Deep Web3 Secrets - Episode 4 - How to spot a Rug

Finally Episode 4 of Deep Web3 Secrets is out - it took us a bit to manage the additional challenges, this is the first episode where we use video, showing you exactly How to spot a Rug!

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Transcripts:

Ecoinstant: Welcome back once again to Deep Web3 Secrets I'm Alex Trapp.

Spiritsurge: And I'm Spiritsurge.

Ecoinstant: And we're here today with a very special episode, we're testing out video we're going to show you live exactly how we analyze some of these projects, smart contracts, DeFi. Let's jump into it, Spiritsurge, what have you got for us today?

Spiritsurge: I have this wonderful project, well allegedly wonderful project called Splassive, this was a big thing back in May 2022. People aped into this project because it was on Avax and because it promised this: daily return of two percent. So when you talk about a daily return of two percent that means if you were to invest a thousand dollars, that's twenty dollars every day I mean you're getting money back within one and a half months I mean it was just bonkers with what it allegedly said they were gonna do and it's amazing what people can come up with while they're making their projects. So two percent return, how do you think this project went? Let's just take a guess, how do you think this project went?

Ecoinstant: Yeah I mean thinking about it the two percent return, I extrapolate that into the future and of course I'm now a very rich man but I have to imagine that at some point it fell apart, right? So you can keep these things going for a while if people are compounding but if as soon as somebody or multiple people try to realize those returns I imagine those returns are in some sort of token that you have to sell into a liquidity pool so my guess is at some point it fell off a cliff.

Spiritsurge: Right, so this is the graph this is the wonderful graph of the splash token. What this project promised...

Ecoinstant: Oh look at that.

Spiritsurge: When it did, it started the problems, that nine dollars was the value of one token when this project started. It had a market cap of 29 million when the project started and it got "exploited" I put that in word commas, /rugged, and here we are after almost one year now has a market cap of 2.98 thousand dollars and this is in Avalon is there 6161 but none of these people are compounding maybe one or two there's only 194 695 621 transactions to date, to date after 10 months there's only 194 000 transactions.

Ecoinstant: So something like 20 million dollars has been turned into three thousand dollars. I mean it's practically worthless is that right? I mean it's in the thousands. Oh my gosh.

Spiritsurge: Because here's the thing the problem with this project was you invest once and then that money is lost and then that's how you're basically earning. The premise of this project delivering was that new people will invest so when you're doing thousand dollars, your thousand dollars are gone. You just get these tokens which you can compound and then maybe you can get these tokens on a daily basis and turn them back into real money. So that was a premise but here's the thing if it becomes a pyramid scheme which it was because the whole premise of this being functional was that new money will start coming in but here's the thing it's May and it died 9th May and then at the end of May this project lasted a grand total of one month before it started dying and it took so much money with them. Now this website Alex, just have a look at this website, looks pretty right?

Ecoinstant: Yeah, in fact better than I could make I usually make pretty blocky websites but it's pretty, somebody knew JavaScript.

Spiritsurge: Yeah well it's made on react so it's a very good website and like so you want the access to the lp the bell is there, you want to earn there's ways to earn it, you can play games like rock paper scissors put this splash token on betting and so there's so much nice stuff here I mean if I were to go to their white paper, I mean just look at this wonderful white paper they made all right, compound interest after two percent daily returns, sustainable through tax instructions full team building referral systems, it's so nice what what they have made that means they're like really talked about Einstein and a saying of compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it. Such a nice thing right, so professional and look at the road map everything just looks wonderful so what happened when I found this project, I looked at this project and I did what anyone would do when they start this project and that is hey this might be a pump and dump scheme that I can take advantage of but something in my mind started triggering me and I was maybe I should look at what this smart contract for this project says. I mean sure it like looks amazing in terms of how it has like performed and how it's doing stuff but let's be honest here. We have to be practical and look at what is happening on the back end, all right. So what I'll do now is I'll go splash financial token.

