Honeypot Crypto: How to Avoid Scams

The world of cryptocurrencies is developing rapidly, attracting more and more investors in search of high returns. However, as cryptocurrencies grow in popularity, so do the number of risks and scams associated with them. One of the most dangerous and common scams is the ‘honeypot’. These cleverly planned schemes are designed to attract unsuspecting users with the promise of quick and easy profits, but in practice lead to the irretrievable loss of invested funds.

According to recent research by the analytical firm Chainalysis, losses among crypto users increased by 27% in 2025 compared to previous periods. Moreover, almost half of the recorded cases relate specifically to honeypots – situations where investors voluntarily send their money to malicious actors, believing promises of free token distribution or easy earnings.

Modern schemes are becoming increasingly sophisticated and professional. Whereas previously such projects were easy to spot due to their poor quality, now fraudulent websites and social networks literally duplicate the interface of large and trusted platforms, creating an illusion of reliability. To increase trust, they use the services of celebrities and popular bloggers, whose reviews make the scheme even more attractive. Users forget to be cautious because everything looks convincing and professional on the surface.

It is quite easy to explain the essence of honeypot crypto in simple terms: these are special lures designed to attract those who dream of making a quick buck. Usually, fraudsters create a special token or smart contract containing hidden conditions or restrictions, thanks to which the investor loses access to their funds immediately after purchasing the asset. Despite the initial increase in the value of the asset, it soon becomes clear that it is impossible to withdraw profits — the money is frozen forever.

That is why honeypot crypto meaning is extremely important for every participant in the cryptocurrency market. Awareness of the warning signs will allow investors to avoid trouble and protect themselves from financial losses. In this article, we will take a detailed look at the nature of honeypot schemes, offer recommendations for identifying signs of fraud, and give advice on how to protect your investments.

The Origin of the Term ‘Honeypot’

The term ‘honeypot’ first appeared in the field of cybersecurity. Initially, this term was used to refer to special resources or systems designed to distract hackers and collect information about their methods. Such traps were created to study the activity of attackers and identify vulnerabilities in enterprise security systems.

As technology developed and cryptocurrencies became more widespread, the scope of the term expanded. Today, the word ‘honeypot’ is actively used in the world of digital finance and cryptocurrency, where it has taken on a new meaning. Now, ‘honeypot’ refers to a specific form of fraud designed to deceive investors by creating an attractive offer of quick profits or free tokens. Such traps are disguised as real investment opportunities, but contain hidden elements that prevent the withdrawal of funds or the sale of the acquired asset.

The origin of the term is related to cybersecurity methods, but its modern application has become widely used in the context of protecting crypto assets and combating financial crimes.

How Honeypot Crypto Scams Work

Fraudsters skilfully use psychological pressure and false promises to lure people into a trap. Let's take a closer look at the stages of such schemes and understand how to avoid unpleasant consequences.

Step 1. Create an attractive bait

The first phase involves developing an attractive investment idea that creates the illusion of success and easy money. It is this attractiveness that causes many people to let their guard down and rush into a decision to buy a token or participate in a project.

Here are the key points of the first stage:

• Creating a fake coin. Scammers issue a completely new coin, claiming an innovative idea, high growth potential or unique earning opportunities.
• Website and documentation design. A professional website is created with beautiful graphics, high-quality documentation and a detailed description of the advantages of the new token.
• Active advertising campaign. The scammers start mass promotion of their product through social networks, thematic groups, and messengers such as Telegram or Discord.
• Attracting influential people. Sometimes they use fake opinion leaders or anonymous experts to confirm the alleged real value of the project.

At this stage, the main goal of the scammers is to convince potential investors of the reality of the project and attract as many investments as possible.

Step 2. Stimulating mass interest

The next stage is the active creation of artificial demand for the token. To do this, fraudsters resort to various tricks, artificially generating excessive interest among the audience:

• Fictitious trading volume. Transactions are carried out using trading robots or bots to show active demand and rapid growth in the price of the token.
• Stories of fabulous earnings. Stories are published about successful early investors who allegedly earned huge sums at the start.
• Social proof. Fake positive reviews and feedback are created to reinforce the confidence of newcomers.

Such actions contribute to the formation of a panic fear of missing out (FOMO) among community members, forcing them to invest hastily.

Step 3. Hidden restrictions on exiting the transaction

The name Honeypot perfectly reflects the essence of the scheme: on the surface, the offer seems attractive, but in the end, it turns out to be inextricably linked to serious losses. The main ways to restrict exit from the transaction include:

• Hidden conditions in the smart contract. Although the token is available for purchase, the smart contract mechanism automatically prevents its subsequent sale or withdrawal of funds.
• High transaction fees. Large fees charged for attempting to withdraw money make the transaction unprofitable.
• White listing of addresses. The right to sell the token is granted exclusively to the project creators; ordinary users are denied this opportunity.

In other words, once the token is purchased, the owner remains a prisoner of their own greed, and the real value of the investment plummets.

The table shows the main types of fraud.

 

The final stage of the scam is the complete removal of any traces of the project and closing access to it. Usually, scammers proceed as follows:

• They erase liquidity. They remove funds from liquidity pools, making the purchase of tokens meaningless.
• They remove the platform. They shut down the website, block social media accounts, and hide contact information.
• They move on to the next project. They launder the stolen money through other wallets and begin preparing the next scheme.

