Cryptocurrency is a new distribution in the financial industry. Transparency and security are the core element in a crypto project which is much lacking in the traditional financial industry.
Recently we have seen many scams, rug pulls, and honey pots both in ROI Dapps and Defi protocols within the cryptocurrency sector. Today, we’re going to look into a common issue which is called an Exit Scam.
There are 3 classic Exit scams that commonly happen in the ROI DAPP sector. Below are 2 common scenarios that are frequently used by project owners/developers
This is the third scenario that does happen but is not as frequent as the 2 scenarios above. So, what is a Mirror Effect?
Here’s the outline view of what a DAPP Mirror Effect is.
1. A verified and audited contract is been deployed
2. After x number of days, the original verified and the audited contract is been replaced with an unverified and unaudited smart contract to perform an act of scam and unethical scenario
Let’s understand how a project owner uses Mirror Effect to lure potential investors and then Rugg the entire project. This is a very unethical, gruesome, and heartless act of a project owner @ human towards their investors @ another human.
In the beginning, the project owner will deploy a smart contract that has no malicious codes or any scam scripts. This is done due to the fact that they need an audit report to back their project and to show to the community @ investors that their project is legit and has been audited by more than one audit company. Usually, they’ll choose reputable audit companies, like HazeCrypto that has a name in the current industry.
The twist here is, they will have the same smart contract built up but with a malicious code or backdoor ready to be deployed as well.
Now, once the project owners have received the audit report from the auditing company, they will do either of these two:-
I believe this will be the next big question that you would want to know and ask. It doesn’t sound logical nor can your mind comprehend it but there is more than meets the eye.
One has to understand that the blockchain verifies a smart contract only. Auditing companies, verify the programing codes, in this case, Solidity. Neither the blockchain nor an auditing company conducts a check or audit on the following: -
1. Website speed/layout
2. Design / Video / Animation
3. Management of the project
4. Marketing & Promotions
5. Community growth
An auditing company checks the project's code once it’s been deployed on the blockchain. When all the necessary criteria are met, and no backdoors, malicious codes, or scam scripts are found, the audit company issues a report verifying that the project bearing the stated contract address is legit and no unethical or fraudulent activity is found.
The most important part here for you as an investor to understand and take note of is:-
You, as an investor, must always verify the project’s smart contract address against the audit report’s details. When both the smart contract address is the same, it ensures that you are investing in the verified project, but if you notice a difference, please do not invest as 99.99% it's going to be a fraudulent act of play.
Now, that you have a comprehensive understanding of how Mirror works, let's have a look at the recent scam happenings with a project called BNBMatrix.
The only way to be competitive and also avoid being scammed or rug pulled is to get yourself educated about those topics. A few things you as an investor should take into consideration before investing in a ROI Dapp:-
For any doubts or any related issues about a project which has been audited by HazeCrypto, please feel free to ask at our telegram community group.