A Memecoin Safety Survival Guide

Centralization Risks

Recently, the Dexx incident once again reminded users to be vigilant about platform centralization risks. In this section, we focus on analyzing Pump.Fun, currently the largest memecoin launch platform:

Through on-chain transactions, we identified the Pump.Fun contract address as 6EF8rrecthR5Dkzon8Nwu78hRvfCKubJ14M5uBEwF6P.
This contract code is not open-sourced and is controlled by a multisig address (7gZufwwAo17y5kg8FMyJy2phgpvv9RSdzWtdXiWHjFr8).

However, upon further investigation, it was found that this multisig address is effectively controlled by a single address (4zJkeipCFGvfcJvKm4TY57ED9uEdL3sBRvs8TPdZKG5Q), creating a single point of failure and significant centralization risk.

Solscan - Pump.Fun Contract Address

On May 17, due to operational issues, Pump.Fun suffered a private key leak, resulting in a loss of approximately $1.9 million.

Proper management of project private keys and the application of multisignature (multisig) wallets are especially crucial for preventing single points of failure.

When issuing a memecoin through Pump.Fun, users must mint tokens within an “internal pool” using $SOL. The price of these tokens during the minting process is determined by a Bonding Curve (also known as a bonding curve model).

For each memecoin, Pump.Fun creates a corresponding Bonding Curve program, whose data fields include the following:

tokenTotalSupply is set to 1 billion tokens.

virtualSolReserves, virtualTokenReserves, realTokenReserves, and realSolReserves serve as parameters for the automated market maker (AMM) to calculate the token price.

Once other users have minted 800 million tokens within the internal pool, the complete field switches to true, after which the memecoin is then made available for public trading in a liquidity pool on Raydium.

By inspecting the on-chain data of any memecoin issued via Pump.Fun, we can observe that the update authority for these contracts is a privileged address known as the Pump.Fun Token Mint Authority (TSLvdd1pWpHVjahSpsvCXUbgwsL3JAcvokwaKt1eokM), which is responsible for minting.

The mint field contains the address and token information for the respective memecoin contract.

These memecoin contracts do not have token extension functionalities; they are the simplest form of SPL tokens.

As a result, there are no privileged addresses that could exploit token extensions such as Permanent Delegate or Transfer Fee features to harm users participating in memecoin trading.

$Cheems Incident and Controversy

On November 25, Binance announced the listing of the Cheems contract.

The token price immediately surged by 35%, but within less than a minute, it crashed over 60%, sparking widespread controversy.

By analyzing on-chain transactions of $Cheems, it was discovered that the address responsible for the sell-off was 0xbb8365B1BA2462ffDce9C894Ada84478f474Fefc.

Using Beosin KYT (Know Your Transaction) analysis on this address, the findings are shown below:

On November 25, this address sold approximately 331.2 billion $Cheems within one minute through PancakeSwap and the OKX DEX aggregator, receiving 406.21 $BNB in return.

Immediately afterward, it deposited all the $BNB into a Binance account.

Beosin KYT Fund Flow Diagram

Although many users suspected this address of “insider trading,” a deeper KYT analysis of its historical transactions suggests it is more likely a Smart Money Address with a history of strategic trading activities:

• Starting from November 18, the address began accumulating $Cheems, and during the accumulation process, it also periodically sold off portions.

• On November 18, the address bought around 131 billion $Cheems and, four hours later, sold 41.3 billion $Cheems.

• On November 21, it withdrew 379.5 billion $Cheems from Gate.io and sold 175.8 billion $Cheems two hours later on-chain.

• On November 22 and 23, there were additional large buy and partial sell operations.

