# Trade or Trick? Detecting and Characterizing Scam Tokens on Uniswap Decentralized Exchange

**Authors:** Pengcheng Xia, Haoyu wang, Bingyu Gao, Weihang Su, Zhou Yu, Xiapu Luo, Chao Zhang, Xusheng Xiao, Guoai Xu  
**arXiv:** [2109.00229](https://arxiv.org/abs/2109.00229)  
**Date:** 2021-09-01  
**Summary page:** https://www.summarizepaper.com/en/paper/2109.00229v2/

## Key points

- Cryptocurrency ecosystem has seen a surge in digital asset trading platforms
- Decentralized exchanges (DEXs) have emerged as an alternative to centralized exchanges (CEXs)
- Uniswap is a DEX that has gained prominence but has attracted scammers who flood the ecosystem with fraudulent cryptocurrencies
- A team of researchers led by Pengcheng Xia has taken the first step towards detecting and characterizing scam tokens on Uniswap
- The team identified over 10,000 scam tokens listed on Uniswap, suggesting that roughly 50% of the tokens listed are scams
- Scammers have gained at least $16 million from 39,762 potential victims through these schemes
- The findings suggest an urgent need to identify and stop scams in the decentralized finance ecosystem
- This approach acts as a whistleblower that identifies scam tokens at their early stages.

## Summary

The cryptocurrency ecosystem has seen a surge in digital asset trading platforms, driven by the prosperity of the industry. Decentralized exchanges (DEXs) have emerged as an alternative to centralized exchanges (CEXs), allowing users to trade cryptocurrencies without transferring custody of their assets to middlemen. Uniswap is one such DEX that has gained prominence but has also attracted scammers who flood the ecosystem with fraudulent cryptocurrencies. In response, a team of researchers led by Pengcheng Xia has taken the first step towards detecting and characterizing scam tokens on Uniswap. The researchers collected all transactions related to Uniswap V2 exchange and investigated the landscape of cryptocurrency trading on Uniswap from different perspectives. They then proposed an accurate approach for flagging scam tokens based on a guilt-by-association heuristic and machine learning-powered technique. The team identified over 10,000 scam tokens listed on Uniswap, suggesting that roughly 50% of the tokens listed are scams. These scam tokens and liquidity pools are created specifically for "rug pull" scams, with some having embedded tricks and backdoors in their smart contracts. The researchers further observed thousands of collusion addresses helping carry out scams in league with scam token/pool creators. Scammers have gained at least $16 million from 39,762 potential victims through these schemes. The findings suggest an urgent need to identify and stop scams in the decentralized finance ecosystem, with this approach acting as a whistleblower that identifies scam tokens at their early stages. Overall, this study highlights the growing problem of fraudulent activity within decentralized finance ecosystems like Uniswap and underscores the importance of implementing effective measures to detect and prevent such activities from occurring in order to safeguard investors' interests.