What Is a Honeypot in Cryptocurrency and How to Avoid Falling Into a Scammer's Trap?

Honeypot in Crypto: A Simple Explanation

A honeypot is a premeditated scheme where attackers show the user a seemingly profitable project, but its real goal is to lure out money, data, or access to a wallet.

Honeypot: what does it mean?

Honeypot crypto is a scam. The name of the scheme means "bait."

How does a honeypot scheme work?

The scammer creates a token and claims that it can be used to make quick money. They may convince the victim that there is a "vulnerability" in the code of their smart contract that allows them to buy the token and immediately sell it at a profit or bypass the commission. To take advantage of this, you need to purchase cryptocurrency.

In practice, the code has a restriction written in advance: anyone can buy the token, but it cannot be sold, or only the creator can sell it. The user is left with a useless asset, and the scammer withdraws the money.

Key Signs of a Honeypot Token

We have described the signs that will help you recognize the trap in advance.

Inability to sell the token

The purchase goes through without any problems, but when selling, the transaction is not confirmed or constantly ends with an error.

Suspicious smart contracts

The code is not available for viewing, has not been audited, or contains unclear terms and conditions.

Abnormal fees or restrictions

The contract contains a direct prohibition on the sale of tokens or excessively high fees — 50%-90%.

Common Honeypot Schemes in Crypto

Here's how scammers operate:

Fake token and coins

Scammers launch fake tokens under the name of anticipated projects and offer to buy them before listing. The token appears in the wallet, but it is impossible to sell it.

Manipulation in smart contracts

A token is created with restrictions hidden in the code. As the price rises, users buy the coin. At the right moment, the creator withdraws liquidity or sells the token.

Honeypot in Telegram and memecoins

Scammers promote Telegram channels, build trust, and create a sense of urgency. After the token is launched, users buy an asset that cannot be sold initially, and the channel later disappears.

How to Check a Token for Honeypot Before Buying?

Even a basic check reduces the risk of losing funds.

Checking via blockchain scanners

• Check the smart contract by its address via a web browser. Closed or unverified code is a sign of a honeypot.
• Analyze the history of transactions with the token. Many purchases without sales are a cause for concern. 

Using the honeypot checker

There are services that automatically analyze contracts and show whether there are any hidden restrictions (Honeypot.is, Token Sniffer, DEXTools).

Checking liquidity and contract owner

To check liquidity:

• Open the token page on DEX.
• Find the Liquidity/Liquidity Pool section.
• See if the token has any liquidity and, if so, how much (too little liquidity means high risk).

The status "LP Unlocked" means that the creator can withdraw money at any time.

In the "Holders" tab, check how many percent of LP tokens are held by one address: 90%-100% allows complete control over liquidity and removal at any time.

How to Protect Yourself and Avoid Falling into the Trap of Scammers?

Honeypot schemes are designed to take advantage of haste and inattention.

Safety rules for beginners

1. Always check the smart contract before buying little-known tokens.
2. Study official project resources.
3. Don't trust promises of quick profits.

Avoid tokens with no history or liquidity

If the project is new, trading volume is low, and liquidity is controlled by a single address, selling such an asset will be difficult.

How to recognize a suspicious project?

Closed comments, pressure to "get in now," deletion of messages, and frequent changes of administrators are warning signs.

Examples of Well-Known Honeypot Schemes

Here are some illustrative cases that crypto market users have already encountered.

Traps in DeFi and memecoins

The Squid Game (SQUID) token was launched in 2021 on the wave of popularity of the TV series of the same name. The project was advertised as a play-to-earn game. The price of SQUID rose from cents to thousands of dollars in a matter of days, but the smart contract blocked the sale of tokens. After the influx of funds, the developers withdrew liquidity, leaving investors with losses.

Cases of fraud on Telegram

The fake ZKSync token (a copy of the real token) appeared in 2024. The scammers offered to purchase the "fake" before listing, citing insider information. To build trust, a Telegram channel was purchased and promoted in advance, through which users were directed to DEX to purchase the fake token. The coin was displayed in the wallet, but it was impossible to sell it. The total damage exceeded $1 million.

Conclusion

Honeypot is a scam scheme where you can buy a token but cannot sell it. To reduce risks, it is important to check the smart contract, liquidity, and owner, as well as not to fall for hype and urgent offers.

Disclaimer

This material is for informational purposes only and does not constitute financial advice.

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