On-chain scams

Customer empowerment through transparency and trust

On-chain scams in the blockchain industry can take many forms, one of them is smart contract impersonation. Smart contract impersonation is a type of scam in which malicious actors create a replica of a legitimate smart contract and use it to steal funds from unsuspecting users. This type of scam is particularly prevalent in the decentralized finance (DeFi) space, where users are often lured in by the promise of high returns on investment. The replication of smart contracts is relatively simple due to the open-source nature of most smart contracts, this allows malicious actors to copy the code, change the address and use it to scam users. They can use various methods to promote the fake contract, such as phishing, social engineering, or impersonating the legitimate project on social media or in chat groups. Once a user interacts with the fake contract, the funds are transferred to the scammer's address, making it difficult to trace and recover the funds. This type of scam can be especially dangerous as it can be hard to detect, especially for less experienced users.

Another key aspect in on-chain scams in the blockchain industry is the use of fake tokens, which can be used to trick users into buying worthless assets. These tokens are often created by malicious actors and promoted through various channels, such as social media, chat groups, or phishing scams. They can be designed to look like legitimate tokens, with similar branding and logos, making it difficult for users to differentiate between real and fake tokens. Fake tokens can also be used to conduct pump and dump schemes, where the scammers artificially inflate the price of a token and then sell it at a profit, leaving the unsuspecting buyers with worthless assets. These schemes can be difficult to detect, as they often use sophisticated marketing tactics and create a sense of social proof to lure in investors.

In addition, another key aspect in on-chain scams in the blockchain industry is the use of decentralized autonomous organizations (DAOs) to conduct fraudulent activities. DAOs are organizations that are run by a set of smart contracts, and they can be used to conduct Ponzi schemes, pyramid schemes, and exit scams. The decentralized and transparent nature of DAOs can make it difficult for users to detect and prevent these scams.

It's important to be aware of the red flags of on-chain scams, such as unsolicited contact, unrealistic promises, fake tokens, and the use of DAOs for fraudulent activities. The key to protecting oneself from on-chain scams is for founders to keep building with transparency and trust as core values and to users to make their on due dilligence either by themselves or using customer protection solutions.