Uniswap and its popular Automatic Market Maker (AMM) feature attracted plenty of crypto traders for its ease of use. Spotting a chance, scammers decided to profit by creating fake tokens on Uniswap representing some of the best projects in the sector.
While decentralization seems to be a key goal for investors and developers alike, the feature brings a set of its own problems. Scammers continually hit Uniswap with fake tokens disguising themselves as token sales held by popular projects which recently announced their offering.
Today, Aug 19, a DeFi lending platform named Teller Finance warned their community that scammers created a fraudulent Teller token on the Uniswap exchange. The project further states that they have not officially disclosed any plans or dates for an upcoming token sale.
Ever-Present Fake Tokens
Last week a highly popular DeFi protocol also faced a threat from scammers. The Near Protocol held a token sale last Tuesday, and prior to the start date, the project warned users of fake tokens circulating on the market. The team stated:
“The only place for official word of NEAR tokens is near.org/tokens. Any NEAR currently for sale at locations not mentioned there are not officially sanctioned by the NEAR Foundation and participating puts you at severe risk.”
Despite the fact that NEAR held the token sale on the CoinList exchange, specific individuals took the opportunity to list fake tokens on Uniswap. Interestingly enough, there were several such tokens on the decentralized exchange at the time.
The Acala Network reported that they met the same fate last month. On July 22, the project’s Twitter account pinned a warning tweet for users willing to buy the Acala token. Acala Network will not hold any public sale, and all existing token distributions are conducted via official communication channels, stated the team.
Decentralization brings both solutions and problems
The main issue with decentralized exchanges such as Uniswap lies in the liberty of listing tokens. Users do not have to follow any rules or requirements when listing tokens. Furthermore, ERC-20 tokens are easy to create and spam all over the market.
At the time of writing, CoinMarketCap shows that there are more than 400 token pairs on Uniswap. 300 more tokens also await verification.
Prominent blockchain figure and Ethereum developer Vitalik Buterin expressed his view on the matter on Twitter last week. His solution to the problem, decentralized reputation systems. These systems would pose an alternative to centralized solutions, which Vitalik believes are inherently dangerous.
On the other hand, the blockchain industry already offers such products. Kleros, a blockchain dispute resolution layer, is a viable platform for curating and verifying tokens. The platform already has a registry containing a list of tokens that are not connected to harmful addresses. Kleros even provides badges for user-vetted cryptocurrencies.
Moreover, the project shared a useful user interface on GitHub for investors. The interface shows traders which trading pairs are not verified by the Kleros registry.