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Main TakeawaysHoneypot scams are deceptive schemes that entice users with the promise of quick profits and lure them into purchasing tokens whose sale is programmatically restricted, resulting in financial loss. Understanding the risks of token contracts helps you avoid scams and make safer decisions. Remain vigilant by staying informed about common warning signs, such as unusual trading activity or suspicious transaction histories. Consider using wallets like Binance Wallet, which offer dedicated audit pages and proactive security alerts to help safeguard you from various threats, including honeypot scams.Smart contracts are the backbone of Web3, but they come with their own risks. An increasingly widespread trap relying on malicious smart contracts is honeypot scams, a scheme engineered to let you buy, but not sell or withdraw funds. Let's break down the threat, how it works, and how you can spot and avoid it before criminals disappear with your funds.What Is a Honeypot?In Web3, a honeypot is a malicious smart contract that looks like a normal token but is intentionally coded to trap your funds. A token like this may be advertised as the next moonshot, but behind the scenes, its underlying code is rigged, waiting for unfortunate investors to find out that they can’t sell the asset at all.Here's how this scam usually plays out:Creation and Promotion: A new token is launched on-chain and is marketed through fake ads and hype campaigns on platforms like X, Telegram, and WhatsApp. Simulation of Activity: Artificially injected liquidity and fake trades, all engineered by the scammers behind the token, make the asset look popular. This hype causes more buy-ins, price increases, and if the cycle catches on, the fear of missing out (FOMO) drives even more users to the malicious project, leading to an uptick in activity, part of which may be organic.Ditch and Run: Once enough users are drawn in, the trap is sprung. Attempts to sell the token are met with failed transactions or blocked permissions – users simply can’t cash out. Behind the scenes, scammers have either quietly programmed the contract to restrict selling or drained the liquidity pool. With the illusion of a thriving token still intact, they siphon off the funds and vanish, leaving holders stuck with assets they can’t move or redeem.Rinse and Repeat: The cycle starts again with a new honeypot token trapping more innocent victims.Staying Safe with Binance Token AuditsBinance Wallet incorporates multiple safety features to notify you when you try to interact with risky or malicious tokens. These come in the form of high-risk warning messages on the main token page and detailed breakdowns in the Token Audit tab.To get to this tab, first click on the token of interest on the app homepage or market pages. You will see the Audit tab below the token name and address. Clicking on it allows you to view the detected risks, such as suspicious tax rates, smart contract irregularities, and other signs that the token could compromise your funds.Always review the risk details on the audit page before interacting with a token.The page also features a feedback section at the bottom, allowing you to reach out to us with any relevant observations of your own, in case you notice any inconsistencies not yet reflected on the page. Best Practices: A Safety ChecklistWhile Binance Wallet provides advanced threat detection and analysis for your protection, completing this process may require additional time. Your active participation and careful review of each step, while performing multiple confirmations are crucial to maintaining security.Below are some tips that will help you steer clear of honeypot scams:Conduct Thorough Research (DYOR): Never rely solely on hype or recommendations. Always verify the legitimacy of a token you are going to interact with and its development team. Check if the contract code is verified on reputable blockchain explorers such as Etherscan or BscScan. If you have coding knowledge, review the contract for suspicious functions, such as those that restrict selling or impose excessive fees.Review Trading Activity: Analyze the token’s trading history for red flags such as a lack of sell transactions, concentrated token holdings among a small group, or unexplained liquidity removals by developers.Use Security Tools to Analyze the Contract: Utilize reputable security tools to scan smart contracts for potential vulnerabilities or malicious features. These tools can provide insights into possible risks before you interact with a token.By following these steps – before you put your hand in the jar rather than after you get stuck – you can make informed decisions and reduce the likelihood of falling victim to a honeypot scam.Final ThoughtsHoneypot scams are a rising threat in the Web3 space, exploiting the very technology that promises decentralization and autonomy. By understanding how these scams work and utilizing tools like Binance Wallet's audit features, users can better protect themselves from financial loss. Vigilance, thorough research, and leveraging security tools are essential practices for anyone navigating the Web3 landscape. As the ecosystem continues to grow, staying informed and proactive will be key to safeguarding your investments and ensuring a secure and rewarding experience in the world of decentralized finance.Further ReadingHow Fake Approval Scams Exploit the Revoke FunctionStay Safe From Smishing – Activate your Anti-Phishing Code TodayNo Room for Spam Tokens in Your Web3 Wallet