Let’s look at how to spot red flags for coins or tokens, from whales to liquidity pools, scam codes, market cap, and price action, by analyzing the tokens ecosystem.
For any coin or token to be listed on any blockchain (such as Ethereum ERC-20, Binance BNB Bep -20), every developer or dev team of the coins/tokens are required to program smart contracts. These smart contracts detail the purpose of their coin or token. Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met. They automate the execution of an agreement, so that all participants can be immediately certain of the outcome, without an intermediary’s involvement or time loss.
Smart contracts refer to computer protocols that digitally facilitate the verification, control, or execution of an agreement. Smart contracts run on the blockchain platform, which will process all the transactions in a contract; hence, middlemen are not required for executing the transactions.
Similar to traditional contracts, smart contracts define rules and penalties around an agreement and automatically enforce those obligations. While they can work independently, many smart contracts can also be implemented together.
The integral components of a smart contract are termed objects. There are essentially three objects in a smart contract – the signatories, who are the parties involved in the smart contracts that use digital signatures to approve or disapprove the contractual terms; the subject of agreement or contract; and the specific terms.
Uses of Smart Contracts
Smart contracts can be used in a variety of fields, from healthcare to supply chain to financial services. Some examples are as follows:
1. Government voting system
Smart contracts provide a secure environment making the voting system less susceptible to manipulation. Votes using smart contracts would be ledger-protected, which is extremely difficult to decode. Moreover, smart contracts could increase the turnover of voters, which is historically low due to the inefficient system that requires voters to line up, show identity, and complete forms. Voting, when transferred online using smart contracts, can increase the number of participants in a voting system.
Blockchain can store the encoded health records of patients with a private key. Only specific individuals would be granted access to the records for privacy concerns. Similarly, research can be conducted confidentially and securely using smart contracts. All hospital receipts of patients can be stored on the blockchain and automatically shared with insurance companies as proof of service. Moreover, the ledger can be used for different activities, such as managing supplies, supervising drugs, and regulating compliance.
3. Supply chain
Traditionally, supply chains suffer due to paper-based systems where forms pass through multiple channels to get approvals. The laborious process increases the risk of fraud and loss. Blockchain can nullify such risks by delivering an accessible and secure digital version to parties involved in the chain. Smart contracts can be used for inventory management and the automation of payments and tasks.
4. Financial services
Smart contracts help in transforming traditional financial services in multiple ways. In the case of insurance claims, they perform error checking, routing, and transfer payments to the user if everything is found appropriate. Smart contracts incorporate critical tools for bookkeeping and eliminate the possibility of infiltration of accounting records. They also enable shareholders to take part in decision-making in a transparent way. Also, they help in trade clearing, where the funds are transferred once the amounts of trade settlements are calculated.
Benefits of Smart Contracts
1. Autonomy and savings
Smart contracts do not need brokers or other intermediaries to confirm the agreement; thus, they eliminate the risk of manipulation by third parties. Moreover, the absence of intermediaries in smart contracts results in cost savings.
All the documents stored on blockchain are duplicated multiple times; thus, originals can be restored in the event of any data loss.
Smart contracts are encrypted, and cryptography keeps all the documents safe from infiltration.
Smart contracts automate tasks by using computer protocols, saving hours of various business processes.
Using smart contracts results in the elimination of errors that occur due to the manual filling of numerous forms.
Limitations of Smart Contracts
1. Difficult to change
Changing smart contract processes is almost impossible, any error in the code can be time-consuming and expensive to correct.
2. Possibility of loopholes
According to the concept of good faith, parties will deal fairly and not get benefits unethically from a contract. However, using smart contracts makes it difficult to ensure that the terms are met according to what was agreed upon.
3. Third party
Although smart contracts seek to eliminate third-party involvement, it is not possible to eliminate them. Third parties assume different roles from the ones they take in traditional contracts. For example, lawyers will not be needed to prepare individual contracts; however, they will be needed by developers to understand the terms to create codes for smart contracts.