Ecoinstant: Okay while you dig into that I want to just mention we talked about Ponzi scheme or pyramid scheme, the general idea of that is that future returns depend on new investors coming in so that's the red flag there. I believe that's how the SEC defines it. There's been a lot of pre-crypto pre-internet legislation and work on how exactly you define it and so that's definitely a red flag like are we depending on new people buying in to come and then you mentioned pump and dump which is another term where we're gonna get people excited because the price is going up and then use those new people as exit liquidity. These things can exist at the same time it could be a Ponzi scheme that also pumps and dumps or it can be a non-ponzi scheme that can pump and dump the token so they're two different things. One thing you said that I mean so true right this could be a pump and dump that I could take advantage of so in the past there was these high yield interest protocols and the key a lot of people that participated there said well I can make a lot of money as long as I get out quick, right. So this is risky some people do it. I know this is not going to last but I'll get in I'll make some money and I'll get out quick before the dump or before the rug or before the crash right that it all falls off a cliff. So there are maybe less secure ways to try and risk a few bucks to make a few bucks if something's going to pump and you can be aware of that try to get in with the other people who know things make a little money but behind all that we also have code right so let's see what is the code revealed to us. Okay I'm looking at the smart contract security audit rug free coins. Now I'm not hearing you anymore Spiritsurge, you still there?

Spiritsurge: Apologies. So this rug free coins, this was a company that was established back in 2020 and what they had was they had they gathered all the top people, the security, smart Solidity developers. They got them together and it was like Hey how do we prevent scams from happening and then they had this brilliant idea to, let's pool our knowledge and let's start doing audits for these projects. So this is the Splash token, the smart contract's security audit which was done on March 16 2022. So this information is available to you, it's public information. If I were to go on their website it's here, this in the bottom it's written here you click on this you can get the audit report. Some people don't even go down they just look at the nice things and they just back off but if you were to look down, you press on this button you get that particular audit report. So I just want to talk about some things here. Do not get intimidated just because you see a smart contract security audit. These are four very dense words, each one you could write an essay on but the thing is this you don't need to be a programmer or a Dev to understand what this security audit report says. Now it's a long thing it's like 38 pages, don't worry about it we're not going to go through all 38 pages, I'm just going to point out the red flags and how things work. So what is the audited project: it's the Splash token. What is this, what are the tokens and how their systems work and what the address is, what is the client contact blockchain, its Avalanche what is Project website okay so these four are normally the things that people look at when they're doing their due diligence. They don't go beyond that so there are some disclaimers here but that's a different thing. I am just going to go through some of the points here and that is what is Splash contract, 10% tax when buying, selling and transferring, this is tokenomics so even if you are not a Dev, going through the security audit reports tells you how tokenomic is designed.

Ecoinstant: Okay let me ask a couple questions, okay so we saw what blockchain it's on and we saw a few other basic things I think everybody can kind of understand that, now tokenomics this is a new word right so this is the economics of a token and you might even say like the US dollar has its own economics and so that's monetary policy when it's a fiat currency the Central Bank decides when to print more when to ease or when to tighten so a tokenomics is basically that for each token so each token will have a supply it'll have in it some inflation, it'll have different things and so when we talk about that think about like a central bank. With crypto, every project if they make a token they are the central bank and supposedly they're supposed to put this all into code before they start so we could kind of read it so let's figure out with that in mind let's figure out if there were any red flags in the tokenomics before we even started this project.

Spiritsurge: Okay just keep in mind the project started on May and it died in June this smart contract was done on March 16th so that's three months before the actual project actually started and when I got the note and I got information this is the first thing I looked at so it talks about this 2% daily return up to 360% of initial principal amount. I talked about the wealth which is basically how things work if Avax dividends for usual which is basically incentive for people to invest into the use of this particular LP change stuff. Talk about the shore AKA Reservoir where they have their preparing things with wrapped BNB. Become liquidity providers and earn WBNB rewards this itself right for me I'm looking at this project I'm looking at the Avalanche project why the hell are they talking about BNB? That's a problem for me from the start this tells me that they haven't really thought this thing very very well, I mean sure you have you're trying to tie with wrapped BNB but why BNB, there's so many other tokens on avax that you could tie this up with why are you doing this wrapped BNB? So this is like a common sense kind of red flag the fact that you could tie this to avax but he chose to do it with a wrapped BNB instead of doing it with raptorium or anything else so that is that is a concern here.

