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Token Safety on ElectroSwap

ElectroSwap has become the most popular decentralized exchange (DEX) for purchasing tokens on Electroneum Smart Chain. However, with its open and permissionless nature, using ElectroSwap also presents certain risks.

Understanding how to protect yourself is crucial to navigating ElectroSwap safely and avoiding common scams. This guide will cover the common types of scams on ElectroSwap, tips for staying safe, and general best practices when purchasing tokens.

Safety is our priority

Our default token list showcases tokens that meet our stringent criteria, offering them visibility among our users. Be very cautious when trading tokens not on ElectroSwap's default token list!

Common Types of Scams​

  1. Impersonation Scams

    • These scams involve malicious actors creating tokens with names similar to popular projects or tokens. Fraudulent tokens may use the same symbol or logo to deceive buyers.
    • Example: A fake token might mimic the name of an established token like “BOLT” by creating a similar-named token called “B0LT”.

  2. Liquidity Pool Draining (Rug Pull)

    • In this scam, developers create a token and pool liquidity to attract buyers. Once a significant amount of liquidity is added by unsuspecting buyers, the developers remove or "drain" the liquidity, causing the token's price to plummet.
    • Example: A project might launch with promises of long-term value, only for the developers to withdraw all funds in the pool, rendering the token worthless.
Locked Liquidity

All tokens on our default token list have locked liquidity which prevents liquidity pool draining / rug pulls.

  1. Mintable or Unlimited Supply Tokens

    • Some tokens on ElectroSwap have contracts that allow the creator to mint an unlimited number of tokens, flooding the market and driving down the token’s price.
    • Example: A token might look legitimate, but if the contract allows unlimited minting, the token creator could mint and sell tokens indefinitely, devaluing the holdings of other buyers.

  2. Rebase or Reflection Tokens with Unexpected Behaviors

    • Rebase or reflection tokens have mechanisms that can adjust the token balance or value in users' wallets. While some are legitimate, these mechanisms can be manipulated to trap users or siphon funds.
    • Example: Tokens that perform unexpected “rebase” events or sudden balance adjustments, causing confusion or loss of funds for users unfamiliar with the mechanics.

  3. Phishing Tokens and Contracts

    • These scams involve fraudulent contracts that contain malicious code to steal funds directly from the user’s wallet upon interaction.
    • Example: A token contract might prompt for an approval transaction that grants access to all tokens in your wallet instead of just the token you intend to interact with.

How to Protect Yourself on ElectroSwap​

  1. Verify Token Information from Official Sources

    • Always obtain the token contract address from official sources, such as the project’s official website, Twitter, or community channels. Never rely on a name or symbol alone, as these can be easily duplicated.
    • Tip: Use tools like the Electroneum block explorer to verify the contract address and transaction history for the token.

  2. Check Liquidity Lock and Holder Distribution

    • Use the Electroneum block explorer to examine liquidity details. Tokens with a small number of liquidity providers or where the top holders control a large percentage of the supply are risky.
    • Tip: Look for tokens with locked liquidity pools, as this can help reduce the risk of rug pulls.

  3. Review the Token Contract

    • Analyzing a token’s contract code can help identify potential red flags, like mint functions or permission settings that allow the creator to manipulate the supply.
    • Tip: If you're not comfortable reading Solidity code, you can use contract audit tools like Token Sniffer or consult experienced members in community forums.

  4. Limit Your Token Approvals

    • When interacting with a new token, limit the spending approval amount. Rather than granting “unlimited” approval, set a specific limit to reduce your risk in case of a scam.

  5. Research the Project and Team

    • Legitimate projects often have a clear roadmap, active social channels, and transparent information about the team. Lack of transparency, or poorly maintained channels are red flags.
    • Tip: Look for reputable team members with a verifiable presence and consider researching the project’s Git repository for development activity.

General Best Practices for Safe Token Purchases​

  1. Avoid FOMO (Fear of Missing Out)

    • Many scams play on FOMO, enticing users to buy quickly. Take your time to research a token and avoid rushing into purchases based on hype alone.

  2. Start Small

    • When buying a new token, start with a small amount to test the token's behavior and the interaction with the contract. This minimizes your risk if the token turns out to be a scam.

  3. Stay Updated with Security Tools

    • Consider using a portfolio or wallet tool with scam detection features, such as DeBank or Zerion, which flag suspicious tokens or contracts.

  4. Learn from Trusted Community Resources

    • Communities like Reddit's r/CryptoCurrency, forums, or Telegram groups with knowledgeable users can be invaluable for gathering information. However, always validate any claims or recommendations independently.

  5. Use a Secondary Wallet for High-Risk Transactions

    • If you regularly experiment with new tokens or projects, consider using a separate wallet with limited funds for high-risk interactions. This keeps your primary funds safe from potential malicious contracts.

Conclusion​

While ElectroSwap provides unparalleled access to new and innovative tokens, its open nature comes with risks. By understanding common scams and taking protective measures, you can navigate ElectroSwap with greater confidence. Remember, always conduct thorough research, use reputable tools, and keep your security practices up-to-date. Staying vigilant can help you avoid scams and make safer token purchases on ElectroSwap.