Investors who find themselves in this situation realise their mistake too late, having lost their investment for good.

For anyone who wants to stay safe in the world of cryptocurrencies, understanding how honeypot scams work is crucial. It is important to remember three key tips:

• always check the reputation of the development team;
• study the audit of smart contracts;
• avoid overly lucrative offers.

Awareness and caution will help keep your capital safe and secure in today's world of digital assets.

Key Warning Signs of a Honeypot

Below are the main signs that may signal a potential scam.

Anonymous developers.

If the project team remains hidden or is represented by pseudonyms, this should raise suspicion. Legitimate projects usually openly display the profiles of their founders and employees.

Unrealistic promises of high returns

Any claims of guaranteed returns, especially extremely high ones, should be treated with extreme caution. If the reward sounds too good to be true, it probably is.

Problems with withdrawing funds

The inability to quickly withdraw your funds or long waits for transaction confirmations are clear signs of possible fraud.

Unsecured or unoptimised smart contracts

A lack of transparency in the contract code, hidden fees, or a confusing algorithm for blocking funds are signs of a trap.

Liquidity manipulation

Fake or illiquid DEX exchange pools may signal the organisers' intentions to freeze user funds.

Lack of active communication with the team

Poor support or refusal to respond to user requests may indicate the developers' dishonesty.

Short project lifespan

New tokens or platforms with a short operating history tend to attract less attention from regulators and increase the risk of fraud.

Tips for avoiding honeypots:

• Always check liquidity and trading volume. The more trading activity and liquidity a token has, the less likely it is to be a trap.
• Study the public source code of the smart contract. Transparency and accessibility of the full code reduce the risk of fraud. Use Etherscan, PooCoin, DeFi Pulse, and other services.
• Pay attention to the project's audience. An active community and openness of the project's authors are positive signs of reliability.
• Code verification. There are a number of services available for this purpose. Your task is to find conditions linked to the ‘transfer’ function, i.e. reasons why the code will not allow the crypto to be withdrawn.
• Use specialised online services. There are tools that allow you to conduct a preliminary analysis of possible risks in investment instruments.

It is important to remember that attentiveness and caution are your main allies in preserving capital in the world of cryptocurrency investments. Any offer that sounds too attractive requires additional verification and consideration. This is the only way to effectively protect yourself from potentially dangerous situations.

Real-World Examples of Honeypot Crypto

Honeypot scams have led to significant financial losses among investors, often disguised as promising projects. Let's look at a few examples

Squid Game token scam (2021)

The developers released the SQUID token, inspired by the popular series ‘Squid Game’. The token's value rose to incredible heights, but the smart contract code made it impossible to withdraw funds. By the time investors realised that the token could not be sold, it was too late — the scammers had already fled with several million dollars.

The Thodex cryptocurrency exchange scam (2021)

The Thodex exchange collected user deposits, promising huge profits and bonuses. Soon, the platform ceased to function, and the manager disappeared with billions of dollars of client funds. This case demonstrated the importance of choosing reliable and regulated exchanges.

Snibb token scam (2023)

The Snibb token gained popularity thanks to social media. Anyone could buy it, but the smart contract included a prohibition on selling. As a result, investors were left with completely useless tokens, losing significant amounts of money.

Each of these examples highlights the need to be careful when choosing projects and to always check smart contracts for hidden conditions and restrictions.

How to Protect Yourself from Honeypot Scams

Despite the growing complexity of fraudulent schemes, there are effective ways to protect yourself from them. The main thing is to remain vigilant and carefully approach the selection of projects. Below are some practical tips for protecting yourself from honeypots.

Checking smart contracts

Use specialised services to analyse smart contracts (Etherscan/BscScan). Be sure to check that the contract code is publicly available and complies with security standards. Check how distributed the token issuance is and whether there is an excessive concentration of funds among a certain group of individuals. Regularly check announcements about pre-sales and token trading in official sources, avoiding participation in shadow operations.

Tokenomics analysis

It is necessary to assess the trading volume and liquidity level of the token on the platform. A high level of activity may indicate the seriousness of the project. Conduct a comparative analysis of tokens with similar characteristics on the market. A relatively small difference in indicators gives confidence in the absence of manipulation.

Specialised tools

The use of specialised monitoring services such as Blockfolio, DappRadar, and Nansen AI helps to track suspicious activity. Use analytical tools to assess the quality of smart contracts, such as Mythril or Securify.


Basic safety rules:

• Do not invest large sums in unfamiliar projects. It is better to start with small tests.
• Be wary of offers promising super-fast profits. More often than not, these are bait for gullible investors.
• Communicate with the community and forum participants. Experienced participants can share information about the problems and shortcomings of the project.

Conclusion: Awareness Is the Best Protection

Honeypot scams pose serious threats to participants in the cryptocurrency space. The loss of funds can lead to significant financial damage. But timely detection of signs of fraud can minimise the risks.

The main rule is to act consciously and rationally. Before investing, conduct a detailed analysis of the project, review audit reports and feedback from experienced market participants. Only a systematic approach to investment can guarantee your financial security.

Remember that fraudsters are constantly improving their methods, so your vigilance and knowledge are your best allies in protecting your capital.