As the decentralized finance (DeFi) market is enjoying the uptrend, so are the scammers. The fraudsters impersonating popular DeFi projects are also surging to take advantage of the hype.
Various scam tokens, mimicking the legitimate DeFi protocols flooded the decentralized exchange (DEX) and liquidity protocol Uniswap recently, mainly due to its open though controversial listing policy.
Uniswap, which is an automated trading platform for ERC-20 tokens, allows users to import any new token simply by pasting its address to the Uniswap’s swap menu. The protocol is built on the Ethereum network and allows peer-to-peer (P2P) trading of the ERC-20 standard tokens. The decentralized exchange recently turned into a popular one, as the number of new Ethereum-based DeFi projects began to surge.
The scam tokens spread
As the DeFiprime warned decentralized finance community users this weekend, there could be a lot of fake tokens on the Uniswap platform that mimic the legitimate projects and deceive users into trading their funds for a worthless scam token.
The list of victims included popular DeFi projects like decentralized exchanges 1inch, Curve and dYdX. As DeFiprime further reported, the scammers also listed the fake BZRX, TornadoCash Token and even the Uniswap Community Token. They additionally launched a token pretending to be the BAL token of non-custodial portfolio manager Balancer Labs and fake OPM token of decentralized derivatives project Opium.
A quick response from the legitimate DeFi projects (Curve, 1inch, Balancer Labs) revealed that scammers tend to exploit the fact of the upcoming legitimate token release by impersonating them:
⚠️⚠️⚠️ The Balancer (BAL) token 0x6cb8... on uniswap is a SCAM. BAL has not been created yet ⚠️⚠️⚠️— Balancer Labs (@BalancerLabs) June 13, 2020
We'll announce here when the official token gets deployed.
However, numbers of other Ethereum-based DeFi projects are planning to release their tokens, which makes scammers still able to exploit the advantages of Uniswap’s listing policy and launching their fake coins before the legitimate ones.
The flood of scam tokens is taking place in the midst of a decentralized finance market breakthrough, which increased its value by $1 billion within a few months this year and holds the total value of $2.14 billion at a time of publishing, according to the DeFipulse.
In the meantime, decentralized exchanges are one of the leading DeFi sectors, whose trading volumes exceeded $1.5 billion and reached the all-time high in June. Uniswap and Curve together processed nearly $800 million, which is more than half of the overall monthly volume.
Furthermore, DEXes were among the rare booming sectors during the mid-March market crash when both traditional and cryptocurrency markets went down due to the global COVID-19 pandemic.