4. Vague terms
Since contracts include terms that are not always understood, smart contracts are not always able to handle terms and conditions that are vague.
Now you understand a little bit about the smart contract. Let’s begin with how to spot red flags for coins or tokens from whales, liquidity pool, scam code, market cap, and price action from analyzing the token ecosystem.
You’d have to dig through the contract code and the relevant transaction logs to be able to prove what someone is telling you. For example, a contract could contain a transfer Ownership() function, and that function could set the contract owner as a known burn address, e.g. 0x00…000. A case in point would be the Sablier contract, which renounced ownership in this transaction by calling Ownership Transferred().
Let’s take a look at ERC-20. ERC-20 must have an ERC-173 compliant contract must implement the ERC173 interface. Contracts should also implement ERC165 for the ERC-173 interface.
Many smart contracts require that they be owned or controlled in some way. For example to withdraw funds or perform administrative actions. It is so common that the contract interface used to handle contract ownership should be standardized to allow compatibility with user interfaces and contracts that manage contracts.
Here are some examples of kinds of contracts and applications that can benefit from this standard:
Exchanges that buy/sell/auction ethereum contracts. This is only widely possible if there is a standard for getting the owner of a contract and transferring ownership.
Contract wallets that hold the ownership of contracts and that can transfer the ownership of contracts. Contract registries. It makes sense for some registries to only allow the owners of contracts to add/remove their contracts. A standard must exist for these contract registries to verify that a contract is being submitted by the owner of it before accepting it. User interfaces that show and transfer ownership of contracts.
Ownership renounced means the development team doesn’t hold large amounts of tokens they “supposedly” don’t own any acquired pre-sale. Leading into ruggable or “rug pull” which means by having a huge sum they could wait until the public buys a lot then sell their large amount taking the entire liquidity pool and crashing the price to zero causing investors to lose all of their money.
If a smart contract is not renounced or controlled by one or multiple parties. It will contain a regular address. If the owner renounces their contract. It’s contain 0x0000000000000000000.
Liquidity pool lock
Let us start with understanding what liquidity means for cryptocurrency and why you may want to lock it.
Liquidity, simply put, is a pool of funds that crypto token developers need to create to enable their investors to buy and sell instantly. Without this pool, the investors will have to wait for someone to match their buy or sell order and there is no guarantee that the trade will be completed at all.
Liquidity is created by pooling in the new token along with another token of established value (e.g., ETH or BNB or stable coin like Tether) in an exchange like Uniswap or PancakeSwap. This pool of funds gets deposited in the exchange and the liquidity provider receives liquidity pool (LP) tokens in return, which can be used at a later point to withdraw the pool funds.
Why should liquidity be locked?
If liquidity is unlocked, then the token developers can do what is infamously known as “rug pull”.
Once investors start buying tokens from the exchange, the liquidity pool will accumulate more and more coins of established value (e.g., ETH or BNB or Tether).
This is because investors are sending these tokens of value to the exchange, to get the new token. Developers can withdraw this liquidity from the exchange, cash in all the value and run off with it.
Liquidity is locked by renouncing the ownership of liquidity pool (LP) tokens for a fixed period, by sending them to a time-lock smart contract. Without ownership of LP tokens, developers cannot get liquidity pool funds back.
This provides confidence to the investors that the token developers will not run away with the liquidity money. It is now a standard practice that all token developers follow, and this is what differentiates a scam coin from a real one.
What to keep in mind while locking liquidity
Alright, so locking liquidity is important, we get it. But as a developer, how do we go about it? Let us talk about some of the questions you might have on your mind:
1. How long should I lock my liquidity pool tokens for?
To provide the necessary confidence to the investors, a minimum of one year and ideally a three or five-year lock period is recommended. This would also allow ample time for your coin to grow to a scale where investors will pool in liquidity, and nobody would be worried about a rug pull by the owners.
2. How much liquidity I should lock?
Liquidity is the first thing that your investors check for and anything which stands out might make them uncomfortable. Ideally, you should lock all your liquidity, and at minimum 80%. Otherwise, many token scan tools like Mudra, Techrate, Certik audit, Token Sniffer, and Poocoin will start flagging your token.
