Using Crypto Honeypot Checker by Quick Intel: Across 43 Chains (& Growing), including Solana, Injective, & more!

Jun 12, 2023

Crypto Basics

A honeypot is a TRAP! While there are many different types of scams in the crypto space, the one thing they all have in common is they are attempting to steal your money! Today, we will focus on the crypto smart contract honeypot where most users will have heard the term, "honeypot."

In this blog post, we will cover:

  • What a smart contract is

  • What token taxes are

  • What a smart contract honeypot is

  • How you can protect yourself (and your money) from honeypots

What is a Smart Contract?

Think of a smart contract like a program on your computer. You ask the program to do something, and it does that thing based on how it was coded. An example would be a note-taking program like Notepad. Notepad allows you to write text and then save it when you click the save button.

A smart contract is similar. When you want to buy a token, behind the scenes you are talking to the smart contract which has specific coding developed by the token’s team to perform a buy on your behalf and handle the token’s taxes if they are set. This smart contract code is very useful as it allows all sorts of features, but it can also contain code that a scammer will use to steal your money.

What are Token Taxes?

Taxes are a fee the token’s team collects when an investor buys or sells their token. This fee is almost exclusively displayed as a percentage, so you may see it as “5% buy, 5% sell taxes." Most contracts have their buy and sell taxes that can be set separately, and a team can set their tax from anywhere between 0% and 100%.

So if a token has a 5% buy tax and you buy $100 of the token, you will get $95 worth of the token in your wallet and the team will get $5 in theirs to further the project.

What is a Smart Contract Honeypot?

A smart contract honeypot typically involves setting a token’s sell tax to a very high percentage in the smart contract code. This is how they scam you.

There are typically two common scenarios you will see:

  1. A scammer will create and launch a shiny new token with a low (or no) buy tax, but the sell tax is set to a high percent (100% for example). What happens is you buy the token and then when you go to sell, all of your money goes to the team as it has a 100% sell tax. You get nothing.

  2. The second scenario is the same as the first, however, the team will delay setting the sell tax to 100% until a later time. This allows the chart to look “normal” as people are buying and selling which then pulls more investors into the honeypot. Once the token has enough buyers, the team sets the sell tax to 100% and again, you get nothing.

How to Protect Yourself From Crypto Honeypot Scams

One of the best ways to protect yourself is by leveraging Quick Intel’s smart contract scanner. Quick Intel’s contract scanner performs several tests and provides this information in an easy-to-read format so you can make informed decisions.

The first test Quick Intel performs is a simulated buy and sell of the token. This is the “Honeypot Test” listed on the scanner and handles the first scenario listed above.

The second test Quick Intel performs is evaluating whether the token’s buy and sell tax can be changed. In addition, Quick Intel will tell you if there is a maximum percentage that can be set. As an example, a token may have a 5% sell tax set currently but also has code to ensure the sell tax cannot be set above 10%.

Want to see Quick Intel’s contract scanner in action and start protecting yourself from honeypots and other malicious scams? Try it out for free today!

And in the meantime, be sure to stay tuned for more crypto safety tips and project updates!