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How to identify a crypto scam before it’s too late?

When the plan is too good…

Prior to its collapse, a protocol of Terra, Anchor Protocolpromised more than 20% interest on deposits in stablecoin TerraUSD (UST). This rate was well above the 5% promised by Tether (USDT) and many investors were attracted by the very high yields. Eventually, TerraUSD collapsed, as the system was not robust enough to withstand a massive withdrawal of funds from investors when the protocol rapidly reduced its yield from 20% to 17%.

14/ How about anchor protocol which was marketed as safe with high yield of 20% on $UST deposits? Investors got absolutely wiped out when #Luna and $UST crashed to oblivion. Yield depended on constant reserves top up and was clearly unsustainable.

The lesson here is not to rush into the highest return projects just because they are lucrative. It is better to go for projects with decent returns (5-10%) and forego excessive returns to be sure of long-term success.

Going by the world’s most successful investor, Warren Buffett, it’s not just the numbers that count, but rather the strength of a company’s fundamentals to ensure continued returns.

Reliable investors

The future of each project is determined by what it has to offer, which should be stated in a white paper. Unfortunately, most of us don’t take the time to read it. It’s like the terms and conditions when we sign up for a new service!

A strong white paper often attracts big investors like venture capitalists. Many successful cryptos like Solana, Aave, or Polygon benefited from a venture capital boost in their early days.

An undedicated team

Sometimes all it takes is a spelling or grammar error to spot a scam. A quality project will be well crafted with the help of professional writers and talented developers.

If you see errors on a website, it’s a sign that developers aren’t spending a lot of time on it. They actually plan to spend some time there to raise funds before moving on to the next scam!

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