What Is a Honeypot Crypto Scam?
Imagine spotting what seems like the next big crypto token, pouring in your funds, and then realizing you can’t sell it—it’s trapped, just like a fly in a honeypot.
This is the essence of a honeypot crypto scam, a scheme on the rise in the fast-paced world of cryptocurrency, where the promise of huge returns can often obscure red flags.
This guide will walk you through how these scams work, who they target, and—most importantly—how to spot and avoid them before it’s too late.
Table of Contents
- What is a Honeypot Crypto Scam?
- How Does It Work?
- 5 Common Types of Honeypot Crypto Scams
- How to Identify Honeypot Crypto Scams
- Tools & Resources to Help Detect Honeypot Scams
- Infamous Cases of Honeypot Scams
- FAQs
Honeypot crypto scams lure you with big gains but lock your money in – if you can’t sell, you can’t profit.
Always check the code; a few hidden terms can mean the difference between cashing in and getting stuck.
Use tools like Orb, RugDoc and DEXTools to stay one step ahead and dodge traps that restrict your funds.
What is a Honeypot Crypto Scam?
A honeypot crypto scam is a type of cryptocurrency trap that entices investors to buy a token but prevents them from selling it, effectively locking in their funds.
At first glance, the token may look promising, with signs of rapid growth, high liquidity, and enticing social buzz. However, once bought, the token’s code restricts sales —meaning investors are left holding a token they can't trade or withdraw.
Scammers profit as more people buy in, driving up the price, while they cash out. This type of scam primarily targets new investors or those driven by FOMO, eager to jump on “the next big thing.”
How Does it Work?
Honeypot crypto scams operate by luring investors into buying a token that’s been coded to prevent selling, effectively trapping their funds.
Scammers create an appealing-looking token or project that appears legitimate and promising, often with misleading or hidden code in the smart contract that restricts sell functions.
Here’s a closer look at how this “trap” works:
How Scammers Create a “Trap”
- Attractive Tokens: Scammers develop a token that looks appealing, often with fake or inflated statistics. The project may show rapid “growth” on the blockchain or boast a high trading volume.
- Misleading Terms: Enticing terms like “next big crypto,” “guaranteed high returns,” or “early access” are used to lure investors, playing on their desire for big profits.
- Hidden Code: In the token’s smart contract, there are often hidden clauses or limitations that prevent specific wallet addresses from selling or transferring funds once purchased.
Why Users Can’t Withdraw or Sell Tokens?
- Smart Contract Manipulation: Scammers modify functions within the smart contract to restrict withdrawals or sales, which can be difficult to spot without a code audit.
- Common Transaction Errors: When investors attempt to sell, they may encounter transaction failures or “insufficient liquidity” errors, which signal that the token was programmed to block these actions.
Signs of a Honeypot Trap
- High Fees and Low Liquidity: Watch for tokens with unusually high trading fees or poor liquidity, which restrict investors from easily exiting their positions.
- Fixed or Unmodifiable Contracts: Many honeypot scams use contracts that prevent updates or modifications, making it impossible to change restrictive settings.
- Unclear Contract Information: Scammers often provide vague or inaccessible details about the project’s smart contract, keeping investors in the dark.
By generating excitement and urgency, scammers create the impression that the opportunity won’t last. This urgency, combined with promises of exclusive gains, can lead investors to act impulsively without doing proper research.
Common Types of Honeypot Crypto Scams
Classic Honeypots
Classic honeypots are straightforward scams where investors can buy tokens, but the smart contract restricts any form of selling or transferring. Once funds are invested, the contract settings only allow incoming transactions, creating a dead end for withdrawals. It’s a basic yet effective trap targeting new investors who don’t check for liquidity restrictions or exit options.
Liquidity-Locked Honeypots
In liquidity-locked honeypots, scammers advertise tokens with “locked liquidity,” giving the illusion of a secure investment. However, the funds can only be deposited, not withdrawn, as scammers use unmodifiable contract settings to block sell functions. These scams are particularly effective because “locked liquidity” often sounds secure to newcomers, masking the reality that withdrawals are impossible.
Gas Fee Honeypots
Gas fee honeypots lure investors with seemingly promising tokens, only to require exorbitant gas fees for selling or withdrawal. Once an investor tries to reclaim their funds, they face gas fees so high that it becomes economically unfeasible to continue. This trap doesn’t entirely restrict withdrawal but deters investors through impractical transaction costs.
Time-Locked Tokens
Time-locked tokens allow users to purchase tokens that can’t be traded or sold until a specified time frame. Scammers use this time delay to disappear or pull liquidity before the tokens become transferable. Investors are left with worthless assets once the “lock” expires, realizing too late that they’ve been deceived.
Advanced Smart Contract Honeypots
Advanced honeypots are more sophisticated scams that use complex smart contracts to allow only specific wallet addresses to sell or withdraw tokens. These scams are often well-coded to appear functional but block all attempts to sell or trade for regular users, providing just enough realism to deceive even more cautious investors.
How to Identify Honeypot Crypto Scams
Recognizing a honeypot crypto scam is crucial to protect your investments. Here’s what to look for:
1. Analyze the Smart Contract
Start by checking the smart contract on blockchain explorers like Etherscan. Look for red flags like restricted functions that prevent selling or high transaction fees. If you can’t view the code or it seems overly complex, that’s often a warning sign—especially if the functions limit interactions to a single wallet or type of transaction.
2. Check for Locked Liquidity
Scammers often advertise “locked liquidity” to create a false sense of security. Confirm liquidity lock status using tools like RugDoc or DEXTools. If the lock is too short or the contract owner can remove liquidity at any time, it’s likely a scam. A legitimate token should have a liquidity lock of at least several months.