3. Will locking liquidity hamper trading of my token?
Not at all, you are locking your liquidity tokens and not your original tokens. Investors can freely exchange your token and even more so with confidence.
4. How do I lock liquidity?
Liquidity is locked in a time-lock smart contract. Some token owners deploy their time-lock contract, however since it is a custom contract, this practice is not well trusted. The ideal way is to use a reputed third-party locker. There are quite a few, however, Mudra, Techrate, and Certik audit. The manager offers the best way to lock liquidity.
5. How are Mudra, Techrate, and Certik different?
Mudra locker, Techrate, and Certik audit is a trusted and secure platform for locking liquidity for BSC cryptocurrency. It has no hidden agenda, like promoting a utility token and forcing users to buy it. Finally, it offers the best UI and features of all the platforms. It is easy to use, you can lock liquidity, withdraw on lock completion, add more tokens to the lock, transfer ownership, extend the lock duration, all in a matter of seconds. And the cherry on top, you can create shareable lock certificates with QR codes that you can share with your investors, flaunt on your website and social media.
Analyzing token ecosystem
Scammers are very smart, they are always out to lock into the endless opportunity surrounding crypto tokens; therefore, there are no perfect methods for analyzing crypto tokens.
1. Scrutinize the token’s whitepaper
A token’s whitepaper is where you’ll find the team’s aim for the project and the token’s use cases. As such, it’ll help you decide if realistic goals have been outlined
And even if you’ve found realistic goals, you need to be sure they weren’t lifted off the pages of another project’s whitepaper. Because let’s face it, the latter has happened time and again.
2. Assess the team behind the project
After having a good knowledge of the project’s offering, the next step is to assess the team backing the project. Has anyone worked on reputable projects in the past? Are they reputable members of the blockchain ecosystem? What are their qualifications?
The goal of this assessment is to be confident you’re investing in a token backed by people who know what they’re doing. Consider this as a fundamental analysis that’ll save you from investing in a company that’s only out to cart away gains. But remember, images can easily be lifted off the internet.
3. Check out the project on social media
A surefire way to invest in coins or tokens is to keep a close eye on the token’s community on social media. Here, you’ll get to know if the project has a large community supporting its cause. Facebook, Twitter, Telegram, and Reddit would be a good place to start.
On the same note, you’ll get to know what others are saying about the project and, thus, make informed decisions. Needless to say, there are bounties out there, whereby people are rewarded to make positive statements about the project. Hence, such reviews may be biased.
4. Ascertain legality Issues
So you’ve found great coins or tokens to invest in, but you’re not allowed to participate due to your jurisdiction. You’d be breaking the law if you still forged ahead to invest. That being said, you need to be sure that regulators in your country have not restricted participation in such offerings. Nevertheless, ICOs are still unregulated in a good number of regions, and regulators in some are working on more friendly rules.
5. Verify if the token’s project is solving a major problem
Verifying this is another key factor you must not miss when analyzing a token you are about to invest in because it determines the utility value of a token’s market value. So, as a smart investor, one question you should answer before investing in a token is this:
What unique problem is this token solving?
Let’s take, for instance, Atayen Inc. It is redefining the advertising industry and especially the influencer sector with its SaTT solution, allowing anyone to be rewarded for their posts on social networks, with a platform developed at the cutting edge of technology. Another is Vinchain; it’s creating a worldwide blockchain database of used vehicle information that is 100 percent secure, transparent, and accessible by all, and so on. Practically, blockchain projects that uniquely solve a major problem will have more surge in demand, thereby boosting the tradable value of its token.
6. Find trusted people
It’s true you may have a lot of work on your hands, and may not always have the time to carefully scrutinize every project. If that’s the case, it should not be at the expense of your money. It’ll be useful to follow trusted people in the cryptocurrency space. These should be experienced individuals who have good knowledge about the ecosystem and can give you sound advice. It’ll save you from spending hours in front of the screen analyzing a project.
