According to a recent Bloomberg report on August 16th, more than 500 fraudulent tokens have been deployed on Base, a new blockchain introduced by the cryptocurrency exchange Coinbase. Citing data from the market surveillance platform Solidus Labs, these 500 fake tokens have generated approximately $2 million in profits for scammers.
A spokesperson for the company told Bloomberg: “We encourage consumers to carefully research before engaging with any dapps [decentralized applications], on Base or any other chain, just like on the open internet.”
Bloomberg’s report highlights the vulnerability of blockchain networks, which can be freely accessed by anyone, making them attractive targets for fraudsters. From mid-July 2023 until Base’s public launch in mid-August 2023, developers exploited this loophole and created fraudulent tokens.
Around 300 of these fraudulent tokens allowed creators to mint an unlimited number of coins without the knowledge of Base users, thereby affecting the token’s value. Another 60 coins prevented buyers from trading them on exchanges, creating even more favorable conditions for fraudulent activities.
According to the report, these scam tokens generated around $3.7 million in trading volume on decentralized exchanges based on Base, where users can directly trade with each other. In addition to the fraudulent tokens, other cryptocurrencies were also advertised and traded deceptively on Base.
Interestingly, while detecting fraudulent tokens in decentralized finance might seem easier compared to traditional finance, the buzz created by Base has attracted scammers. Those behind these fraudulent tokens have gained traction through exaggerated advertising, promises, price manipulation, and volume control.
However, Base is not the only platform facing this issue, as fraudulent tokens are becoming prevalent across all public blockchains. In fact, blockchain data platform Chainalysis found that 24% of all new tokens launched in 2022 exhibited characteristics of pump-and-dump schemes.