I just saw many people asking what scam is and how to recognize it, so I decided to share some things I’ve learned from the cryptocurrency market.

What is a scam? Simply put, it is the fraudulent act of individuals or organizations aiming to seize assets, especially cryptocurrencies. Those who do this are called scammers, and they will face punishment if caught. The problem is that nowadays, scams are becoming more sophisticated and complex, with scale that can spread across many countries affecting millions of victims.

When caught in a scam, investors fall into a trap of deception that they often do not realize immediately. Some people even know it’s a scam but still participate for high profits. A typical example is the Ponzi scheme—where later investors pay earlier investors, and the earlier you join, the more profit you can make. But when new investors run out or the scheme becomes too crowded, it collapses and everyone suffers losses.

There are many common forms of scams. ICO scams are one of the classic methods—fraudsters launch new cryptocurrency projects with flashy advertising, hire KOLs to promote, then issue tokens via ICO to raise funds. After collecting large amounts of money, they abandon the project and disappear with the funds. Signs include: the project lacks clear solutions, doesn’t truly need blockchain, has an anonymous team or a history of scams, a poorly written whitepaper, and vague roadmaps.

Another form is liquidity withdrawal, often happening on DEXs. Initially, the project is built carefully, then listed on pools like Uniswap or PancakeSwap. Warning signs include: low liquidity, “inner” liquidity (can be withdrawn at any time), promises of high APY. Some projects even lock buy/sell functions or hack themselves to dump coins onto the market.

Protecting yourself is very important. Before investing, you need to research thoroughly: what is the project’s solution, does it really need blockchain, how is the community, what does the tokenomics look like. Check the smart contract for signs that holders and founders might have bad intentions. When connecting your wallet to a website, make sure it’s reputable and secure. After you no longer need it, remember to revoke permissions to prevent misuse.

Today, there are many tools to help verify projects, making it easier to avoid simple scams. But the most cautious approach is yourself—don’t let quick profits cloud your judgment. On Gate or any other exchange, always DYOR (Do Your Own Research) before investing in any project.