Ecoinstant: So let me ask about that when we... One thing I've noticed in this space is that because a lot of people publish code some things are open source we get a lot of copycats so the fact that we see BNB in an avalanche project is that could that possibly because they've copied some or all of this project from another project previous?

Spiritsurge: Perfect yes that's exactly what they've done there was a project called drip and it's still ongoing spawned two-year mark. When drip launched their first version open source that it came with exploits and what these splassive guys did was they took that open source code they made their own project on avax so they weren't competitors they used every single thing they use a reservoir, the faucet and they just gave it random names so in drip the reservoir is the same function, a drip is on Binance smart chain so it makes sense for them to use BNB it does not make sense for Avalanche project use wrapped BNB when there are so many tokens on Avalanche that they could use or if they even want to tie they could tie to wrapped ethereum so this is just really strange. One of the things I really want to talk about so if you were to take it from the project drip, drip gives 1% daily return but these guys did was just to make it more attractive they changed the code and they just put 2% into it. Now this is just absolutely strange the way they've tried to do this but I understand because this was like the low hanging fruit. No one took drip open source and then changed it to their own project so this was a chance for them and they did that, the buddy system, everything they just copied it but now I want to talk about something interesting here. For every project there is a target market and a concept and this is extremely important for a person who's looking into projects for investment purposes. Now let's look at the target market, anyone who's interested in the crypto space with long investment plans. This to me is a massive red flag, you are talking about two percent and you're tying it up to 360% is the maximum return that you get and then you're talking about long term that is six months, in six months you're going to immediately reach your max payout if you're doing it on a daily basis 180 days into 2% is three 360% then you talk about long-term investment plans. Anyone who's ready to earn a passive income by holding tokens, I need to clarify here, holding implies you have a choice there is no choice here once you spend your money that money is gone it's already spent you got tokens can not do anything except old those tokens until a fixed amount of time passes and then you can sell it. That's another red flag anyone who's interested in trading tokens, okay so this is a bit hilarious. Alex what do you think about this one anyone who's interested in trading tokens is that a target market?

Ecoinstant: Well it is really kind of funny so it's kind of counter-intuitive these red flags. I'm really kind of impressed by this because let's start at the top so anyone who has a long-term investment interests, anyone who wants to hold this kind of sounds good right? It's very marketing but like you said this is a high interest high yield scheme so it almost seems like they're advertising for people that they can rug. We want people who are not going to be active we will have people who are going to just leave it there and so now trading tokens it's a tough thing I personally, I live in Colombia and when the bull market's on everybody's a trader trading it's not just with crypto you could trade in Forex you could trade gold and silver and currencies and I tend to think and history has kind of proven this only when markets are up is everybody a trader right now nobody's a trader nobody wants to trade it's easy to trade rising markets it's difficult to trade markets that are descending or dwindling so it almost seems like what they're advertising. This is my impression that they are reaching out for people with some buzzwords but they're reaching out for people without experience I mean they're looking for people that have no idea what they're doing is that is that how I'm understanding this?

Spiritsurge: They're banking on people to be greedy, they want greedy people people come in looking for a shortcut to earn fast money and we all know what happens when people talk about shortcuts you and I know shortcuts don't exist, it's a trap, this is air trap or Honey Trap call it whatever you want it's just a trap to get the wrong people so here's the thing there are some people who please order trip votes right are YouTubers so this is the best thing I want to talk about YouTubers those who are talking about the project what they will do is they'll talk about all these nice things until this page, page 11 the YouTube video is over they never go beyond let's go beyond. Let's see what's in the depth because those YouTubers they don't know what's happening. Look at this potential to grow with score points project efficiency, uniqueness, information quality all 10 out of 10, 10 out of 10, 10 out of 10 right looks really nice it's just perfect I mean all of this is just amazing that's where the YouTube video finishes. Let's talk about the slash token contract.

