The rise of Web3 has transformed the way we experience finance, identity, and the internet. However, with such innovation comes new risks. We have seen a record rise in scams involving on-chain fraud (on-chain scams). These scams happen directly within blockchain networks and target both new and established users.
You may think that on-chain scams resemble traditional phishing scams. More often than not, they include Rogue smart contracts, fraudulent token airdrops, and hacked dApps (decentralized applications). All it takes is one wrong signature, and you can lose your entire wallet in seconds.
This article will help you identify on-chain scams and take basic steps to protect your wallet.
What Are On-Chain Scams?
On-chain scams are hosted on blockchain marketplaces like Ethereum, Solana, or BNB Chain. On-chain scams typically leverage smart contracts, whereas off-chain scams typically rely on fake emails or malicious websites as part of the scam.
Common Types of On-Chain Scams
The following are some of the types of on-chain scams:
Malicious Smart Contracts
These are seemingly innocent smart contracts that contain malicious hidden functions, causing you to give the scammer permission to move your tokens without your consent once you have signed.
Fake Airdrops
Users may receive some tokens that seem real, but can only be sold via a malicious contract if they try to sell or interact with them.
Approval Exploits
Users might approve unlimited access to your tokens, and when the scammer gets a chance, they can simply drain your balance later.
Fake dApps or Clones
Scammers may create dApps that resemble popular dApps. Users may connect their wallets, and when their transaction gets approved, they get a signal of malicious transactions.
Wallet Drainers
You may see a direct message with a link claiming to help “claim rewards.” If you connect your wallet and approve their transaction, your wallet could become empty.
How to Detect an On-Chain Scam?
To avoid becoming a victim, note the following warning signs:
1. Strange token names and unusual activity
Abnormal token names, unusually large decimal values, or unverified contract sources are all red flags. Many times, tokens appear in your wallet as airdrops.
- Always check your token’s status using Explorers.
- Do NOT engage with unknown tokens that suddenly appear in your wallet.
2. Suspicious approval requests
Scammers often request complete access to your tokens rather than permission for a one-time transaction.
- ALWAYS look at what you are signing.
3. Irreversible Signatures
When you see a dApp requesting that you sign a transaction that says “Set Approval For All” or “Permit,” be very careful. These permission actions allow the dApp to move your assets without restriction, now or in the future.
- Only permit if you genuinely intend to allow that access.
- If you can, approve the dApp’s access for a defined period and for a certain limit, so there won’t be a chance of them taking more.
4. Inactive vs. New Wallet addresses
Scammers rely heavily on newly created addresses with zero transaction history. When interacting with a smart contract, always verify its reputation.
- You can check on blockchain explorers if the address is active on the blockchain.
- Be wary of any dApp that you engage with that does not have a verified social footprint (no social volume) that you can find.
5. Interface Lookalikes
Like fake shops online, a clone dApp may look 99% like a real one, but will divert your transaction to a scam contract.
Always use the direct site for dApps or confirmed aggregators in the DEX.
- Bookmark a real platform’s website so there is less chance of copying domain creations.
How to Secure Your Wallet and Stay Safe?
It’s not enough to just spot scams—you must also implement preventive habits to minimize risk.
1. Use a Hardware Wallet
Hardware wallets allow you to access your private keys offline, which will deter most malicious contracts from compromising your assets.
2. Revoke Old Permissions
As dApps grow in popularity, you will end up providing access to many different dApps. Some of these may no longer be safe.
3. Enable Wallet Warnings
Always turn on advanced settings, like phishing detection and contract simulation, before you approve an action.
4. Learn to read transaction details
If you know how to read transaction prompts, it can help avoid approving malicious transactions.
5. Don’t Connect to Unverified Links.
- And if someone sends you a random link via Telegram, Discord, or Twitter, don’t click it. Even if that message claims that it is an airdrop or a new NFT mint.
What to Do If You Think You’ve Been Targeted?
- Immediately disconnect your wallet from the dApp.
- Revoke token approvals using trusted tools.
- Move the remaining money to a different wallet.
If you’re a victim of such a scam, contact LegalCertifi for expert help recovering your assets. Visit legalcertifi.com today.
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