In the latter scenario, as in the case of Rebel Satoshi, the line between a scam and an unsuccessful project is not always clear. And sometimes, because of the large amounts of money involved, “something that wasn’t a scam to begin with can turn into a scam later,” says Ben-Natan. “Over time, the line can become more blurred. »
According to Ben-Natan, these scams are largely carried out by sophisticated cybercriminal groups and not lone actors. A “microeconomy” formed around them, he says, in which separate parties could be tasked with managing different elements of the charade, from the marketing campaign to website design and so on. The largest of these operations can bring in hundreds of millions of dollars. “The numbers are staggering,” says Ben-Natan.
For anyone willing to look for them, the warning signs are there, says Dyma Budorin, co-founder of Hacken. It’s easy to check whether creators have revealed their identities, for example, or whether there’s a system in place that prevents them from getting rid of their assets without warning. But in their desire to quickly launch into new projects, few investors bother to do their due diligence. “It all comes from gluttony,” explains Budorin.
In extreme cases, profit-hungry investors have started using “sniping bots” to automatically buy tokens as soon as they start trading on the open market, Budorin says, in an attempt to get in early. Others engage in copy-trading, a process by which they blindly replicate someone else’s trades so they don’t have to do their own research. Both techniques increase the likelihood that a person will be exposed to a scam.
As bad as memecoin-based scams are, there is still plenty of room for growth. “The people who buy this product are mostly people already in the industry,” Budorin says. Pre-sale events are marketed in niche circles, and most new tokens are not traded at launch on mainstream crypto platforms. But as newcomers are drawn into the cryptosphere by the rising prices of traditional tokens, like bitcoin, the pool of potential victims will widen.
According to Budorin, one way to guard against these scams would be to establish an industry-wide standard for new crypto tokens, requiring features in the code that prevent developers from abusing their control over large quantities of tokens. In theory, provided someone can persuade exchanges and other stakeholders to adopt the new standard in unison, any diverging tokens could be easily identified and blacklisted. “This could be solved relatively easily with a standard,” says Budorin.
But in the meantime, investors looking for outsized returns will continue to take the risk of buying freshly minted memecoins. Ryan admits to being partly responsible for potentially losing his money to a scam. “Looking back, I can hardly blame them. I should have known that. There were lots of flags,” he said. Still, the incident did not dampen his enthusiasm for memecoin investing.
“There are other tokens with a lot of potential, so I think I’ll continue to invest money in them and stay away from sketchy things,” Ryan says. “I’m not going to let this stop me.”
