Anatomy of a Sh*tcoin: A Thorough Guide on Guarding Your Wealth
Bitcoin and Ethereum are considered the safest cryptocurrencies to invest in in the volatile market of the crypto space. However, let’s face it, they’re unlikely to pull off that legendary 100x growth move, given their massive market caps. This is why many investors seek “gems,” new and underrated projects with massive growth potential.
Unfortunately, the current wild west of the market is much more frequently inhabited by “sh*tcoins” instead. So what is a sh*tcoin? Read more to find out.
Sh*tcoin in a Nutshell
Unless you’re new to the crypto space, the term is used too leniently by many. For example, many Bitcoin maximalists consider almost every other project as a sh*tcoin. However, in its more accepted definition, a sh*tcoin is a coin that has at least 1 of the following properties:
- The project is a scam
- The project has minimal/no utility
- The project is a copy of another project without any advantages over the original.
Most likely, you probably would find these a bit too vague and rightfully so. Therefore below, let’s cover the “Anatomy” of a sh*tcoin, various signs, and red flags indicating that the project will fail.
The head of a project, its face, and its brain is the project team. It’s the most critical parameter to look out for; if the team is credible and experienced in their field, the project is already on the right track. Below are the signs to watch for when doing your research on the team:
The Team is Anonymous
Some teams indeed wish to remain anonymous, but much more frequently, an anonymous team is a sign of scammers who don’t want to get sued after ripping you off. For example, although Satoshi Nakamoto, the creator of the most successful crypto project, Bitcoin, is anonymous, he did not run an ICO or require millions of dollars to kick-start his project.
Today the crypto landscape is much more competitive, so innovative projects require massive investments to compete. Furthermore, since enthusiasts make large investments, trust is essential, so the team is almost obligated to be brought to light.
Some scammers have acknowledged the problem with anonymous profiles, so they decided to create fake LinkedIn, Twitter, and other profiles. While one should investigate whether the profiles are real or not, an alternative strategy could be to check whether they have posted videos of themselves speaking about the project. Most development teams organize regular AMAs, video updates, and other digital content with their faces in it. If not, that’s a significant red flag.
Additionally, other scammers may create fake social media profiles, like fake LinkedIn and Twitter pages. Therefore, be sure to reverse search images, the team members’ names on Google, LinkedIn activity, connections, experience, et cetera. If something’s off, odds are you’ll notice it.
The team may be the head, but the coin itself and its fundamentals are the project’s core (the body). Here, we have multiple points to consider; the website, the whitepaper, the roadmap, the tokenomics, the coin utility, the coin code, the coin logo, and the name.
Every project needs a website; there are no exceptions. If it’s some Twitter account “conducting an ICO,” – it’s a scam that doesn’t get any more obvious than that. However, a majority of sh*tcoins have websites, very stylish too. That’s because the projects that cannot impress you with their product will try to impress you with the ad, providing an illusion of credibility and innovation. Therefore the next step would be to check the whitepaper.
If a cryptocurrency is a house, the whitepaper is its blueprint. Since you wouldn’t hire someone who builds a house without blueprints, you probably wouldn’t like to invest in a project without a whitepaper. Whitepapers must be elaborate and detailed, providing the team’s vision for the project and naturally technical. Therefore beware of short whitepapers (less than a couple of pages) or papers that sound easy to understand for an average investor.
Frequently this is presented as intentional, “to help beginners” or “to make crypto more accessible.” However, good projects will inevitably need to talk about the network architecture, whether the algorithm is Proof of Work or Proof of Stake, consensus mechanisms, scalability, governance, and other advanced topics that a short, easy-to-understand whitepaper can never cover.
Some sh*tcoin developers recognize the pitfalls of making whitepapers too easy to comprehend, so watch out for plagiarism and circumlocution. Equivocation is when the author intentionally makes stuff more difficult to understand and obscures the true meaning of his words. If you’re reading a whitepaper and you’re unsure whether that’s the case, ask for help! Plenty of Reddit and Telegram communities have experienced developers who can help you sort through the debris.
Another type of sh*tcoin whitepaper is the Tokenomics whitepaper. One can easily recognize it by its constant talk about token economics: fair distribution and redistribution of tokens among holders, burning the tokens spent on transaction fees, hard caps, deflationary models, etc. Such a whitepaper is a big red flag since no matter how much one decreases the supply, if the demand for the token is zero, the price of the token is zero as well.
