Distinguishing fraud and scam tokens from real ones (various methods and tools)

For digital currency investors looking for the best use of new investment opportunities, it is essential to distinguish scam currencies and tokens from real tokens. Blockchain technology and digital currencies are developing rapidly, and even experienced investors may have difficulty distinguishing fake tokens from real ones. While there's no guarantee that blockchain-related startups will be legitimate or successful, the tips in this article will help you be sure that you won't fall for a scam.

Tips to distinguish scam tokens from real tokens

Fake tokens and scams abound today, but many ways can help you stay aware of these potential scams. One of the best ways to protect capital is to thoroughly research project team members before investing. A digital currency whitepaper or token is the primary document for that project. Companies that do not provide white paper should be avoided at all costs. Make sure you read and analyze the white paper carefully before investing. Each token depends on a currency system to facilitate the financing process. Therefore, the companies and legal efforts of the system and the progress of the token sale over time, as well as the increase of token investors, can give good information about its authenticity.

Solutions to distinguish scam tokens from real tokens

Investigate the project team

You should always thoroughly research project team members before investing. For example, if you can't find information about a particular developer or founder on LinkedIn or other social media, you can take that as a red flag. In addition, you should check if their activity matches the number of followers and likes they collect. People who rarely interact with their followers yet have thousands of fans may not be genuine.

Beyond determining whether the development team is genuine, it's essential to check whether their qualifications match the project's theme. For example, do the founders have the experience they claim? Is their experience relevant to the current project?

Check the project white paper

A project's white paper should outline the background, goals, strategy, concerns, and timeline for implementing any blockchain-related project. White papers can provide you with much information. The first step to analyzing a white paper is to read it in its entirety. Then, check if the white paper has additional resources. These resources include financial models, legal concerns, SWOT analysis, and a roadmap for project implementation. Companies that do not provide white paper should be avoided. However, it is possible for a fraudulent company, as in the case of PlexCoin, to present a convincing white paper. Nevertheless, the company managed to raise more than $15 million before the US Securities and Exchange Commission (SEC) stepped in to shut it down.

Check the token sale history

Another way to distinguish scam tokens from real tokens is to check their sales history. Watch the token sale statistics over time and see how it progresses. If a company does not provide information on the progress of its token sale to investors, this is a red flag. Some token scammers hide their token sale progress under the camouflage of keeping addresses secret. This prevents investors from knowing exactly how much of the token has been sold over a given period of time. In some cases, this may be an attempt to create a sense of urgency among investors, even if there is no evidence of a successful sale at the same time.

Check to what extent the success of this project is possible

Although it may seem obvious, the tokens and cryptocurrencies with the most excellent chance of success are those that have the basic structure to outlast their competitors. Many projects, even those that have spent much money on advertising, are entirely forgotten after the initial popularity fades—the best chance for successful investing lies in a company with achievable and possible goals. The company must have a compelling concept now, but it must also be able to execute it in the short and long term.

Along with the issue of feasibility is the point of transparency. Companies that follow specific concepts and models are more transparent and honest with the community than their competitors. So look for companies to invest in that plan to keep investors updated with regular and detailed progress reports on the company's website or social media. Reviewing the company's timelines and roadmap in the project development process will also be helpful.

Finally, weigh all aspects and exercise caution

Even the most successful tokens and digital currencies are criticized for various reasons. Getting rich over a night by investing in a new project is tempting enough to lure experienced investors and beginners alike. Be careful when looking for new investment opportunities in the token and cryptocurrency spaces.

Note that projects that look too good may not be accurate at all. Take the time to scrutinize the details and assume that missing a piece of important information may be an attempt to hide information that will destroy your capital. Before investing, look for external sources to check the legitimacy of any project and always find convincing answers to your questions, even on minor matters. The digital currency and token spaces offer tremendous opportunities for well-researched investors who can make sound investment decisions. They also have traps that can lead to the loss of large amounts of money and capital due to fraud and scams.

How to protect your capital from scams related to digital currencies

Despite checking all the mentioned cases, sometimes scam tokens are so professionally designed that it will still be difficult to recognize them. Here are some steps you can take to protect your capital against these tokens:

Protect your wallet 

To invest in cryptocurrencies, you need a wallet with private keys. If a company asks you to share your keys to participate in an investment opportunity, it is most likely fraud. So keep your wallet keys private and don't share them with anyone.

Be careful with your wallet app

The first time you transfer money, only send a small amount to verify the legitimacy of the cryptocurrency wallet app. If you are updating your wallet app and notice a suspicious act, terminate the update and uninstall the app. Only invest in tokens about which everything is clear: If there is no clear information about how the token or cryptocurrency works, it is better to do more research before making an investment decision.

Don't rush to analyze the currency you want 

Scammers often use tactics to get you to invest too quickly. For example, they encourage you to invest without research by promising a reward or discount for immediate participation. So instead, take the time to do your research before investing.

Beware of social media advertising 

Cryptocurrency market scammers often use social media to promote their projects. For example, they may use images of celebrities or high-profile business people to create a sense of legitimacy or promise free gifts or cash. So when you see a digital currency being promoted on social media, be careful about it.

Be careful of calls 

If someone calls you to introduce you to an investment opportunity in digital currency, it is probably a scam project. Never disclose personal information or transfer money to anyone who contacts you.

Download apps from official platforms 

Although fake apps can be found on Google Play Store or Apple Store, downloading apps from these platforms is safer than other platforms.

Check the project's real promises 

Companies that promise guaranteed returns or want to make you rich overnight are probably scammers.

Finally, if an investment opportunity is ahead, never invest money in the cryptocurrency market you need and cannot afford to lose. Even if you don't fall target to fraud, the digital currency has a volatile market and experiences many fluctuations. The TOBTC website provides up-to-date and complete information about the financial markets. Our goal is to increase your awareness to earn profit and prevent possible losses and loss of capital. In addition, you can share your questions, suggestions, and opinions with us through the comment section and social networks.