Anatomy of a crypto con
The crypto space can be a very hazardous terrain to traverse. These days danger seems to be lurking at every corner. Hardly a month goes by without an exploit or a hack being reported.How seriously the affected network or platform is disrupted depends on the magnitude of the funds stolen during the hack. Sometimes the platform makes a quick rebound because of the contingency plans that have been put in place to manage such scenarios. At other times, the post hack Outlook is rather bleak as the hack may well be the trigger for the demise of the platform.
Cons in the cryptospace come in various shades. Some of them are inside jobs involving a member or members of the development team, at other times it is the handiwork of external actors. Despite past incidents of hacks, people still fall prey to cons even those that have spent a significant number of years in the cryptospace. One of the most common cons these days are high yield investment platforms or HYIP in short.
These platforms claim to offer an unusually high rate of returns on investment within a short time interval. Ordinarily such high rates ought to be a red flag for any potential investor but whether you call it greed or the human urge for more profits seem to becloud or hinder sound reasoning causing such individual to fall prey or victim.
Each new platform that emerges touts itself as being different from it's predecessor that failed or folded up. Sometimes they seemingly or rather deceptively appear to do things differently giving them an air of legitimacy. Alas it's all nothing but a smokescreen as the end game still remains the same, make away with invested funds when they've warmed their way into the hearts of such investors by doing things to earn their trust. I will highlight some red flags which if found in any project are warning signs that such project is up to no good.
Unusually and consistently high rate of returns on investment
Any crypto project that promises unusually high rate of return of investment which remains consistent irrespective of market conditions or sentiments. Even the most established crypto platforms with years of experience in the bag cannot boast of such consistently high returns on investment thus it makes sense to be wary of any new platform that's just cutting its teeth claiming to offer such packages which are intended to be too juicy to resist.
You should probably do a thorough research about any platform offering recovery of initial funds invested within a short period of time irrespective of whether we're in a bull or bear market. Such outcomes may indeed be possible during a bull run but in a bear cycle the chances of that happening are rather slim if not altogether impossible.
Focus on massive investor or membership drive
It is not out of place for exchanges or decentralized finance platforms to organize or have a referral programme which rewards existing members for inviting new members. However when that apparently becomes the sole focus of the platform with mouth watering rewards which are irrestible such that the old members just want to bring others in without educating the invitees about such platform and the possible risks, then that's another red flag. The likely end game for such platform is the draining of liquidity when a particular target for invested funds is attained.
Sudden or bizzare change in mode of operations or road map
Before making any significant changes as per modus operandi, what responsible development teams do is to consult their community members. Often this culminates in a vote by community members to decide on adoption or rejection of the proposed changes. When the development team unilaterally conceives and executes changes out of the blue, it gives room for concern as such moves may be the beginning of worse things to come with the end result usually being unsavory such as a rug pull leaving investors with worthless assets and loss of funds. Such devs usually evasive and give unsatisfactory responses or answers when being queried by community members as to why unilateral action was taken.
The above red flags are from my past experiences with projects which turned out to be well planned Con operations. The moment these projects assess that they've built sufficient trust with the investors that's the time they strike. Little wonder those who have spent a long time in the crypto space also have a rule aside the regular ones that we're familiar with. The rule is
TRUST NO ONE and always manage your risk.
Thank you for reading.