The overall fund flow is shown below:

Beosin KYT Fund Flow Diagram

Addresses involved in this controversy include:

• 0xbb8365B1BA2462ffdce9c894ada84478f474fefc

• 0x0d0707963952f2fba59dd06f2b425ace40b492fe

• 0xbff62cee932fe7496a88c9193e9ba3fd5eeff46d

When trading memecoins, users might also encounter “Pi Xiu” scam tokens (“貔貅盘” scams).
Previously, Beosin had illustrated such scams with case studies to help users understand and prevent these pitfalls. Here’s a more comprehensive breakdown of common memecoin scams:

Counterfeit Tokens

Every day, large numbers of new memecoins are launched across various blockchains, creating the illusion of endless opportunities for getting rich.
In reality, counterfeit projects are rampant, making it difficult for users to distinguish real tokens from fakes.

Many memecoin deployers copy the name and symbol of already popular projects, creating new token contracts with identical names.
If users fail to carefully verify the contract address, they may mistakenly purchase counterfeit tokens—or even outright scam tokens—leading to situations where the tokens cannot be sold.

In addition, disputes within the crypto community and among token issuers over memecoin name casing (capitalization) have also caused extreme price volatility.

Recent controversies and price fluctuations involving $NEIRO vs. $neiro and $ELIZA vs. $eliza illustrate the high risk associated with memecoins.

Users must research the relevant memecoin information, monitor community feedback, and stay alert to potential market manipulation by project teams through information control.

Sell Restrictions

During the memecoin trading experience, users may encounter “Pi Xiu” scams where the tokens they purchase either cannot be sold or are extremely difficult to sell.
Here are common methods scammers use through smart contract code to restrict selling:

(1) Blacklist / Whitelist Mechanisms

Token issuers can incorporate blacklist or whitelist functions into token contracts to restrict token transfers.

For example, if a user’s address is added to a blacklist, they may be prevented from calling functions like transfer() or transferFrom() to move tokens.

• Only non-blacklisted addresses are allowed to transfer tokens.

Only addresses that are not on the blacklist can be used to transfer tokens.

(2) Balance Manipulation

Issuers can also manipulate token balances directly through the smart contract, drastically lowering a user’s token balance.

• If the balance change is recorded only within the contract’s internal storage, the victim will still see their original balance displayed on blockchain explorers but will actually be unable to sell more than the manipulated balance.

• If the balance update is committed on-chain, the user will observe their memecoin holdings visibly drop—or even become zero.

Here’s an example of Solidity code that sets a blacklisted address’s balance to zero:

Outside of the EVM ecosystem, Solana also has a similar balance manipulation feature through Permanent Delegate extensions:

• Permanent Delegate is an official Solana token extension that grants administrators the authority to transfer or burn tokens at any time.

• It was originally designed for specific use cases like token recall or stablecoin compliance oversight.

• During token creation, a creator can initialize the Permanent Delegate via the createInitializePermanentDelegateInstruction command.

However, because the Permanent Delegate’s permissions are so broad, some malicious actors exploit this functionality:

• They issue tokens,

• Attract users to purchase,

• Then transfer or destroy user-held tokens for profit.

Example: Using Permanent Delegate to burn a user’s tokens.

Use Permanent Delegate to destroy tokens

(3) Transaction Thresholds

Another reason users might find themselves unable to sell memecoins is the presence of severe transaction thresholds coded into the contract:

• The smart contract may require users to hold a token amount far exceeding what they actually own in order to execute a sale.

• Or it might impose extremely high transaction taxes.

For example, in the following code snippet, the contract developer adjusts the amountToBurn parameter to manipulate the transaction tax:

• When the parameter is set to 2, it effectively imposes a 50% tax on each user transaction.

In Solana’s token extensions, there is also a TransferFee feature, which enables a tax to be applied on each token transaction.
Configuring TransferFee requires setting the following fields:

• Fee in basis points: The fee charged for each transfer, measured in basis points.

• Maximum fee: The cap on the transaction fee.

• Transfer fee authority: The address authorized to modify the TransferFee.

• Withdraw withheld authority: The address authorized to transfer withheld tokens from token accounts.

Since there is a maximum fee limit, it is relatively rare for Solana to use excessive transaction fees to create Pi Xiu scams. Instead, losses are more often caused through token transfers or token destruction.

