How to Evaluate the Risks of Memecoins


Risk management is the last step before we make an investment decision. We can use a variety of tools to analyze the coin's on-chain information to help understand the reliability of the memecoin project and reduce the risk of our own investment.

Check Smart Contracts, Addresses, and Transaction Records

Take an ERC-20 coin as an example. You can check its detailed contracts on Etherscan, and check out information including but not limited to the following list:

  • Verification of the contract: Look for a small check mark next to the "Contract" label, indicating the code has been verified.
  • Suspicious Whales: Under the "Holders" tab, monitor the top addresses. Generally speaking, the more "scattered" the distribution of tokens, the better, which means that there are many people holding positions, and there is less suspicion of manipulation by the project. In addition, the sum of the coin holdings of the top 10 non-contractual addresses (i.e., addresses that exclude exchanges and liquidity pools) should not exceed 20%. Cross-referencing with the token's distribution plan (if provided by the project) can help identify any mismatches.
  • Potential HoneyPots: If the "DEX Trades" tab shows no sell records or only a few addresses selling, it could be a honeypot scheme.
  • Scammed Victims: The "Comments" tab might offer insights if someone has been scammed or if there's any negative feedback about the coin.
Take PEPE as an example. The small checkmark on the Contract tag indicates that the smart contract passed validation, and the message in the Comment tag indicates the investor's fury

Other Useful Tools

In addition, there are some tool websites that can help detect whether there are vulnerabilities and risks of memecoins. 

You can choose the official website's detection tools, such as the detection website of the BNB ecosystem, or some third-party detection websites. Here are some of the great tools we've found on the market, along with some brief descriptions.

Generic Smart Contract Inspection Tools

There are a lot of free and good tools in this field, including De.Fi, Token Sniffer, SolidityScan, etc. Their functions are basically similar, you just need to paste the contract address of the project you want to detect into the search box, and you can immediately get a risk analysis report. You can choose one that is convenient for you to use.

De.Fi's smart contract testing of Ben (BEN) reveals a private wallet holding a large portion of the tokens, posing a significant risk of a Dump
The smart contract test results screen above Token Sniffer. 25/100 means that the smart contract is extremely risky, with some of the risks detected and a brief description behind the red markers: high transaction fees, developer's ability to modify the contract
The contract inspection report provided by SolidityScan, with a score of 76.19/100, indicates that the project is of medium risk.

Token Distribution Detection Tools

In addition to the previously mentioned information about token allocation in your browser, tools like Bubblemaps can also be used to detect any suspicious holders.

Taking the contracts of Bullet Game (BULLET) as an example, Bubblemap visualizes the data to clearly show the relationship between some of the heavily held addresses. If there is a large number of holding bubbles, you need to be alert that someone is controlling the market

HoneyPot Detection Tools

You can use, IsRug, and other tools to help determine if a cryptocurrency project has an "all in, no out" risk. can perform Honeypot detection on tokens on the Ether and BSC networks. The chart above shows that BOB Token (BOB) has no risk associated with HoneyPot for the time being
IsRug is another one of the useful HoneyPot detection tools. It covers relatively more networks

It's important to note that while these detection tools can help us uncover fraudulent project parties, they are not always 100% accurate. Memecoin investments require caution.



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