Ecoinstant: Yeah I mean that's a near five one million that's nearly a perfect score right, that's nearly a perfect score 9.75 out of 10. I mean wow that wow they got a, they passed the test right?

Spiritsurge: Yeah but this is they're talking about potential their scoring potential, potential of this project which is correct this project has a lot of potential. When you're talking about potential of the project every project based on ideas is good one, 2% per day is a very good return whether like using the tax system is very good having more people come into the liquid to like provide liquidity and giving them rewards is very good it has a lot of potential but let's go down and see what went wrong what's gone wrong it's a vault address, top token holders, so here is where the problem starts top 10 token holders the top 10 holders collectively own 98.46 percent of the splash token. what do you think about this Alex?

Ecoinstant: Wow yeah so that my first thing my eyes are drawn to those two huge wallets and then there's a couple after them 98% owned by the top 10 wallets that is terrible distribution, so distribution refers to how many different people or wallets hold the tokens it's not impossible to spoof this so generally on most of these chains creating a wallet is free so one person could have multiple wallets but the fact that they're advertising this with with my gosh look at that and even the top four wallets looks like 96% there's no distribution.

Spiritsurge: Oh look at this in the corner. Total token holders 4002.

Ecoinstant: Wow and so what is the problem with this? The issue with liquidity is when you reduce the circulating supply to a very small number this happened with FTX as well they mentioned with the FTX token you can trade a very small amount of the liquidity and make the price move basically wherever you want it. When things are more distributed more actors are in the market the free market acts the way it should so if it gets too high certain participants will say hey that's high I'm going to sell if it gets too low people can buy in but when the project owns 98% of it, it almost seems like they're artificially reducing the distribution so that they can pump the price. If too many tokens are out there it gets expensive for them to pump the price which might eat into their profits so I imagine some of these big wallets they're probably saying well this is the the burn contract or this is the team contract or this is probably some reason why the top two wallets are so big but still this distribution it looks terrible to me.

Spiritsurge: It is horrible. So this, when someone looks at this, so I told you right the YouTuber finishes here now if someone were to go down and look at this that's a red flag looking at this project you're like bro if these guys okay let's forget the top two wallets let's go down seven plus six plus one point four that's fifteen percent off the tokens that can be dumped in the market 15 percent is significant enough to change the price of the token especially if there's four thousand people looking to buy the token.

Ecoinstant: Yeah right and so 15% of whatever it is two or three percent circulating I mean that's five times the circulating Supply.

Spiritsurge: Correct that is that it's really really bad and all of this and most of this I mean I know is over the counter sales. People buying it in backroom deals, this is some YouTuber or an influencer who's going to shill this project he's taken tokens in advance and he's good, now this information it's not something you can find if you are not a Dev but if you were to look at the audit reports and really just go through them spend some time go through these audit reports you're going to see this information that will save you from losing money. so let's talk about security issue checking status.

Ecoinstant: Security issues yeah this is the good stuff okay what can we see here?

Spiritsurge: So when you're looking at this the only thing that comes out is oh you're using an older solidity version, okay so that means they're not seeing any major exploits that can happen to this product so let's move on to the next part and this is the most important thing if a project can be rugged or not. All projects that launch obviously when you talk about smart contracts you're talking about a trustless system where you don't have to worry about it the temptation of the owner of the project so that if he gets like tempted he can rug the project whenever he wants so this will basically point out and tell you what the owner is capable of so here's the number one, the owner can add whitelist wallets that means the owner can stop wallets from buying in or selling this token. That is a huge problem because let's say there is a project that has no, so if you go back up and looking at these top 10 tokens holders if the owner decides to Blacklist any one of these they can't earn any more token they could invest a lot and then earn nothing. The owner can remove address from whitelist this is what I'm talking about the owner can mint new tokens, the owner can add custom tax rate to each wallet meaning some wallets can pay more than other wallets. The owner can remove custom tags from wallet meaning some wallets don't have to pay any tax. So Alex when you're looking at this what are you seeing?

