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Falling into the honeypot scams trap can be easier than you think. The idea of getting rich quick sounds appealing to anyone, but it would be wise to maintain a rational approach to the crypto space.

Introduction to Honey Pots

Understanding how smart contracts work

Before getting into how a honeypot scam is done, it is imperious to know the inner workings of a smart contract. We can think of this as an automated contract.

Let’s start with a typical case where a customer has to send money to someone. Blockchain technology makes this step simple by executing it automatically. This mechanism is precisely the innovation that smart contracts brought to the world.

Smart contracts are basically computer code that provides for the execution of at least one or more transactions simultaneously. They represent one of the defining features of the blockchain that users have utilised the most over the years.

However, such an ingenious mechanism has a downside. A mischievous developer can design an intelligent contract to scam and steal money from users.

Type of Honeypots

There are different types of honeypots, and recent studies have identified at least three:

  • Ethereum Virtual Machine (EVM): with this type, users are tricked into thinking they have found weak spots in a smart contract. However, the transactions never entirely validates and users only lose their money.
  • Solidity Compiler: Solidity is the name of the popular coding language in smart contracts. Users would need to check every smart contract line to find issues in the code.
  • Etherscan and other Blockchain Explorers: hackers can also exploit the lack of information on Etherscan’s website, the Ethereum blockchain explorer. Smart scammers can hide secondary transactions on the explorer.

Defending yourself against honeypot crypto scams

While hackers have so many tools to design the perfect honeypot scam, users’ defensive weapons are almost none. The best way to protect themselves against these hacks is to refrain from clicking on non-verified links while also checking any information they find in crypto communities tenfold.

The good news is that several developers have started to build tools and software to identify honeypot scams. Even better, crypto projects can use these tools to prove their safety.

Another vital step to consider in this case is to dedicate the right time to do some research before engaging with a smart contract. It is unwise to trust users sharing their private keys online. Criminals rely on the lack of knowledge from their victims.

New crypto projects generally like to show all sorts of audit certificates they obtained on smart contracts. So, if a new project does not mention any audit, the users should be cautious and check the smart contracts themselves.

Conclusion

Falling into the honeypot scams trap can be easier than you think. The idea of getting rich quick sounds appealing to anyone, but it would be wise to maintain a rational approach to the crypto space.

Understandably, not everyone has the skills and know-how to analyse a smart contract. For this reason, many developers issue audit certificates for all types of smart contracts on the blockchain.

Written By

Petrache Ionut

May 28, 2022