UNISWAP

DESCRIPTION OF EVENTS

"Uniswap is an Ethereum exchange, built using smart contracts and liquidity pools, as opposed to the order book of a traditional centralized exchange (CEX), such as Binance. With any Ethereum wallet, users can simply connect to the Uniswap application and effortlessly exchange ERC20 tokens without first sending them to the exchange platform account."

"[T]he development of Uniswap was facilitated by Vitalik Buterin’s idea for a decentralized exchange (DEX), which would involve an automated market maker. Actually, the protocol developer himself, Hayden Adams, at first tried to just practice development on Solidity, and later this hobby brought him several grants and $100 000 from the Ethereum Foundation. Now the project went far beyond just entertainment and became one of the most important components of the entire DeFi industry."

"Uniswap scams are not a new happening within the crypto space. Uniswap ETH-based decentralized exchange that offers every project a chance to air its views to the world. Notwithstanding, it’s one of the most misused platforms within the DeFi world, with more entities taking advantage of its name and services."

"Since its ‘V2’ overhaul in May, Uniswap has emerged as a cornerstone of the nascent DeFi ecosystem, with data published by Dune Analytics indicating that Uniswap comprises DeFi’s top pool by total users with 92,000."

"Scam tokens are a growing problem on the decentralized exchange and liquidity pool Uniswap — owing to the protocol’s open listing policy." "Uniswap, allows users to import any new token simply by pasting its address to the Uniswap’s swap menu."

"They create a fake contract with some dot-finance token name (maybe these are real shitcoin names, who knows), add ~15 ETH worth of liquidity and their newly minted tokens, wait for the price to go up as others buy the token and then promptly remove their liquidity at the new price of 1.3x what they put in. Bam, easy money. Make a new address, move some of your eth, deploy a new contract and start again. It takes less than an hour usually and in this case just 20 minutes to make 5 ETH."

"Here's where the interesting part comes in: people are always watching the blockchain for ways to make money, and one of those ways is watching new tokens that get deployed and get fresh liquidity injections on uniswap (method signature `0xf305d719`). In a neutral world this is a great plan, get in on new tokens before everyone else can catch on, get first dibs on new tokens and then sell when the masses arrive via the official token marketing push. But the market isn't neutral and clearly people deploy fake contracts and provide them with fake liquidity to take advantage of people who think they're getting in early."

"[T]here could be a lot of fake tokens on the Uniswap platform that mimic the legitimate projects and deceive users into trading their funds for a worthless scam token."

"With any token able to be listed on the platform’s drop-down menu simply by making a GitHub request, the platform’s users are increasingly calling for more stringent vetting to be introduced."

"Uniswap Labs said [July 23rd, 2021] that it was restricting access to dozens of tokens on its trading interface app, including synthetic assets meant to mirror the prices of stock-market giants like Facebook Inc. and Tesla Inc., as well exchange-traded funds such as Invesco’s so-called QQQ that tracks the Nasdaq 100 Index." However, there is no indication of anything done to restrict scam tokens.

"As Uniswap’s protocol is permissionless and both good and bad actors can list tokens through it, you will often see a warning for users to take the initiative in avoiding scammers."

"Rather than searching for tokens or pairs on Uniswap, you can verify you are selecting genuine ones by going via a trusted source, such as the CoinMarketCap or CoinGecko crypto tracking websites. On CoinMarketCap, for example, you can search for the token, select it, then navigate to the trading pairs towards the bottom of the page. If you then click on the relevant pair next to Uniswap, it will take you to the genuine Uniswap page and help you to avoid fake tokens. It also has an option at the top for MetaMask." "Explorers like Etherscan can also be used to check the vital analytics needed to make a more informed decision."

Uniswap allows anyone to list a token. Therefore, there have been a massive number of scams with tokens named similarly to popular tokens. Scammers can set up a fake token, inject liquidity, and then dump quickly when anyone else buys. In this case, the token was not impersonating any legitimate project.

HOW COULD THIS HAVE BEEN PREVENTED?

There are no reported cases of centralized platforms listing fake tokens. Such an event would likely be short-lived. Platform operators have an inherent interest in protecting their users against fraud, and the insurance fund is available for platforms to use.

Check Our Framework For Safe Secure Exchange Platforms

No Title (Aug 3)
@degenspartan Twitter (Aug 3)
How Does Uniswap Work (Jun 5)
Fake Tokens on Uniswap Are Trying to Cash in on DeFi Hype (Sep 10)
Scam Tokens Flooded Decentralized Exchange — DailyCoin (Sep 10)
@defiprime Twitter (Sep 10)
Uniswap Reports A Surge In Scam Tokens On The Platform Claiming Affiliation To Popular DeFi Projects - Digital Coin Standard (Sep 10)
Uniswap Restricts Fake-Stock Tokens as Regulatory Scrutiny Grows - BNN Bloomberg (Sep 10)
How to Avoid Buying Uniswap DeFi Scams in 2021 | Hacker Noon (Sep 10)
How to Identify and Avoid Uniswap Scams | Alexandria (Sep 10)
Trade or Trick? Detecting and Characterizing Scam Tokens on Uniswap Decentralized Exchange (Sep 29)
Fake Uniswap Liquidity or How to Make 5 ETH in 20 mins : ethereum (Sep 29)
Address 0x515f197a769893befb4388d3db087e311bd1b2b5 | Etherscan (Sep 29)

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