How Uniswap scams work — part 1
During the second part of 2017 and the first part of the 2018 ICO ecosystem was booming. Binance was the exchange that took most advantage of that situation, by the end of 2017 it was the most popular exchange. They did it by listing a large number of “hot” new tokens, tokens listed on Binance regularly pumped so successful projects wanted to get there and needed to pay more and more to get listed there, reporting up to 1 Million dollars to get listed, fast forward to 2020…
Uniswap is a decentralized exchange with a meteoric rise. On Jul 31, 2020, Uniswap did a $126M volume in 24 hours. This is 1/3 of Coinbase. 1/2 of Kraken. More than Gemini, Polo, and Binance US combined.
It gives permissionless possibility to launch own crypto project with Ethereum token, get listed on its decentralized exchange, provide liquidity for token swaps, and get into the crypto world for FREE. With that, there are also opportunities for retailer buyers to buy projects early and get great returns for a low price. Sounds great?
Scammers know many people are willing to try their luck, buying new and unknown token before it increases tenfold, so they offer new ones on Uniswap in buckets. Usually just creating a new smart contract with some crazy name and providing liquidity for it until they catch few unlucky people who will try their luck and lose some eth. So how does it look like?
Let's look at the Farmer Pepe project https://uniswap.info/token/0xf8df541267a14e12d4f21820ff977cbccfe95e10
If you go under Transactions section, click on Adds, this is where liquidity was added for this project
then if we go under Swaps you can see few unlucky people trying to get early and giving their ether to this new project
After they catch few Ether worth of value they pull out their liquidity 1 hour later, which can be seen in Removes section
“Farming” out peoples ether in this popular move called “rug pull”. If you are wondering why do they remove liquidity so quickly, it is because if those people who invested get doubts, they could sell back those tokens for eth and remove scammers gains, so it is easiest for them to remove liquidity and go on to next project.
In the end, you will be left out with this kind of screen, showing 0 liquidity, and you unable to sell those tokens.
This kind of scams happens in hundreds each day, every 5 minutes with a new one coming in and in an hour or so going out.
Also, don’t be fooled by high liquidity of projects, some of them will +100 of ether and pull the rug also (https://uniswap.info/token/0xe8097ea6c2ae93e9a11232ff4a1793af49451b86)
Even having a website and pretending to build community on telegram/discord has happened. But lately, with amount of new “projects” coming to Uniswap, they don’t even bother with that, just create a new token, steal some eth and go out.
Scammers are also getting cheeky, mocking their victims with projects named Degenerate Platform
or Retard and Useless token, still people FOMO in and buy those kinds of projects and lose their ether.
There are also some other plays, for example where they resurrect old projects from the last ICO 2017 craze, those project will have some history, website and “some legitimacy” but all they do is buy loads of tokens for cheap, then pump up the price and sell slowly to new people at higher prices until they run out of suckers or tokens to sell or do the same rug pull fast.
You can also find tokens with names like other popular projects with like Zilliqa https://uniswap.info/token/0x02080b9c5d393a19ff311bb41401dcdac8a0b3dc
which also got some people into it ending in similar scenarios or projects that combine some popular names of other projects and people might put some eth into them as they sound familiar. They are trying whatever works and seems it is working at this point and works in loads of eth being taken out from people taking too much risk and not enough information.
With all this, I am not even mentioning lots of Uniswap vaporware projects that do not do this kind of lowest level scams as they provide liquidity and even have decent volumes but will unload on people until this Uniswap bull market exists and in a year or sooner will be left with 0 liquidity and 0 price.
What to do about it?
I am not going to hold my breath that someone catches these scammers, although I seen eth provided for “projects” coming from exchanges like Binance so some of them could be caught on KYC bases on CEXes, some traces could be made. Also, it is questionable how much is this a scam if all they offer is just a smart contract and liquidity, and people FOMO into it.
One thing that could be done is education and information with posts like this, another thing would be that Uniswap adds the option of locked liquidity in smart contracts, so projects would have a timeframe in which liquidity cannot be pulled out, this would be a good 80/20 solution and not a big problem to implement for them. They would lose some of the scam volume but would make it a nicer and much less spammy environment.
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Do You want to help fight crypto scammers and help bring more articles like this?
Of course You wont, seems nobody does, that is one of the reason crypto is full of scams, enjoy