How to Use Mizar and Other Tools to Avoid Scams

Here’s a detailed look at the steps you can take to protect yourself when trading on DeFi.

1) Check Token Settings

Using Mizar Token Sniffer or other tools such as DEXTools (which leverages GoPlus, QuickIntel, and IsHoneyPot) can help you assess a token’s legitimacy by evaluating several key metrics:

• Contract Renounced: A renounced contract means the token's creator has no control over it, preventing any sudden changes that could harm traders, which is a positive sign.

• Verified Contract: A verified contract allows you to review the code on the blockchain, ensuring transparency. If the contract isn't verified, treat it as a major warning sign.

• Tax Rates: Check that the token’s tax rate is below 15%. High tax rates can erode your profits, so anything above this threshold is a red flag.

• Buy and Sell Limits: Avoid tokens with restrictive buy and sell limits, as these can manipulate the market and hinder your ability to trade freely, especially in volatile conditions.

2) Check If the Token is a Honeypot

A honeypot is a type of scam where the token allows buyers but prevents selling. Mizar Token Sniffer and ishoneypot.io are invaluable for detecting honeypots. If a token is flagged as a honeypot, it’s best to avoid it entirely.

3) Check if the Token Syphons Wallets

Another tactic scammers use is coding tokens to syphon funds from traders. ishoneypot.io can provide information on whether a token has syphoning characteristics. This type of token drains funds through malicious contract functions, and if this is detected, it’s an absolute no-go. Protect yourself by checking these metrics on reliable platforms before entering any trades.

4) Look for Scammer Wallets Using Mizar Terminal

Analyzing who is trading the token can reveal a lot about its safety. Mizar’s AI Smart Wallet Labeling provides insights into suspicious activity around a token:

• Percentage of Scammer Wallets: If more than 20% of the wallets trading a token in the last 24 hours are labeled as “rug addicted,” “scammer,” or “suspicious,” this could be a major indicator of scam activity.

• New Wallets: A high percentage (above 20%) of newly created wallets trading the token can be a red flag. Scammers often create new wallets to inflate trading volume or deceive new investors.

• Trading Volume vs. Wallet Activity: If a token’s volume is high but primarily consists of numerous low-value trades (e.g., below $1) from many wallets, this could indicate wash trading designed to create artificial volume. Also, check the liquidity of the token: if liquidity is low and volume is very high (like above $1M), it may be artificially inflated. Look at community channels to gauge the token’s genuine hype and interest.

5) Smart Wallets Indicator

Monitoring smart wallet activity is crucial for assessing a token's safety and legitimacy. Mizar’s AI Smart Wallet Labeling feature offers valuable insights into how many smart wallets are actively trading a token. When you see smart wallets buying and selling a specific token, it indicates confidence and suggests that the token may be a legit. Conversely, a lack of activity from smart wallets can serve as a warning sign, signaling potential risks associated with the token.

6) Be Wary of Low Liquidity, Low Volume, and New Tokens

Tokens with low liquidity, low volume, or those younger than 24h are generally riskier investments. This is particularly important for scalpers and short-term traders who need quick liquidity to execute trades effectively. Tokens with liquidity below $10,000, or low trading volumes (below $50k in 24h), could be vulnerable to price manipulation.

If you are drawn to these tokens, consider setting up a “test” bot with a minimal amount of funds ($2 pert trade) to observe its behavior over 1-2 days before increasing your order size.

7) Check Social Media Activity

Taking a few minutes to examine a token's social media presence can provide valuable insights into its legitimacy. Look for active accounts and assess the engagement levels. Be cautious with tokens that lack any social media presence, as these are often high-risk and should generally be avoided. If the token has low liquidity but its social media activity appears too good to be true, it could indicate the presence of bots generating fake interest.

Additionally, check if the token has a dedicated website or landing page. Evaluate the legitimacy of the site; many basic scams lack a professional online presence, and if they do have a website, it may be poorly designed with numerous bugs.

The absence of a logo, along with missing listings on platforms like CoinMarketCap or DEXTools, is a significant red flag that the token may be a scam.

8) Avoid Getting Caught in the Hype

In the fast-paced DeFi world, FOMO can lead to rushed decisions. Take a measured approach and consider building a test bot to execute a few small trades on a token. Observe the bot’s performance across at least 10 closed trades to assess stability and reliability before deciding to scale up your position.

9) Know When to Exit

Monitoring trading volume trends is crucial for timing your exit from a token effectively. A significant decline in the 30-minute or 1-hour trading volume compared to the 6-hour or 24-hour metrics may signal waning interest in the token. In such cases, market-making bots and scam wallets might be artificially inflating activity, or the project may be poised to eventually execute their planned scam mechanism, potentially leading to a rug pull. This underscores the importance of considering an exit before liquidity diminishes completely. Remember, it’s natural to close a position at a loss; this is part of trading. Exiting at the right moment can help safeguard your overall investment.

10) Engage with Mizar Community

Having already taken numerous precautions to assess whether a token is a viable investment, the final step is to connect with others to discuss your findings. Collaborative discussions can yield valuable insights that you might not uncover alone. Consider joining our Discord channel, where you can tap into a wealth of knowledge, share experiences, and receive fresh alpha on emerging tokens. Remember, more minds are always better than one!