Frequently, such sh*tcoins will have an astronomically large supply (in trillions and even quadrillions) to give holders an illusion of wealth (e.g., having 500 Doge feels more satisfying than 0.0036 BTC). This is a strategy to confuse the beginner investors who don’t understand market caps (“Oh man, my coin is worth 0.00002€, what if it one day reaches 1€? I’ll be rich!”).
Aside from the blueprints, to build a house, you need a schedule to plan what needs to be done every week, month, and year. In the crypto space, roadmaps serve that role and are present on most promising projects’ websites. In addition, roadmaps can be a direct reflection of a project’s utility (see later).
Projects with solid fundamentals have milestones talking about upgrades, forks, improvements in decentralization, scalability, interoperability, et cetera. Consequently, Sh*tcoins can’t have that since they don’t focus on innovative tech.
Their milestones would be more advertisement-geared: achieve 50,000 Twitter followers, get listed on a new exchange, do a presentation at a conference, expand the team, and so on. You get the point. Occasionally a project will throw in an overly ambitious goal it knows it can’t fulfill (like 4-digit APYs on liquidity pools) or, again, will employ circumlocution to deceive the investors.
One of the most prominent direct signs that the coin is garbage is its absence of real-life use-cases. Sh*tcoins, as a rule, either have no or minimal utility. But, of course, they are not just going to write that on the website.
They’re frequently going to follow the current trends or emulate another successful project, most frequently by forking. For instance, there are many Bitcoin forks (copies) today including, Bitcoin Gold, Bitcoin Diamond, Bitcoin SV. If the project is a copy of another project without significant advantages such as improved tech or occupation of a new niche, the project will suffer.
This BTC copycat rivalry was once a trend, and sh*tcoins love to follow trends to justify existence. For instance, as of 2021, “NFT Marketplaces” and trying to be “Greener than Bitcoin” is all the rage in the sh*tcoin industry. The competition in NFT marketplaces is very high, and pretty much every project is greener than Bitcoin, so if these are the only utilities the coin provides, be rest assured. It’s a sh*tcoin.
The Coincode/Logo and Name
Finally, perhaps the quickest way to discern a sh*tcoin is from its name and logo. If the name or the logo contain symbols/words for rockets, dogs, cats, moon, mars, a celebrity (especially Elon), memes, and “safe,” – the coin is most likely a sh*tcoin. Most of these were birthed in the aftermath of Elon Musk’s patronage of Doge, which sent the meme coin soaring.
Hungry sharks of the crypto-space decided that if Doge could do it, any sh*tcoin could do it, which couldn’t be further from the truth. Though it must be noted, do not judge a book by its cover!, instead, DYOR and understand the project.
The head and body are ultimately carried by the community, the legs that will allow the coin to climb the stairs of rankings and market caps. The larger and more active the community, the more the project has a chance at recognition. Telegram, Reddit, and Discord are the holy trinity of all crypto-communities, the links to which are normally available at the project’s official website.
Join the community and start asking tough questions and expressing your opinions. Suppose you have voiced your genuine concerns but have been labeled as a FUDist by the community; this is a big red flag. The project has attracted an immature and frankly moronic audience, and the community could even be full of shillers and bots.
Talking about shillers, on platforms such as 9Gag, Twitter, TikTok, and Instagram, paid “shillers” (a derogatory term for advertisers) will use every tool available in the marketing world to attract your money. Unfortunately, a shilled project is frequently not a good one because the tech will speak for itself in the long run.
Therefore the projects without strong fundamentals have little to do, thus resort to TikTok stars and Instagram influencers to promote their sh*tcoins. Shillers often try to instill a sense of FOMO in you and promise great returns, making them easy for you to spot and avoid.
And the Arms?
Sh*tcoins don’t have arms. If they did, they’d pull themselves out of sh*t a long time ago.
Our overview of the anatomy of modern sh*tcoins is now complete. As scammers get smarter and new trends arise, this overview will be periodically updated to protect you from projects not worth your time and money.
Most importantly, do not forget to do your independent research and do not jump into a project you understand little about, no matter the FOMO in the media. When researching a project, focus on the main points mentioned earlier. Dig deeper into the performance of the tokens in multiple analyst platforms.