Ecoinstant: Okay so generally I like to see that every wallet is treated the same so I get that in certain wallets with smart contracts, the smart contract address or maybe the team wallet won't earn interest, I get that but I think and this is just kind of in my head when I'm analyzing this, I think that those things should all be defined up front. The fact that the project can change on the fly which wallets are getting interest or what interest they're getting or what tax rate they're paying or which wallets are whitelisted or blacklisted, I think that's completely unacceptable. I mean a special wallet address should be defined from the beginning I think that's one thing that probably shouldn't change, right? I mean would you say am I on the right track here this is completely unacceptable behavior?

Spiritsurge: Yeah it is I mean where's your transparency if you can't talk about this I mean how can anyone expect you to be honest if the information you're not telling anyone? What about this one the owner can mint new tokens, this is a smart contractor.

Ecoinstant: Yeah so is that about, now the owner is the owner the smart contract address so there's the smart contract the owner or is the owner a separate wallet?

Spiritsurge: The owner is a separate wallet not the smart contract.

Ecoinstant: So okay because I get the fact that a smart contract needs to be able to mint new tokens but if the owner can also mint new tokens basically this is saying these are the tokenomics we think but we could change anything at any time and that that's what I'm getting from this.

Spiritsurge: Yeah that's correct I mean it's talking about 1 million apply so one million but I mean anyone can change that sure. The owner can add custom tax rate to each wallet fine I understand right you're talking about some wallets not having these burn wallets or marketing while still not having any tax rates or need tax rate so the fact that you could actually hard code that saying that okay the marketing audit has a zero percent tax rate and the fact that you're not hard coding that but adding the option that you can add a customs tax rate to each wallet that is concerning.

Ecoinstant: To me yes.

Spiritsurge: That means you are not thinking ahead.

Ecoinstant: All of the special wallets should be hard-coded I mean that is something I know there is some issues with smart contracts that you can't edit them later and so that's an issue you have to think ahead but which wallets are special in a contract seems like one of the things that is easy to think ahead about. That's not one of the things that you're going to be like Oh I wanna, it sounds like this person wants to make sure that when they're dumping they don't have to pay any tax.

Spiritsurge: It's ridiculous okay so the last one is something I can accept the owner can remove custom tags from wallet that's fine if it's a compromised wallet or if they want to do something with a wallet that's compromised makes sense so I'm okay with this but this also can be hard-coded in a different way so that was that was the splash token. This is a wave token, the wave token is essentially, it's like leveraging its own price and selling itself to maintain the price of the splash token.

Ecoinstant: Okay so this wave is not the wave blockchain this is a a second token in the same protocol?

Spiritsurge: Correct it's the second token in the Avax chain for this project and it is used as a way to ensure that the price of splash token is protected.

Ecoinstant: And we've seen a lot of these derivative tokens I mean a lot of tokenomic projects have multiple tokens they could they can do interesting things they can support economies so having a second token isn't necessarily a red flag let's dig in a little deeper is this top 10 I'm seeing it again a lot in a few wallets.

Spiritsurge: Right but this isn't that much problematic because it's like only 958 holders so that's fine I mean this is just people putting in tokens and LP so splash token was essentially going to put it in a system it's gone you can't do anything you can't get it back you just have to earn it every day but the wave token is something you can put in a reservoir, right. It's in an LP and it's paired with WBNB, wrapped BNB so you can take it out whenever you want so this is fine, problem is it only offers an APR of 20 to 30 percent which is acceptable to 958 token holders right because they'd say hey you know what I'm putting this money here I can take it out whenever I want sure there's an impermanent loss but that's fine but this is a normal LP token right and basically what was happening is if for instance a splash token price fell down then they would sell, the owner would sell the wave token and then use it to buy the splash token you get what I'm saying?

Ecoinstant: Yes okay so this is a backup funding it's a way to stabilize the splash token price and I get that now we talk about these APR numbers now generally in a market the higher the APR the higher the risk a lower APR is going to represent a lower risk so the fact that they're distinctly different is probably okay two percent per day is extremely high so we could say that's probably extremely high risk 20 to 30 percent maybe we could say that that's good APR compared to like putting your money in a bank account but maybe this token has less risk would you say is that the case this holding wave is less risky than splash?

