For hundreds of years, the term honeypot was used for something beguiling and dangerous. There were some historical antecedents, beginning in early-20th-century espionage, where the term referred to traps set to seduce or compromise targets as part of an intelligence operation.

In the 1990s, the cybersecurity industry adopted the term to refer to decoy systems meant to ensnare and study hackers. In the crypto world, a honeypot scam has become a term to describe projects that use promises of profit to attract users before stealing their assets by disabling withdrawals.

So, in this article, we take a look at the way honeypot crypto scams operate, how to spot them, and what you can do to minimize the risks for your investments.

What Is a Honeypot in Crypto?

So, what is a honeypot in crypto? In DeFi, this is the type of scam trying to look like a real legal business offering high returns. Such projects release their tokens and try to appear legitimate, even quite promising, prompting users to buy into the idea of quick profits. But unlike real tokens, the honeypot tokens typically have code that is intended to prevent users from selling or moving their holdings. And once the money has been invested, there is no way out — your assets are stuck in a honeypot crypto scam.

How Honeypots Work

Even sophisticated investors can be duped by honeypots, which may be very carefully crafted. Here’s a look at what a honeypot scheme is and how it tends to attract its victims.

Fake Smart Contracts or Projects

Such scams typically begin with the creation of a faux token or crypto project trying to prove its credibility. These might be sleazy schemes promising cutting-edge technology, amazing returns, or a first crack at secret investments. To gain the reader’s trust, they:

• Execute a listing on decentralized exchanges like Uniswap or PancakeSwap.
• Create sharp-looking web pages and whitepapers.
• Run social media campaigns and create influencer endorsements.

The project might appear completely aboveboard at first blush. But its smart-contract contains malicious code that blocks the ability to sell or withdraw tokens.

Promising Returns

Scammers generate hype to draw more victims to the moment when their token goes live. Their methods usually comprise:

• Social media marketing posts or even the whole campaign.
• Influencer endorsements, paid (or fake) for trust building.
• Price manipulation with bots or wash trading.
• Guarantees of returns (Nobody can guarantee you any returns!).

Scammers play on greed and FOMO (fear of missing out) to convince people to invest rapidly and without due diligence.

Hidden Withdraw Block or Blacklist

The heart of the scam is the token smart-contract. Although users can buy the token quickly and easily, soon they find out that they can’t sell it or move tokens anywhere except for the wallet, or can’t take out money due to high fees, or anything else.

These restrictions are written in the code, and not visible to the average investor, so the trap is hard to spot until it’s too late.

The Final Rug Pull

After enough money is put into the honeypot, scammers pull the rug. There are several common exit strategies:

• Remove all the liquidity, which makes the token worthless.
• Disable all the transactions (the project is frozen).
• Take down the website and social media accounts.

After that, scammers transfer the stolen funds to various wallets, often via crypto mixers to obfuscate their trail, and investors are left with worthless tokens of zero price.

How to Detect Honeypot Scams

Although honeypot schemes may be tricky, they frequently carry glaring warning signs. Being watchful and dissecting the project beforehand can prevent you from falling prey. So, let us consider the basic things that will help you to recognize red flags and safeguard your crypto assets.

Code Audits & Transaction Simulations

A honey pot smart contract is the code that allows you to interact with the token (e.g., buy or sell tokens). It only “traps” you in, allowing you to buy but not sell the asset. If the smart contract code contains:

• transfer restrictions,
• fake balance updates,
• modified transfer behavior,
• no selling logic at all.

This is a clear red flag showing the project is a honeypot scam.

To check the suspicion, you can buy a minimum amount of tokens, and then try to sell it. Look for reverts, no output, transfer fails, liquidity fails, and fees (lots of honeypots have huge sell taxes, like 99% or something).

