Just like the jungle where predators are seeking their prey, the DeFi world is laced with scammers just waiting for someone who would fall into their trap.

These scammers have tools they make use of to make sure that no one sees through their scam attempts. They have become quite good at camouflaging themselves and waiting patiently to pounce on unsuspecting investors.

This isn’t the time to get scared, instead, you need to arm yourself with arsenals that will be of help in navigating the Defi jungle with confidence and sniffing out even the most cunning scams.

By equipping yourself with the 7 essential tools that will be shared in this article, you will have just about the right arsenal to help you protect yourself from these scammers.

Disclaimer: The tools mentioned here are just a select few of the abundant tools that can help protect you in your DeFi journey, and there is no guarantee that they do provide 100% accuracy in determining a token’s validity. Always DYOR, and use these tools as a guide, whilst being on the lookout for others.

Tool #1- Token Sniffer:

This is one of the most popular tools used to search for various tokens on the Ethereum Chain and Binance Chain. It is actively monitoring over 3,384,541 tokens, and 443,923 scams at the time of writing.

All you need to do to use this tool is to paste the contract address into the search bar, and TokenSniffer will provide info on exploits, contract code, audit, suspicious high initial liquidity, abnormality in holdings, etc. One useful feature that makes it popular is its list of scams and hacks which gives an easy insight on if a suspected token is on the list or not.

Tool #2- Unicrypt

With Unicrypt, you can easily check the liquidity status of a specific token you're interested in. If the creator of such a token has locked its initial liquidity, then it will be nearly impossible to withdraw the locked funds (rug pull) which translates to your funds being lost as a holder of the token.

However, if the liquidity is unlocked, there's a greater possibility of such a creator going to unlock the funds and leaving you as the holder with losses.

Also, note that in some cases, these token creators lock their liquidity for a short period which allows them to quickly go back and take it all out. So keep an eye out for short-term locks.

Tool #3- De.Fi Scanner

De.Fi Scanner can help you check the smart contract of tokens you're interested in for vulnerabilities, exploits that can be hacked into, or any unsafe practices.

All you need to do is input the contract address of the token or NFT you're interested in, eg "0x555555axc77777", and wait for the scan to be completed. With this tool, you can have peace of mind knowing that your trade is secure.

Tool #4- Block Explorer

Just as the name implies, a block explorer stands as the place to get the totality of information about a token. On a block explorer, you will be able to see the liquidity pool, transaction data, token smart contract, token creator's address, and a host of others.

Think of the block explorer as your DeFi map and compass. With block explorers like EtherScan, BSCscan, or Polygonscan, you have a transparent view of every transaction on that blockchain. This tool gives you details that will make you see if the developers are doing what they said they would do or are just cash grabbers ready to walk away with your funds.

A quick way to start with the block explorer is with the comments section. All you need to do is copy the token's contract address and paste it into the search box, then click on the tab that says "comments."

Regardless of how important the comment section is, you mustn't rely heavily on it. This is because anyone can post anything they want to their intention might be to cause FUD in a good project and find a good entry, or maybe the project isn't just a good one. They also might just be trying to shill the token to get profits on their investment. Nonetheless, if so many people are saying one thing, that might give a sign that it could be true.

In this example above, the token holders share warnings for others who might want to fall, victim, just like they did. They even went as far as looking for a picture of the scammer & providing video evidence. Such red flags should give a pointer and a good researcher would go deeper to confirm if there's any truth to the indicators.

Another thing you would want to look into is the contract creator's address to see if they have removed liquidity at any point from the pool. You'll find the creator's address on the top right side of the page containing the token's contract (see picture below)

With the address in hand, you can check to see if liquidity has been removed. In the picture below, the creator of the token supplied 100 BNB ($28.5k) as initial liquidity to the BNB-CINU pool.

In less than an hour, the creator removed 1,723 BNB ($484K) - accumulated funds from those who had invested in the project and sent it out to multiple wallets.

You can also take a look at the liquidity pool of the token; there you can find the contract address of the pool which is captioned "Pancake LP's". This gives you another view of the transactions in the pictures above and his much liquidity is remaining in the pool.

Tool #5- RugDoc

RugDoc is a community platform that provides DeFi safety and education. It comes with high-quality tools and services that will give you up-to-date information on which token is liable to the rug and which is not.

With RugDoc, you can now have full control of your crypto investments. It helps you screen all tokens and filters which would result in 100% theft of your funds. Using a least risk, low risk, some risk, medium risk, high risk, and not eligible risk rating; helps you limit the risk of exposure to tokens that will empty your resources.

Tool #6- Community Sentiment

It's not enough to rely on charts and graphs. Community activity and engagement is also one of the things you should look out for, especially when making long-term investments.

Join Telegram and Discord groups, and listen to what people are saying about the token. Are they optimistic? Are they raising red flags? Is there blind hype about the token? These are some things that could also help you in deciding if a token is worth it or not.

Tool #7- Your Gut Instinct

After exhausting all possible tools, the last thing to rely on is your intuition. For me, this is my best scam detector.

If something feels too good to be true, it is too good to be true. Always trust your gut. In the DeFi jungle, a healthy dose of skepticism can save you a lot of headaches and heartbreak from losses.

Final Words

Always remember that even with the best tools, mistakes can still happen. Thus, it is important that you invest responsibly and only put what you can afford to lose.

Note:

(Illustration for some of the support pictures used in this article and part of this research is credited to Matt at 1-inch)