Recently, many newcomers have mistakenly bought the wrong coin while trading. They were scammed.

⚠️ Don't just search for the coin name and buy it; similar avatars and names could also be fake coins. Always check the coin's contract address before purchasing.

In cryptocurrency trading, contracts (especially ERC-20 tokens, smart contracts, etc.) are the core code that determines how tokens operate, are distributed, and traded. Therefore, it is crucial to understand how to review contract addresses, identify fake coins, and prevent purchasing fake coins. Here are some specific steps and tips to help you effectively identify and avoid fake coins during on-chain trading.

Step 1: Understand the contract address

Each blockchain-based token corresponds to a unique contract address. This contract address is the token's 'identity,' containing the token's rules, total issuance, holders, and other information.

• Format of contract address: Usually, a contract address is a 40-character hash (e.g., 0x...);

• View contract address: The token's contract address is usually displayed on the token's official website, white paper, or exchange page.

Step 2: Verify the contract address through blockchain explorers

To verify the authenticity of a token, the most important step is to use a blockchain explorer (like Etherscan, BscScan) to view the contract's detailed information.

1. Find the contract address: In exchanges or the token's official channels, find the contract address of the token. Ensure this address is from a trusted source.

2. Access the blockchain explorer:

• Ethereum: Use Etherscan

• Binance Smart Chain: Use BscScan

Enter the contract address in the browser and click search.

3. Check contract information:

• Token name: Confirm if the token’s name and symbol (e.g., ETH, USDT, BNB) match their actual situation.

• Transaction volume: Check if the token has a large number of transaction records. Generally, fake coins or unverified tokens have lower trading volumes.

• Contract creation time: Check the creation time and status of the contract. Authentic project contracts usually have a longer creation time and are active.

4. View contract source code:

• Many legitimate tokens will publicly disclose their contract source code on blockchain explorers. If the contract code is public and has been audited or verified, it is more trustworthy.

• If the contract has no source code, or the source code is hidden, or has been maliciously modified, this may be a sign of a fake coin.

Step 3: Review the token's community and history

1. Community activity:

• Look for discussions related to the token in communities like Telegram, Discord, Reddit, etc., to see if there is an active development team and user feedback.

• For fake coins, the community usually discovers and exposes them quickly, while legitimate tokens typically have stable supporters and developers.

2. Social media and announcements:

• Follow the token project's Twitter or Medium to ensure there is an actual team and progress behind the token.

• Search for the token on websites like CoinMarketCap or CoinGecko to check its historical information, announcements, exchange listings, etc.

Step 4: Use decentralized exchanges (DEX) and certified platforms

1. Trade through decentralized exchanges (DEX):

• When trading on decentralized exchanges like Uniswap or PancakeSwap, be sure to carefully confirm the contract address.

• Decentralized exchanges allow users to verify the token contract address independently. You can view the specific information of the token in the DEX to ensure it matches the contract address provided by the project party.

2. Use certified platforms:

• Some platforms and tools, such as Token Sniffer and Uniswap Info, can help you analyze the token's contract. They provide detailed analysis of the token contract, including whether there is malicious code (e.g., 'pump and dump' or 'hacker attack' features).

Step 5: Check if the contract has a 'Reentrancy attack' function

Some fake coin projects write malicious code into the contract that allows the project party to steal users' funds through certain vulnerabilities during transactions. You can use contract analysis tools to check if the contract has potential malicious features.

For example, if the contract has functions like burn, mint, transfer, etc., but lacks proper protective mechanisms or code comments, there may be malicious behavior.

Step 6: Beware of 'honey pot' scams

• Honey pot scams: These are those that appear to be legitimate on the surface but actually aim to lure you in with 'bait' to steal your funds. A common feature of fake coins is their extremely high promises of returns or rapid price surges in a short period.

• Before purchasing tokens, be sure to avoid believing in overly high return promises. Real projects generally focus on long-term development rather than short-term explosive profits.

Step 7: How to avoid common fake coin scams

1. Avoid 'free airdrops': If you encounter a sudden 'free airdrop' event, especially one that asks you to provide your private key, wallet password, or click on certain links, be cautious. Real projects do not ask for sensitive information.

2. Check the token's liquidity pool: Examine the token's liquidity pool to ensure the project has sufficient liquidity. If the liquidity pool is small or transactions cannot be executed smoothly, it is likely a fake coin.

3. Verify with the community: For some tokens you are unfamiliar with, you can check with the community to learn about other users' experiences and see if anyone has already purchased and verified this token.

Conclusion: Better to be cautious

The cryptocurrency market is full of opportunities, but also risks, especially in the case of many fake coins. By carefully reviewing contract addresses, checking project team backgrounds, and observing community activity, you can greatly reduce the risk of purchasing fake coins. If you have questions about a particular token, feel free to ask.

The cryptocurrency market, while full of opportunities, requires careful consideration for every decision. Protect your funds and don’t trust any unverified projects. I hope these methods can help you navigate cryptocurrency investments more smoothly!

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