A honeypot in crypto is a crypto industry scam designed to hold captive the victims and steal their personal (sensitive) information or digital assets (funds). So, “Honeypot” is a term used in cybersecurity to distinguish legitimate crypto dealings from fraudulent ones. It’s a metaphor referring to something that is aimed to trap someone.
Bad actors in the industry deploy Honeypots in crypto to achieve their illegal targets (purpose). In this post, you will be introduced to different Honeypot crypto scams that happened in the past or may happen today. They actually seem like a sweet spot of cryptocurrency; once you go for it, you are trapped in it. Let me explain further.
What is a Honeypot in Crypto?
A honeypot is a scam designed and used by cybersecurity criminals in the crypto industry to steal a victim’s data, crypto assets, or any other sensitive information.
Honeypots involve setting up a fake wallet or website that seems legitimate but not actually. Such traps are designed to fascinate and deceive less cautious users.
As an example simplifies things, let’s take an example of a honeypot: a cyber scammer or a hacker might create a manipulated smart contract or a fake wallet. Once a victim deposits funds or fills in personal information, the scammer will steal the provided asset and depart.
So, the fake site was a honeypot, engaging victims with what appears to be a legitimate platform (in actual practice, it wasn’t).
How Does a Honeypot in Crypto Work?
The cybercriminal in the crypto industry may attack such as honeypots and proceed to imprison the victim’s assets. Once done, only the cyber scammer can recover the imprisoned cash.
Honeypots are very sophisticated scams that are orchestrated to operate in several key stages. In most cases, a honeypot works in different stages, as discussed in the following:
- Choosing a Honeypot
Initially, the scammers will decide on the type of honeypot to create based on their resources and specific goals. For example, they might set up a scam site as a famous exchange or throw a highly appealing investment Ponzi scheme.
- Creation or Setup
Next, the honeypot, such as a fake(scam) website, is set up to catch unwary users. It will precisely be designed to imitate it as a genuine service. This might be a replica of big official websites or exchanges (marketplaces), including identical visual interfaces, marketing tactics, functionality, and web content to avoid any suspicion.
- Promotion
With the entirely prepared honeypot, the next goal is to hunt the innocent crypto cats. So, the cyber attacker will drive traffic to this website using various promotional tools and techniques. It might be paid Google ads, search engine optimization, social media campaigns, and engagement through fake social accounts. The goal is to spread information about the honeypot as a new opportunity widely.
- Monitoring Activity
After they live their site and it gains traction through any means, the honeypot scammer (operator) keeps a close eye (monitors) on any user activity within this trap. They anxiously wait for account sign-ups, crypto deposits, fill-ins of personal information(data entry), or other engagements on their site.
- Stealing
Here comes the last stage; once a victim gets trapped in the honeypot and assets or sensitive data are provided, the scammer will suddenly steal it and take down the fake platform to avoid any signs or footprints behind it.
Types of Crypto Honeypot Scams
- Fake websites
- Phishing Emails
- Social Media Scams
- Manipulated Coins
- Malware Attacks
- Fake Airdrops
How to Avoid Honeypots in Crypto
A crypto honeypot scammer can deploy and administer it through open-source and commercial solutions available in the market. You may be shown a lot of buys for a specific coin in a honeypot scam, but the victims will be having a hard time selling it. This clearly signals that the coin is not legitimate, and you should avoid it.
Moreover, check out the contract transaction behavior to de-classify the contracts as honeypots or non-honeypots (a data science approach).
When it comes to investing your funds (real money), try your best to follow all the best practices. It saves you from scams and steers you away from crypto honeypots.
- Research before investing: Conduct in-depth market research of a platform or any investment opportunity before you release funds or any information. Check out their legal registration, reviews, and complaints.
- Ensure certificate validation: Look for a valid SSL certificate on the websites. If not enabled, it’s a sign of fraud; scam sites often don’t have valid SSL certificates.
- Monitor liquidity: The tokens or coins that appear as illiquid or difficult to withdraw, simply avoid them. This signifies a clear honeypot.
- Don’t go blind on endorsements: A celebrity endorsement of investing in a coin is not a logic to blind trust. Such scams (coins or projects) make heavy investments in marketing. Do verify before you invest in an endorsement. Misusing a big celebrity account for such an advertisement is also possible. This has been done in the past to hack big original accounts and trap their followers.
- Don’t hit the allow button: Always try doing manual permissions while connecting crypto applications to your wallets.
- Invest in cold storage: Your crypto assets or funds are more secure in cold storage. It limits the possibility of losses in a scam like a honeypot.
- Enable 2-factor authentication (2FA): Set up two-factor authentication before you make digital transactions or crypto trading, as it provides an extra layer of security to your wallets and accounts.