Spiritsurge: Correct because it is if they only went through down this route perhaps splash wouldn't have rugged but they didn't they wanted people they banked on the fact that people will get greedy that two percent right so that two percent is what like how if you were to break it down in APR or apy that's three times if you're looking at apy that means you're compounding everything that's 3600% apy that's crazy! That's crazy just think about that money 3600% all right that's on one percent so if you're doing it around two percent that's 7200% apy meaning if you were to invest one dollar and you were to compound it every day for one year you will get seven thousand two hundred dollars by the end of the year that is crazy greed that is crazy greed that means if you're investing a thousand dollars you're gonna get seventy two thousand dollars by the end of the year this was the splash token right and you compare that with wave which is you spend thousand dollars at the end of the year you're gonna get 200-300 dollars. All right so you're not you're gonna get this really low value compared to what splash was offering so again let's look at owner privileges the owner can add or update buddies now this is what's the selling point of this project the buddy system contract so what how did the pyramid scheme work? What when you say something is a pyramid scheme what finds it an onboarding system and this project said hey you get more people on this project and whatever investment they do you get a portion of it so if you're getting someone in get three people in all of them are investing a thousand dollars each you get 10% from each of them that's three hundred dollars worth of splash token in your app or well or whatever they called it right where you're going to the faucet where you're going to compound it so this then created a system where YouTubers were making crazy videos talking about how amazing this project is you spend one thousand dollars and you're gonna get 72 000 at the end of the year and all of that nice you know marketing stuff. So and then this is the liquidity token the drops this is the and the liquidity exchange that they were using this drops a third token to buy and sell splash tokens within the contract.

Ecoinstant: Okay let me jump in here about referral now I don't want to be sour grapes I've never been good at referral marketing so generally to me a really strong referral program to me is a red flag and it could be just partly because I'm not really good at referral marketing. I never have been, I prefer projects that can stand on their merits not because you're incentivizing people to pressure their friends in but referral marketing isn't necessarily bad. I know there are good projects that use referrals, affiliate marketing is another way to say it so it's not necessarily bad but it is something that is used by almost every Ponzi scheme, it has a strong referral marketing component so it again, it's not it's not a hundred percent terrible but it is something that has always raised a red flag with me if a big part of the the money is going to people that are referral marketing, I don't like the project just because I'm not good at that but also because it is an indicator that they're really trying to get pressure to get more people in as quick as possible generally before the rug happens right so again it's a red flag for me but maybe not for everybody, it doesn't necessarily mean the project is bad but beware of projects that are really strong that the incentives for referral marketing are almost too good to be true because in the end if you're going to be a referral marketer you, it's you that your friends and family members are going to be looking at if something goes wrong.

Spiritsurge: Yep you're exactly right I would just like to make a slight correction you said almost all pyramid schemes have referral system so I would like to say that's not almost all, it's all of them. Literally how they function so I want to talk about this liquidity token the LP so a lot of people think that because I think some people they look at LPs on uniswap and pancakeswap and they think hey you know there's just I don't suppose there's any programming done behind this or it's like something automated stuff no there is a custom contract that is made on solidity. People are spoiled nowadays they don't know that all LPs have a significant amount of coding done on the back end this is one of the this was the lp for splash right where you can buy or sell the splash token so let's look at their the these coding. Security issues, checking status, high severity issues, the owner can pause the contract meaning the owner can stop the buying and selling of a token of the splash token at any time.

Ecoinstant: So that's a red flag right there right pausing a contract is that is there any case where that is appropriate?

