Don't use your hard-earned money to fatten the '土狗' (local dog) anymore! Who hasn't experienced that feeling of refreshing the market at dawn, being blinded by 'hundredfold potential' and 'initial benefits', only to go all in and then witness the token price plummet, losing more than half of your savings in a day? I lost a six-figure amount back then, going from a crypto newbie to a 'pitfall expert'. After reflecting on my pain, I compiled this token safety inspection checklist that anyone can use. Now, I go through it every time before making a move, effectively reducing my pitfall rate to below 10%. Today, I'm sharing my most valuable insights, all practical details that retail investors can use right away!
Let me be clear: there are no guaranteed profitable trades in the crypto market, but we must avoid 'losing without a trace'. Many friends only look at two points when buying tokens: whether others are promoting it and whether there's hype. What's the difference between that and blindly scratching off a lottery ticket? Real security checks consist of 5 core tasks, and we will break them down step by step, explaining how to operate each step thoroughly.
Step 1: Contract audit report. Don't just look for 'one exists'; check for 'are there any pitfalls'.
Now, projects that have even a little common sense will have an audit report to show off, but don't think everything is fine just because there's a report! I have seen many projects use reports with 'a lot of problems' to fool people, and newcomers can easily be misled. When looking at reports, focus on three points: first, check the auditing institution; prioritize well-known top firms in the industry, as the credibility of those small institutions you've never heard of is basically zero; second, look at the core conclusions. Are there 'high-risk vulnerabilities' or 'medium-risk vulnerabilities'? If there are, skip it and don't listen to the project team say 'we are fixing it'; by the time they fix it, it will be too late; finally, check the details of the vulnerabilities, paying special attention to modules like 'permission control' and 'transfer restrictions'. For example, is there 'hidden minting permission'? If the team secretly mints tokens to crash the price, you will have nowhere to cry. Here's a little tip: go directly to the audit institution's official website and search for the project name; only the results you can find are real reports. Don't trust screenshots provided by the project team, as they are likely faked!
Step 2: Token concentration + liquidity pool lockup, these two are key to 'preventing exit scams'.
Before the project team runs away, there will always be signs. The concentration of held tokens and liquidity pools are the best 'alarm systems'. How to check the holding addresses? Use mainstream block explorers, input the token contract address, and find the 'Token Distribution' section. Pay close attention to the proportion of the top 10 holding addresses. If it exceeds 60%, get out immediately! This indicates that most tokens are in the hands of a few individuals, and if they decide to sell, the price will crash. Also, watch for 'whale addresses' that frequently transfer funds; this could be a sign of a looming exit.
Now, let's talk about liquidity pool lockup, which is the easiest point to overlook. The more funds locked in the liquidity pool and the longer the lockup period, the higher the cost for the project team to run away. How to check the lockup situation? Use a dedicated liquidity pool lockup query tool, input the contract address, and you can see it. Pay close attention to two data points: first, the locked amount, which must be of a certain scale, don't let it be just a few thousand dollars, as they can easily withdraw it with a small amount of money; second, the lockup time must be at least 3 months. Those that are only locked for a few days or weeks are basically ready to withdraw and run away at any time. Remember, never touch projects without locked liquidity pools, no matter how appealing they seem!
Step 3: Investigate the team background thoroughly; related addresses must be checked.
'Anonymous team' = 'high-risk alert'; memorize this! Nowadays, many projects say 'the team is anonymous for safety', which is pure nonsense. Projects that truly have strength and want to operate long-term would love to reveal their team's background to increase trust. If the team dares to show their faces, search for their names on LinkedIn and Twitter to see if they have real industry experience, whether they are veterans in the crypto circle, and if they have experience with successful projects. If you can’t find any information or if the information is clearly fabricated, just pass.
More importantly, cross-check related addresses. Check the publicly disclosed addresses of the project team, the addresses of team members, and the top few holding 'whale addresses' using block explorers to see if there are frequent fund transfers among them. If you find these addresses transferring funds to each other or linked to some blacklisted addresses, then this project is likely problematic, so stay away. I learned this the hard way; I didn’t check related addresses, and as a result, the project team and the major holders colluded to crash the price, leaving me stuck at the top of the hill.
Step 4: Social media sentiment, don’t be fooled by 'paid bots'.
In the current market, half is driven by capital and half by emotional speculation, but emotions are the easiest to fake. Open the project's community and social accounts; don't just look at the comments praising it, learn to distinguish between real and fake fans. How to tell? Look at the quality of the comments. If they are all meaningless phrases like 'Let's go!' 'It must rise!' 'Buy quickly!', they are likely paid bots; if someone asks rational questions like 'How is the project progressing?' 'What does the audit report say about the loopholes?', and a team member responds seriously, that's a real community atmosphere.
Here's another tip: look at the growth rate of the followers on social accounts. If there’s a sudden spike of tens of thousands or hundreds of thousands of followers in a short time, and the follower profiles are all default avatars with no activity, they are basically bought zombie followers. Additionally, check out a few different communities; don’t just stay in the community built by the project team, as it’s full of filtered positive information. Go into third-party communities to hear different voices for a more comprehensive judgment.
Step 5: Token economics stress test, a simple calculation will tell you whether it's worth investing.
In simple terms, token economics is about 'where the money comes from and where it goes'. Many projects have fundamental problems with their token models, and no matter how much they hype it, they will eventually crash. Retail investors don’t need complex calculations; just do two simple stress tests: first, check the release mechanism. Is there a token unlock schedule? If a large number of tokens are unlocked in a short period, such as over 50% within a month, it will definitely crash, and the price will fall; second, look at the application scenarios. What is the token really used for? Is it just for trading, or can it be used for staking and payments within the project? If there are no real application scenarios and it relies solely on speculation, this token is an 'air token' and will eventually go to zero.
Here’s a simple algorithm: divide the circulating market value by the project's monthly revenue (if there's no revenue, just look at user growth). If the ratio far exceeds the industry average, it indicates that the valuation is too high and has already formed a bubble, so don't chase it. On the contrary, if the ratio is below the industry average and the project has real progress, it might be a potential opportunity.
These 5 steps may seem troublesome, but once you actually do them, each step only takes about ten minutes, and a complete safety check can be done in a little over an hour. I know many friends think 'trading tokens has to be fast; by the time you finish checking, the opportunity is gone', but I want to say that real opportunities won't slip away just because you spend an extra hour checking; rather, those that require you to 'hurry and get on board' are most likely traps.
I lost a lot of money back in the day because I was too eager and skipped these steps. Now, every time I buy tokens, no matter how urgently others push me, I go through these 5 steps. Although I missed some so-called 'hundred-fold opportunities', I avoided countless potential traps. For us retail investors, surviving in the crypto market is more important than making big profits.
Lastly, let me say something from the bottom of my heart: there are no 'easy profits' in this market, only the skill to 'avoid pitfalls'. The 5-step checklist I shared today is based on my hard-earned experience with real money, and I hope it can help everyone. Follow me @链上标哥 , so you won't get lost!