3. Monitor Trading Fees and Gas Requirements
Unusually high gas fees or transaction fees are common markers of honeypot scams. If fees seem excessive every time you try to execute a trade, it’s often designed to discourage withdrawal. Compare fees with similar tokens to gauge what’s normal and be cautious of unexplained costs.
4. Look for Unmodifiable Contract Clauses
Examine if the contract includes unchangeable clauses. Scammers often hide restrictive rules within the code that prevent anyone except their own wallets from executing sell orders. Use blockchain analysis tools like Token Sniffer to check for these immutable clauses, as they indicate highly restricted tradeability.
5. Research the Project’s Community and Developer
A credible project will have transparent developers and an active community. Check social media for community engagement and developer responses. Be wary if the developers are anonymous, the community feels artificial, or there’s pressure to invest quickly—these are signs of potential scams leveraging urgency and hype.
Tools & Resources to Help Detect Honeypot Scams
Orb uses real-time data from blockchain networks, news sources, and community sentiment to identify suspicious behaviors in token projects. It’s highly effective for spotting signs of centralization, sudden market shifts, or price manipulation—key red flags for honeypots. By cross-referencing multiple sources, Orb provides an in-depth, reliable analysis of potential scams.
- RugDoc
RugDoc conducts a security assessment on token contracts by looking for risky features like:
setTaxFeePercentorsetSwapAndLiquifyEnabledfunctions, which can prevent selling or manipulate fees.- High control by contract owners, such as the ability to transfer ownership or adjust fees.
Its liquidity pool analysis also flags tokens without locked liquidity, which can prevent common scams like honeypots and rug pulls.
- Token Sniffer
Token Sniffer inspects smart contract code for risky functions commonly found in honeypots, like:
- Functions that restrict selling or impose high transaction fees.
- Centralized ownership that allows developers to modify the code easily.
This tool also checks liquidity lock status to ensure funds can’t be withdrawn, preventing both honeypots and rug pulls.
- DEXTools
DEXTools provides a live overview of token liquidity, transaction patterns, and wallet distributions to help detect irregularities:
- Tokens with low liquidity or concentrated holdings (where a few wallets control most of the supply) often signal honeypot risks.
- Its tools also allow you to monitor unusual transaction volumes, like sudden drops in liquidity, which can indicate market manipulation.
- Honeypot.is
Honeypot.is is a straightforward tool that simulates buy and sell transactions to determine if a token contract restricts sales or applies unreasonable fees. By testing trades directly, it quickly flags any limitations imposed by the contract—ideal for a rapid assessment of tokens listed on decentralized exchanges, helping you avoid hidden honeypots.
- BSCheck
BSCheck evaluates tokens based on ownership, fee structure, and wallet distribution, generating a risk score for each one. It’s particularly useful for detecting tokens with excessive fees or centralized holdings, which often indicate potential honeypots. A high-risk score and poor liquidity lock status serve as critical warnings for investors.
Using these tools in tandem provides a well-rounded approach to honeypot detection, equipping you with essential insights to avoid potential scams.
Examples of Honeypot Cases
Here are three of the most infamous cases that highlight just how tricky these traps can be:
Squid Game Token (SQUID)
One of the most publicized honeypot scams, the Squid Game Token launched in 2021 with marketing that made it look official, as if it were affiliated with Netflix’s hit show Squid Game. But the project was purely deceptive: SQUID token buyers soon found they couldn't sell due to a smart contract function that allowed only buys, not sells. By the time the project was exposed, developers had vanished, taking millions in investor funds with them.
DeFi100 (DFI100)
DeFi100 was a decentralized finance (DeFi) project that managed to attract considerable attention—and investor money. It was ultimately discovered to be a honeypot scam. The creators lured investors in with promises of high returns, but after the project raised significant funds, they disabled withdrawal functions, effectively locking everyone’s assets.
Then, as if to taunt the investors, the homepage displayed a message reading "We scammed you and you can’t do anything about it.” This message intensified public outrage and sent a clear warning to the crypto community about such scams.
Uranium Finance
Uranium Finance was an Automated Market Maker (AMM) on Binance Smart Chain (BSC) that turned out to be one of the largest honeypot cases.
In 2021, Uranium Finance performed an update on its platform, which hackers exploited by inserting a smart contract loophole that allowed unauthorized fund withdrawals.
This wasn’t a honeypot from the beginning, but a setup flaw turned it into one, causing investors to lose over $50 million overnight.
FAQ for Honeypot Crypto Scam
How to Sell Honeypot Crypto?
Unfortunately, honeypot crypto can’t be sold as the scam’s code prevents transactions that would allow you to sell or transfer tokens. If you’re stuck, the best move is to report the scam to protect others and avoid investing further.
How to Get Out of a Honeypot Crypto Scam?
Once trapped, it’s nearly impossible to get your funds back since the contract locks sales. Report the scam on forums, warn other investors, and avoid interacting with similar tokens in the future to minimize future losses.
Can Honeypot Crypto Scams Be Reversed?
No, transactions on the blockchain are irreversible. Once funds are locked in a honeypot, there’s no way to recover them. This makes it crucial to verify tokens before investing.
How Do I Avoid Honeypot Scams?
Avoid honeypot scams by analyzing token contracts with tools like Token Sniffer, checking liquidity, and researching project credibility. Red flags include anonymous teams, vague whitepapers, and limited sell options.
Why Are Honeypots Hard to Detect?
Honeypots are hard to detect because they look like legitimate tokens at first. Scammers often use smart contract code that disables selling while making buying easy, fooling investors into thinking they’re in a regular trade.
Can Legitimate Projects Have Honeypot Features?
Not typically. Legitimate projects allow full buying and selling functionality and provide transparency. If you encounter restricted trading, it’s often a sign of a scam.
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