(4) Transaction Pausing

Token issuers can implement a contract-wide pause function to restrict trading.
Once the contract enters a paused state, the token’s transfer functions become completely disabled, preventing any further trading.

For example, in the Solidity code snippet below, token transfers can only happen if the contract is not paused:

(5) Minimum Holding Time

After purchasing a memecoin, users may be forced to hold it for a minimum period before being allowed to trade.
This holding period is arbitrarily set by the token issuer, and they can modify it at any time.
By setting an extremely long holding time, users can be effectively trapped and prevented from selling.

Example Solidity snippet:

Unique Fee Mechanisms

After a user purchases memecoin, no handling fees will be charged when trading with other users. When it is sold through DEX (such as Uniswap), handling fees will be charged. In addition to selling, the user’s income from adding liquidity or participating in staking will also be affected.

For example, in the Solidity code example below, the transfer will only charge token transactions if the to address is the contract address.

Or the handling fee is not deducted from the transfer amount, but additionally reduces the sender’s balance. Once this method is not handled properly, it will seriously affect the price in DEX, causing the token value to return to 0.

Additional reduction in the balance of the from address

Token Minting

Token minting is a common way to execute a rug pull.

If the contract owner or a privileged address has minting rights, they can issue additional tokens and sell them for profit.

This is a frequent risk across the EVM ecosystem, Solana, and TON.

Here’s an example of a mint function from a Jetton token on TON that includes minting capabilities.

Centralized Token Allocation

Centralized token distribution is a major risk where a project team controls most of the token supply.

• They can manipulate governance decisions through token voting.

• They can also move the market by executing large buys or sells.

Example: In Solidity, all tokens might be assigned to the deployer’s address upon contract creation:

Proxy Upgrades

Using proxy contracts is a common smart contract design that allows the logic to be upgraded without changing the storage structure.
While this increases flexibility, it also introduces serious risks:

• Issuers can arbitrarily modify the contract logic,

• Potentially leading to loss or theft of token holders’ assets.

Example: In Solidity, an admin can update the logic address:

How to Stay Safe?

With scams rampant during the memecoin craze, users must be extra vigilant.
The Beosin security team recommends:

1. Stay Rational
   Be cautious of memecoin “get-rich-quick” narratives and influencer hype.
   Stay rational after a new token launches on a DEX—avoid FOMO and blind following.

2. Don’t Trust “Insider Tips” or “Confidential News”
   These are often traps designed to lure users into risky investments without proper research.

3. Before Buying Any Token, Verify These Key Points:

   • Is the token contract open-source?
   • Does it have an audit report?
   • Does it use blacklist/whitelist mechanisms?
   • Are there transaction taxes? How are they collected?
   • Is there a pause mechanism?
   • Are there special restrictions (e.g., minimum holding time, transfer amount limits)?
   • What functions can the contract owner call? Are the privileges too high?
   • Does the contract use a proxy pattern?
   • How is the contract owner’s authority managed (multisig or renounced)?

4. Use Risk Detection Tools
   Many platforms and tools provide automated contract checks.
   Always cross-reference multiple sources before trading.
   Recommended tools:

   • Honeypot
   • Token Sniffer
   • OKX Web3 DEX Market
   • GoPlus
   • De.Fi Scanner
   • Beosin Alert Chrome Extension

Summarize

In this article, we summarized the common malicious practices in the memecoin world.

Despite the opportunities and excitement, memecoins come with a variety of traps.

Users must remain highly vigilant and cautious when trading memecoins to minimize the risk of financial loss.

In the world of Web3, security always comes first.

Disclaimer:

1. This article is a reprint from [ForesightNews], with copyright belonging to the original author [Beosin].
   If there are any objections to the reprint, please contact the Gate Learn team for prompt handling.

2. Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute investment advice.

3. Other language versions of this article have been translated by the Gate Learn team. Copying, distributing, or plagiarizing the translated article without mentioning Gate.io is prohibited.