Third‑party Honeypot Scanners

Here is the list of reputable third-party honeypot scanners you can use to analyze smart contracts and tokens without having to check the code manually. These tools mimic trades and scan for common honeypot activity — such as turning off token sales, aggressive taxation, or gas griefing:

• Honeypot.is simulates buy/sell transactions to uncover honeypots on BSC and Ethereum.
• De.Fi Scanner – the bot audits smart contracts for 15+ types of risk including honeypots.
• GoPlus Security (Token Security API) provides the ability to detect honeypots, scam tokens, and bad actions based on API.
• TokenSniffer Scans ERC-20 token contracts for weaknesses.
• DappRadar Token Explorer is not actually a honeypot scanner, but it reports questionable token activity and contract vulnerabilities as part of its analysis.
• RugDoc Community is a DeFi audit platform, focused on Yield Farms.
• DEXTools Token Info (Self-drop the contract) is not a direct honeypot scanner, but it allows you to verify the legitimacy of a token.

Common Types of Honeypot Scams

There are several different types of honeypots in the crypto industry, all to trick you into a trap where you lose money and can’t withdraw anything. This short description will help you to better understand the honeypot meaning.

The "buy-only" honeypot is the most straightforward one. You can only buy the token, the system does not let buyers withdraw it, due to limitations not disclosed upfront or blacklist mechanisms.

Fake liquidity or “stealth taxes” is another popular type, where token transfers secretly burn or reroute funds from one of the parties involved. These transactions appear to be ordinary trades but they actually siphon value.

Advanced honeypots, employ smart contract tomfoolery like selective transaction failure-conditioned on the sender address, or fake token balances.

DEX honeypots are transferable on venues such as Uniswap, yet rely on evil routing or slippage traps to suck out funds from wallets.

Such a variety makes honeypots difficult to discover.

Blacklist Contracts

Blacklist contracts are smart contracts that have additional code appended to them, which gives the contract owner or an administrator the ability to restrict or block specific wallet addresses from being able to carry out actions (usually transfers, sells, or interactions with the contract). This gives the contract publisher the ability to block specific addresses making it impossible to transfer tokens, sell them, or call functions in a honey pot crypto scam.

Sweeper Bots & Fake Exchanges

Sweeper bots are smart contracts or scripts that henceforth automatically drain wallets, generally immediately after a less knowledgeable user inadvertently approves a malevolent token or contract. They are watching the blockchain for wallets that have authorized token transfers (i.e., through a phishing site). Once the approval is received, the bot calls the transferFrom() function to move all approved tokens to the attacker’s wallet. Frequently used with fake airdrops or scam tokens that ask you to “approve to claim.”

To defend yourself against sweeper bots, revoke token approval frequently by utilizing special tools such as Revoke.cash or Etherscan’s Token Approvals, check hardware wallets before completing transactions, and be suspicious of unsolicited airdrops or DMs asking you to “claim” tokens.

Phishing exchanges

Phishing exchanges are relatives of phishing sites, which pretend to be real DEXes or CEXes, they are also called clones and their purpose is to steal seed phrases, and private keys and even get the user to drop their funds.

Fake front-ends impersonate actual exchanges such as Uniswap, PancakeSwap, or Binance. Some fake DEXes pretend to do a token swap but only when you connect the wallet and steal your wallet information, or pretend that it was successful and behind the scenes steal your funds.

To stay safe always check the URL and use the official link (bookmark), never enter your seed phrase or private key to any website. Also, it’s advisable to secure yourself with Antivirus, and Wallet Guard. Use only trusted wallets, like Kolo Wallet, MetaMask, Trust Wallet, and others.

Liquidity Honeypots

Liquidity honeypot scams are a sneaky form of crypto scam in which a token seems to have legitimate liquidity and be freely tradeable on a decentralized exchange (DEX) until you try to sell, or sometimes even reclaim your funds.

Occasionally, scammers kind of fake some trade (for example, between bots or other wallets) to make the token look like it’s real and that people are trading it.

To spot a liquidity honeypot check for verified smart contract codes on Etherscan or BSCScan for the presence of sell restrictions or strange logic in the transfer() section.

