Coinbase, a prominent U.S. cryptocurrency exchange, has introduced its ERC-20 Scam Token Detection System, driven by artificial intelligence. The system is designed to identify a wide range of scams, including both familiar and previously unknown types. Coinbase’s Chief Legal Officer has recently discussed this development in an informative post, highlighting how the exchange’s engineering team employs AI to combat the rising threat of scam tokens.
In a recent blog post announcing the launch of this scam-detection system, Coinbase underlined the increasing sophistication and strength of scam artists within the cryptocurrency space. These malicious actors are now using fraudulent tokens to deceive and exploit crypto users. Coinbase’s innovative tool is a proactive measure aimed at identifying and filtering out such tokens, ultimately safeguarding its user base. The article also shed light on two primary forms of crypto scams: honeypots and internal fees.
Honeypots are essentially deceptive traps designed to ensnare unsuspecting crypto investors. They involve fraudulent tokens that incorporate hidden features preventing investors from selling or transferring them post-purchase. Meanwhile, internal fees scams involve the imposition of exorbitant fees during transactions involving these tokens. Both scam categories employ unique tokens crafted explicitly for these fraudulent activities, contributing to the ever-evolving landscape of cryptocurrency scams.
Coinbase’s Multifaceted Approach to Tackling Scams
To address the growing threat of scam tokens, Coinbase has devised a multi-pronged strategy leveraging two key components: Smart Contract Auditing and Machine Learning Production.
1. Smart Contract Auditing: This strategy centers around scrutinizing the integrity of ERC-20 tokens by conducting smart contract audits. Through this process, Coinbase continually expands its database of known scams, enhancing its capacity to identify and deter fraudulent tokens.
2. Machine Learning Production: Coinbase employs machine learning to detect hitherto unknown forms of scams by analyzing abnormal activity patterns. This approach enables the platform to stay ahead of evolving scam tactics and offers additional protection for its users in the cryptocurrency sphere.
By combining these two strategies, Coinbase endeavors to establish a secure and comprehensive list of Ethereum-based tokens. This proactive stance not only bolsters security for its user base but also contributes to the broader effort of fortifying the cryptocurrency ecosystem against the pervasive threat of scams.
