Honeypot scams are one of the most common methods used by scammers. It enables them to steal small amounts of cryptocurrency from a number of unsuspecting users, resulting in a rather large payout over time.
We have also seen people searching the internet about what is honeypot in crypto. Follow along to find out. what exactly is a honeypot scam, and how can you avoid it?
What are Honeypot Scams?
Honeypot scam is a scam related to cryptocurrency that involves scammers applying phishing te Honeypot Scams may appear to be very appealing, like a large pot of honey, but they are actually traps.
By the time victims realise it, it is often too late. Furthermore, unlike some of the more complex schemes devised by scammers, this one is quite simple.
Modus Operandi of Honeypot Scams
It all starts with the scammer contacting cryptocurrency users via the internet. It could take place on Twitter, Discord, Reddit, or any other social networking site. Scammers will pose as cryptocurrency newcomers seeking assistance.
Usually, they will have allegedly received a sizable cryptocurrency payout and require assistance in moving it to another wallet or cashing it out for fiat currency. In exchange for their assistance, the scammer will even offer the victim a big reward.
They will even go so far as to give the victim access to their wallet’s private keys. This is what most people are drawn to. It’s not every day that someone hands you the keys to their cryptocurrency wallet.
Most people who are intrigued end up taking the bait and logging into their wallets.
To their surprise, they will find a large number of tokens in the wallet, usually in a relatively unknown cryptocurrency. However, this is unimportant because the tokens are still extremely valuable.
The issue is that this cryptocurrency cannot be used to pay the transaction fee. This is due to the wallet typically only accepting transaction fees in the native cryptocurrency of the blockchain on which it is hosted.
As a result, in order to assist this alleged “investor in distress,” the victim will need to contribute funds to cover transaction fees. Transaction fees, on the other hand, are generally very low, so most people decide to add some of their cryptos to cover the transaction costs.
However, once they send cryptocurrency to this person’s wallet, the funds are automatically redirected to another wallet that you do not have access to. This is due to the scammer having set up a bot that sweeps all incoming tokens to another wallet.
While the stolen tokens are only a few dollars, the scammers repeat the trick repeatedly, resulting in a fairly large payout over time.
Smart contracts allow honeypot scams to take on a more complex avatar. Miscreants create contracts that appear to have a major flaw.
Other users will have to send a certain amount of cryptocurrency to the contract in order to exploit this flaw. When they do, however, the smart contract opens a back door that drains all of the funds.
It’s similar to a honeypot scam orchestrated through social media but more complicated. Furthermore, because ordinary users rarely have the knowledge to spot a faulty smart contract, this method usually involves one scammer duping another.
Tips to Avoid Honeypot Scams?
Now that you understand how honeypot scams work, you should be able to spot one from a mile away. In addition, if you use a block scanner, you will see several incoming transactions from different wallet addresses as well as an equal number of outgoing transactions to a single wallet address.
Furthermore, no one in their right mind will give up their private keys. As a result, if you come across anyone who does, it’s usually a huge red flag.
Every year, a number of people fall victim to honeypot scams. This is due to the fact that the scheme appears to be quite convincing. Especially when someone provides their private keys to a wallet containing a significant amount of cryptocurrency.
Transferring funds to an unknown person, on the other hand, is always a risky proposition that should be avoided in general. As a result, the next time someone gives you their private keys, you know it could be a scam.