Key Points:
- Scammers exploit Base’s blockchain, pocketing around $2 million.
- Coinbase emphasizes diligent research before engaging in any dapp.
- Despite security efforts, scam tokens continue to plague public blockchains.
More than 500 scam tokens have reportedly been deployed by developers on Base, the new blockchain launched by crypto exchange Coinbase.
These efforts have resulted in scammers pocketing around $2 million, Bloomberg reported Wednesday (Aug. 16), citing figures from New York-based crypto market integrity platform Solidus Labs.
A company spokesperson told Bloomberg: “We encourage consumers to do their research diligently before participating in any dapp [decentralized application], on Base or any other chain, just as they would on the open internet.”
The vulnerability of blockchain networks, which allow anyone to use them, has made them an attractive target for scammers, according to the Bloomberg report.
Between mid-July and Base’s public debut in August, developers took advantage of this vulnerability and created the scam tokens, the report said. About 300 of these tokens allowed their creators to mint an unlimited number of coins, unbeknownst to Base users, thereby impacting the tokens’ values. Another 60 coins blocked buyers from reselling them on exchanges, further facilitating the scams.
These scam tokens generated about $3.7 million in trading volume on Base-based decentralized exchanges, where users can trade directly with each other, per the report. In addition to the scam tokens, other cryptocurrencies have been deceptively touted and traded on Base.
While it may be easier to detect scam tokens in decentralized finance compared to traditional finance, the buzz generated by Base has attracted scammers, according to the report. Scam token creators thrive on hype, promises, and price and volume manipulation.
This issue is not unique to Base; token scams are prevalent on all public blockchains, the report said. In fact, blockchain data platform Chainalysis found that 24% of all new tokens launched in 2022 exhibited characteristics of pump-and-dump schemes.
Coinbase introduced Base to foster a community of developers who would build decentralized apps for Coinbase users, making the exchange more useful and engaging, per the report. Base, one of the Layer 2 networks built on top of ethereum, simplifies the creation of decentralized apps that connect to Coinbase’s products, users and tools.
Illicit crypto transactions hit a second consecutive all-time high in 2022, reaching $20.6 billion, Chainalysis Head of Research Kim Grauer told PYMNTS’ Karen Webster in an interview posted in March.
