker attacks.

The mechanism is to use a computer system that is designed to be easily infiltrated, with an aim that hackers can exploit vulnerabilities.

In conclusion

If how to get out of honeypot crypto scam is your interest, follow the steps and procedures stated above to make sure you don’t get scammed by a honeypot attack.

If you want my best suggestion, I would recommend using a hardware wallet, as they have high security features.

You can purchase a Ledger wallet, because they’re one of the best companies that provide good security devices for digital assets.

About the 'Staunch

Henry is the founder of Crypto Staunch. He studied accounting and finance at Godfrey Okoye University, but became a Cryptopreneur to pursue his interest in learning digital currency and asset investment. Since 2018, Henry Kings has writing about Crypto, DeFi & NFT to help other people get started in the space. His publications has been featured in Binance Square, Digest Africa, Tech Economy, International Business Times, CoinDesk and many other top Crypto media outlets.

If you appreciate my efforts, then gift me some coffee!

Binance Exchange

Reliable crypto exchange by a developer known as Changpeng Zhao, who's now retired as CEO.

Ledger Nano X

Ledger released Nano X hardware wallet in 2019 to help crypto enthusiasts secure their digital asset.

If you have any question, opinion or suggestion for the subject of a future article, please use our contact page to send us a message immediately. Thanks!

About The 'Staunch

Henry is the founder of Crypto Staunch. He studied accounting and finance at Godfrey Okoye University, but became a Cryptopreneur to pursue his interest in learning digital currency and asset investment. Since 2018, Henry Kings has writing about Crypto, DeFi & NFT to help other people get started in the space. His publications has been featured in Binance Square, Digest Africa, Tech Economy, International Business Times, CoinDesk and many other top Crypto media outlets.