How to Vet Binance Smart Chain Projects

With an estimated 90% of Binance Smart chain tokens ending up as rug pulls, choosing the “right” Binance Smart Chain Token can be a daunting task. As a token developer myself I admit the end goal is to cash out bags of BNB and make bank. However, cashing out in a rug pull manner destroys the project, the reputation of those involved, and is unethical … but, it’s completely allowed on the Binance Smart Chain. However, you can avoid loosing BNB due to a rug pull by checking the contract and blockchain explorer for characteristics of a rug pull token.

Check a blockchain explorer to see that the contract has been relinquished. A relinquished contract shows the owner as address “0x0000000000000000000000000000000000000000”. This simply means that the contract can no longer be modified. A contract that has not been relinquished can be modified at any time to charge a “99%” transaction tax to be sent to the developer’s wallet. Scammers will frequently defend not relinquishing the contact because of bug fixes and updates, however these are performed by Binance on the blockchain itself.

Relinquishing the contract also prevents the token from being taken over by bad actors.

BSCScan Image — Owner ID for Marx Token

Check the blockchain explorer and examine the distribution on LP tokens. LP tokens are what back the token with BNB equity. This equity can be withdrawn in a rug pull unless it is locked or burned.

LP tokens which are locked cannot be withdrawn until a certain date. Some projects boast that all their LP tokens are locked — I treat projects with locked LP tokens as delayed rug pull projects. Be ready for the inevitable rug pull in projects with locked LP tokens.

Ideally, LP tokens should be burned. Burning LP tokens does not destroy equity — it permanently locks equity.

BSCScan image — LP Token Holders Chart for Marx Token

The percentage of LP tokens which are burned are shown as owned by address: 0x0000000000000000000000000000000000000000. This pecentage should perferably be 80% or higher.

A rug pull is also possible from the developer selling tokens. It’s prudent to check the contract to see who owned/created the contract and then check the transactions in the developer’s wallet. An honest developer may sell tokens over time and take small profits.

Avoid projects that want you to use their own software wallet, or that want you to connect your wallet for airdrops or logging in. There are common methods of stealing crypto. Use only reputable wallets like Trust Wallet or MetaMask and only connect to Pancakeswap.

Be cautious about going into one-and-one chats on telegram with advisors offering to help. Generally, they want to help themselves to your crypto.

Do your research and stay safe. Trading Binance Smart Chain tokens can be fun and profitable.