Spiritsurge: That's not appropriate in any case I mean sure okay if you got exploited if you're project got exploited for like all of its tokens maybe but if someone has getting into the water he can exploit all your tokens I'm pretty sure he can do a lot worse and pausing won't do anything I can see some merits in it but this should be hard coded into the like program like saying that okay if x tokens are taken from a wallet or if large withdrawal is done then the contract should pause itself and should use some kind of key phrase to resume there should be system like that, it don't if the owner the ability to pause the contract not because the owner okay so one the owner might rug the project and then pause it to this temptation thing but the major thing is that because the owner can be incompetent, the owner is a human he has to sleep he has to eat he has to go and take a shower he has to go on vacation, if something bad happens during the job and this guy is required to be there to pause the contract or do anything with the contract can't do it, it doesn't even make sense to have a human do a code stop so this is a massive massive red flag. Do you have anything to add here?

Ecoinstant: Well I love what you said yeah okay so we're automating certain things and humans do certain other things better and so identifying when to stop is one of the things that we should be looking to automate we should not have a fallible human who needs to sleep depending right so even the excuse that if something happens we need the ability to step it well no identify the things that could happen and code those in so I think that's a really important point. Which are the things that can be automated and stopping the contract is one of those things a human spends at most eight or ten hours a day online and not every day of the year so I think that's an exceptional point. The things that should be automated in the in this contract or in these in this project seem to be left to the humans why are we even using smart contracts at this point?

Spiritsurge: Exactly, exactly and that is a massive warning now you see by page 23 if you're not convinced to not invest in this project right and you need like further convincing so let's go down owner privileges, the owner can add and remove whitelist addresses. The owner can pause or unpause the contract so the fact that you can remove addresses from buying and selling the token so maybe one guy gets one he like worked hard and like after three months he accumulated ten thousand tokens well now you're just remove him from the whitelist address and he can't sell the token anymore, good way to take revenge on people I suppose so not to mention there's a problem with this code anyways. Next is the tap contract right tap was the one that I was talking about in the the referral part right you can airdrop things so the owner can change the total airdrop amount, can change total users it's not I don't see any issues this is going as it is required you can add more max referrals so this is like thing is the owner can change compound tax maximum up to 20%. If you're advertising the project from the start saying that there's a five percent tax this is wrong if you're advertising this and you're saying it will never change in code you can set it up to twenty percent that is a massive problem. The owner can change exit tax maximum up to 20 same thing do what you're say you're going to do what's your opinion on this?

Ecoinstant: Yeah I mean I say what you're gonna do then do what you say, I mean it does seem now I'm starting to get the impression that whatever happened to this project was planned from the beginning when we look as we're looking into this I mean is that your opinion as well like they never planned for this to be a successful long-term project?

Spiritsurge: Yeah I mean this is a classic case so when I looked at this project I looked at the audit report at the start of May I said this project's gonna arrive in a month and I had people tell me you're wrong this is the best project ever all right and you're going to be and we're going to be laughing at you one and a half months from now and the project rugged itself not even two weeks into the project like not even two weeks into the launch.

Ecoinstant: Wow!

Spiritsurge: And that was because I went through this report and other people did not so I wanted actually this is the perfect for me to bring up this point when you're talking about your investment right are investing into your project leave your ego at the door, do not make this about ego you will lose money a hundred percent. Leave your ego at the door be practical, be pragmatic, be realistic, look at the facts make your decisions, informed decisions based on those do not listen to some random shiller who you've never even seen his face are a YouTuber who just you know is famous for showing you tons of money on their thumbnails, don't just buy into the hype that is the wrong way of doing things look at the code look at the facts take information make informed decisions do not make this about ego this is very important all right otherwise I guarantee you will not be making money and you will become exit liquidity for someone else.