7. Get abreast of the token’s project announcements
You do not want to invest in a token and go to sleep, especially when your money is on the line. Therefore, it’s good practice to follow the project on various social media channels. You’ll find the latest announcements on these channels to keep yourself updated. What’s more, there’s a Bitcoin Talk Forum, social media, and more forums where most projects publish announcements. And given that anyone is free to comment, you’ll garner user sentiment about such news. It’s also a good time to ask questions you may have on the Forum.
Timing is everything. It may come in last on the list, but it’s just as important because choosing the best time to invest can impact your return on investment. Accordingly, you need to know if it’s the right time to invest in cryptocurrencies given that there are bear and bull markets. At this time, it can be said that the market generally is on the boom. The same applies to considering if the coins or tokens industry is on the boom. To analyze any crypto token isn’t a walk in the park. However, having these tips in mind will guide your selection of potential coins that’ll stand the test of time, and yield immense profit in the short and long run.
Crypto whales investor and buy Influencer.
Due to the under-regulated nature of crypto markets, whales can use large buy/sell orders to manipulate market sentiment—for example, by creating large, unrealistic sell orders to keep prices artificially low or by creating large buy orders to temporarily inflate the price.
When it comes to monitoring whales, we look at wallet addresses containing a minimum of 10 Ethereum or more or hold more than 10 percent in top wallets for that individual coins or tokens. These wallets can be identified on the blockchain and then monitored for activity. Any incoming or outgoing transactions to/from these wallets may be of interest to market participants.
1. Ivan on Tech, @IvanOnTech.
2. Tone Vays, @ToneVays.
3. Erik Voorhees, @ErikVoorhees.
4. Anthony Pompliano, @APompliano
5. Charlie Lee, @SatoshiLite.
6. Willie D, given the name Willie Dennis is best known for his role as a member of the legendary rap group, Geto Boys.
Willie D Joins Saitama LLC Crypto And NFT Content Creation Team In Multi-million Dollar Deal. Saitama, one of the fastest-growing cryptocurrency and community-driven platforms has named Willie D as President of NFT Curation and Talent Acquisition in a deal reportedly worth over $50 Million with incentives and bonuses. In his talent acquisition role, Willie D will be responsible for securing high-level partnerships within several industries including, but not limited to, high-profile individuals and businesses in the entertainment space. Similarly, Willie D will support Saitama in the creation of new NFTs. NFT stands for a non-fungible token, a unique piece of digital art representing items such as photos, videos, audio, and other types of digital files. Willie D joins the Saitama team with over 6 years of cryptocurrency experience. He was an early investor in Dogecoin, and Bitcoin before it exploded. “Willie D is well respected in the entertainment industry and will bring a unique dynamic to Saitama and its vision,” says Russel Armand, Chief Operating Officer of Saitama.
Other notable Saitama influencers include Del Crytpo, Phalton, Fud Fighter, Crytpo Deb, Jake Gagain. These influencers may not get paid directly but they get paid stipends, donations, coins, or tokens.
Market cap and price action
Manipulation is illegal in most cases, but it can be difficult for regulators and other authorities to detect, such as with omnibus accounts. Manipulation is also difficult for the manipulator as the size and number of participants in a market increases.
A few examples of some well-known types of Securities Manipulation or Crytpo Market Manipulation schemes include:
Pump and Dumps.
Painting the Tape / Marking the Close.
Adding false supply into re-circulation.
Market cap is coin price x circulation coin supply and the Fully diluted market is price coin x total coin supply.
Let’s take a look real coin scenario. Shibnobi market cap total supply is 69 sextillion that 10 to the 24 power for you nerds. Around 25 sextillions to Dead wallet value as zero. Wallet 0d96 holds 25 percent by shibnobi deployer control by the creator. This shows me that shibnobi creator or dev team wallet b7f4 is the sole owner of this project. The creator or dev team have the power to remove all funds from liquid all asset from this coin or lock it for his personal account.