What Is a Honeypot in Crypto?
In honeypot scams, the scammers typically contact cryptocurrency users through social media platforms like Twitter, Discord, or Reddit, presenting themselves as inexperienced individuals seeking assistance. They claim to have received a substantial crypto payout and require help transferring or cashing it out. In exchange for their aid, the scammers offer generous rewards.
To gain victims’ trust, scammers provide them with the private keys to their wallets, a tempting proposition for most people. Upon accessing the wallets, victims discover a significant amount of tokens, often in lesser-known cryptocurrencies. Although these tokens hold substantial value, they cannot be used to pay transaction fees; wallets typically accept fees only in the native cryptocurrency of the blockchain in which they operate.
To assist the ‘distressed trader’, victims are asked to add funds to cover the transaction fees. Since these fees are typically minimal, victims often decide to use some of their own crypto assets. Unfortunately, once the victims transfer their crypto to the scammer’s wallet, the funds are automatically redirected to an inaccessible wallet. This is made possible through automated scripts, known as ‘sweeper bots’, set up by the scammers. Although the stolen tokens may only amount to a few dollars, scammers repeat the process multiple times, resulting in a substantial payout over time.