Ecoinstant: Absolutely yeah you mentioned greed several times today and so maybe I want to talk a little bit about that, I talked in a previous episode about brain hacks so one percent a day, two percent a day, compound interest I love the fact that you showed that they had a quote from Einstein in there, in their paper so there are people out there just like you and me that want money but of course they don't have the same morality that we do and so they instead of looking at how they can add value in the world they're looking at how they can trick you into giving them your money so be very careful of yourself, your own greed of course when we talk about for every dollar you're gonna get seven thousand dollars wow who wouldn't want that but that's impossible. I mean I don't want to say it's impossible because it could be possible in some situation but it really is impossible, it's not something that you give away on the internet if it were possible they wouldn't be telling anybody about it if there was a, if they found a way to do that they would do it and so the way that this works is they trick us into giving them money and maybe they do make seven thousand dollars for every one dollar but we don't and so be very careful of your own brain when you hear marketing with the internet. I think we're all getting better at this I read something recently that people don't even look at ads on the internet anymore they're very skilled at the when their eyes move around they don't even look at the ads they recognize that they're ads and they don't even see them so we're our brains are evolving slowly to this new world but the marketers, the shillers, the scammers they're getting even more ridiculous now it's not one percent a month it's one percent a day this is two percent a day I wouldn't be surprised in the future to see three or four or five percent a day. It's getting less effective but it's still effective and they're because they're using it I must assume it's effective somebody put 20 million dollars into this project so be very careful don't trust your brain leave your ego at the door I love that, try to analyze these things logically. I don't necessarily believe that everything in life is zero-sum there is such a thing as an expanding pie but that expanding pie comes from the proper application of new technology to create value. When we're just pushing money around between ourselves it is zero sum and so a project like this is zero sum, the money that we put in becomes exit liquidity for somebody and these people if they make money it represents a loss for their investors. One way we talked about this in the last episode about doxing or revealing who you are in these trustless ecosystems reputation almost becomes more important and I'm not talking about the kind of reputation that comes with having a million followers on YouTube, I'm talking about the reputation that comes from delivering projects or ideas or proposals over time with your real name and your real face and when you make a mistake saying hey this is the mistake that happened here's why we didn't understand it here's what we understand now I'm imagining now and you'll tell me if I'm wrong were any of the people that coded this project were any of them using their real names with any of them familiar before or was this only marketed based on these fantastic numbers?

Spiritsurge: So this project was made by someone in brown man and he was well known in the market for having a, for being in like a person in integrity, he was someone who would go into their spaces and make logical and rational arguments and so when this project was announced everyone went nuts because this guy had a really good rep, he's been in the space for a long time, what's the lesson here? The lesson here is it doesn't matter if you have in if you're looking at this person and he is fully virtuous and his Mother Teresa and this guy you know in her full form, money it's temptation, temptation creates limited fortunes right people are going to get pulled and pushed apart and they will owe down the wrong path if the temptation is strong enough. This person now has a horrible reputation, any project that he ever announces will never be part of any project you can't do any more projects anymore his rep is dead so his rep allowed him to make money on this project of course now he's just shifting blame saying this person's fault, Dev did it I didn't do anything, no one knows what the true story is but looking at this audit report, I've realized the only thing you need to trust is the code. Don't trust the person, trust the code, trust the roadmap, you trust the delivery of these people don't trust the person, trust and see if he's doing what he's saying he's going to do that is the only thing if let's say he is making excuses, are they logical are they rational is this a delay tactic, does what is, what he's saying making sense, make your decision, an informed decision and then decide you're going to invest in the project or not and this project the reason why I got this project and why I brought this project today even though it's a year old is because it had really strong fundamentals of strong tokenomic system a strong white paper the person running this project had good integrity but the project didn't even last a month and that is a major thing so let's talk about the audit conclusion. The smart contract functional status passed, number of risk issues chose to solidity code functional issue levels, low severity centralization risk correlated to the active owner High. This means this is an alternate flag I don't care about what garbage they have written here this is centralized project and now the owner has 21 privileges this is a trap anyone who invests in this project will get rugged if the liquidity is high enough because temptation will come. I hope by me going through this report page by page has made you more aware about the risks that come with the project and what to look for before investing in a project.

Ecoinstant: Fantastic! Yeah Spiritsurge, thank you so much so just a few final points so in this case reputation was not enough you needed to have read their audit report, you needed to have done some of your own research or worked with your friends, work with people you know to to do your own research here. The presentation was beautiful the website was pretty, prettier than some of the things that I've worked on but in the end I think you've shown me and you've shown all of us that these these red flags were pretty clear and this audit report was linked on the website from the beginning so I think this was fantastic. Thank you, due diligence and we will be back next week with another episode of Deep Web3 Secrets.