Otherwise, you’ll need to make use of the tools like Honeypot.is, or De.Fi Scanner.

Honeypot Example

Honeypot scams, imitating legitimate crypto projects, have already stolen tens of millions of dollars from investors. Here are a few high-profile examples of such projects suddenly “going wrong”.

DeChat Incident

On Feb 26th, 2024, Dechat – a web3 messaging protocol announced the launch of its native token, along with a pancake swap link to purchase the token. Unfortunately, the link was a bad one, leading to a honeypot smart contract. Dechat promptly deleted the misleading post and issued a correction with the proper contract address. They also promised refunds to anyone affected by the honeypot link.

The Thodex Exchange

With promises of spectacular returns and flashy giveaways, Thodex, a cryptocurrency exchange based in Turkey that recently shut down, was long suspected of being a fraud. Following millions being poured in, the exchange suddenly folded, the CEO vanished and the user funds disappeared — around $2 billion, putting this in the ranks of the largest honeypot-style exchange exit scams to date.

Squid Game Token

Riding a wave of enthusiasm for the popular Netflix series Squid Game, fraudsters launched a SQUID token that they claimed would be used for a play-to-earn game. The token shot up from pennies to more than $2,800 in a matter of days. However, the smart contract was purposely programmed to prevent token holders from selling. Then developers disappeared having received approximately $3.3 million.

Snibbb Token Scam

Snibbb was one of those meme coins that went viral fast. Investors could buy the token, but the smart contract was letting users sell tokens. The developers heavily shilled the project across social media, raised millions in investment, and then pulled all the funds from the liquidity pool. Investors were thus stuck with tokens that had become worthless and that they were unable to sell — and lost millions of dollars.

Prevention and Best Practices

Steering clear of such honeypots in crypto requires a blend of technical checks, trusted tools, and security habits. So, how to spot a honey trap and avoid it? Here are the best ways to do that:

Always Check the Contract Code

Even if you're not a professional programmer, you can look for other common red flags:

• Check the contract on Etherscan/BSCScan,
• Check for blacklist, whitelist, and AntiSell Logic,
• Check for excessive tax on transfer() or a prevented transferFrom() on blocked accounts or owner privileges (owners can pause or freeze trading)

Such tools as Slither and Mythril can help you with these checks.

Verify Project Transparency

Before buying large amounts of tokens, check them on DEXTools, DexScreener, and BSCScan. Look for sell transactions, sudden spikes with no fundamentals, liquidity removed or added a few minutes back, or poor liquidity.

Use Scanners Before Interaction

Simulate buy/sell transactions with honeypot check tools before you actually spend any money. Here are some of these checkers:

• Honeypot.is;
• De.Fi Scanner;
• GoPlus API;
• TokenSniffer.

What to Do If You’re Trapped

Now, let’s consider how to get out of honeypot in crypto. Being caught in a honeypot is frustrating and expensive, though there are still actions you can take to minimize additional losses, investigate the matter, and possibly even help other people avoid falling into the same honeypot trap:

• Stop interacting immediately. Do not click to approve or sign any more transactions, and do not link your wallet to any decentralized app you do not trust yourself, say no to claims for your “refund.”
• Confirm it’s a honeypot. Occasionally, trades fail for other reasons (such as gas or slippage). So to check your case, try simulating a sell on honeypot checkers, like Honeypot.is or TokenSniffer.
• Accept & contain the loss. It’s very frustrating when you find yourself in a real honeypot. However, you must calm down, concentrate on the lesson, and protect the rest of your investments.

Withdraw all commits related to suspicious tokens. If you suspect deeper compromise, change to a new wallet address and leverage hardware wallets and browser security tools (such as Web3 Antivirus, and Wallet Guard).

Honeypot vs Honeynet

Unlike their similar-sounding names, the concepts of honeypot and honeynet are quite different. We have already shown what honeypot is. A honeynet is a group of honeypots. It emulates a complete network environment, with multiple machines, services, and transactions.

Here is a summary comparison table for these two terms: