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Basic Sui Memecoin Safety Checks
Meme coins are all the rage in crypto this cycle and for good reason. Unlike NFT projects from 2021, memecoins make no promises about future “utility” and they are 100% liquid. It’s understood that memecoins are simply a way to turn a small amount of $SUI (underlying blockchain currency) into much larger sums. Memecoins on Sui are FUN and provide a real chance for anyone to significantly grow the size of their bags. Having said that however, it’s important to understand the basic things to look at in terms of safety before buying meme coins on Sui or any other blockchain.
Is the Memecoin a HoneyPot and What does that Mean?
HoneyPots are deceptive smart contracts that imprison your crypto, which means you won’t be able to sell the meme coins after buying. They are scams designed to attract investors but ultimately prevent them from selling or cashing in on their profits. Stay away from memecoins if they are honeypots!
How do Honeypot Memecoins Prevent Holders from Selling?
Hidden within the smart contract code of a HoneyPot memecoin scam project are one of two things…
- Blacklisting: The smart contract is designed to blacklist the wallet address of anyone who buys the HoneyPot meme coin, meaning holders cannot sell or transfer their tokens.
- High Sell Tax: The smart contract code dictates a 100% tax on selling, making it impossible to profit on the HoneyPot memecoin.
The unfortunate reality of Honeypot memecoins is that the only people that can sell them for profit are the scam token creators or those with whitelisted wallet addresses. Never buy honeypot memecoins on Sui or any blockchain.
How to Identify HoneyPot Memecoins?
Fortunately, you’ll find HoneyPot detection on Dex Screener under the “Quick Intel” section on the right-side of the screen. If you’re trading Sui meme coins, use free tools like RaidenX and Nexa (formerly insiDeX) to quickly detect honeypots. Simply copy the meme coin contract address, go to Nexa, paste it in the search. The insiDeX app will help you to quickly determine if the meme coin is a honeypot or not in the “Safety Checks” section.
Is the Initial LP Burnt and What Does that Mean?
You’ll want to only invest in memecoins where the Initial LP is Burnt but what does that mean? In order to understand what “Initial LP Burnt” means, we need to first understand Liquidity Pools.
Think of it like setting up a little trading shop. When someone makes a new memecoin, they need to create a place where people can actually buy and sell it. That’s what we call a “Liquidity Pool.” The pool usually consists of two coins… One side is the newly created memecoin, and the other is the underlying blockchain coin. In this example we’ll imagine this is a memecoin on the Sui blockchain. So the LP (liquidity pool) would consist of half new meme coin and half $SUI.
The memecoin dev (creator) puts both $SUI and the new memecoin into the pool, kind of like stocking up a store. In return, they get a cut of all the trading fees that happen there, which shows up as APY (basically your return on investment). When you put coins into the pool, you get what’s called a “Liquidity Position” or “LP” – think of it like a receipt that proves you’ve contributed to the pool.
Now, anyone who has an LP can take their coins back whenever they want. However, if everyone decides to take their coins out of the pool, it’s like emptying out the store completely. Nobody can buy or sell the new Sui memecoin anymore because there’s nothing left to trade with!
The way it works is pretty straightforward… When you want to buy the new memecoin, you put your $SUI into the pool and take out some of the memecoin. When you want to sell, you do the opposite. But if everyone has taken their coins out of the LP, it’s like trying to sell something at a store with no cash register… There’s no $SUI left in the pool to give to sellers.
“LP burnt” means that the people who have deposited coins into the pool have renounced their LP position (basically sent the initial LP to an address that can never be accessed). So if the initial LP is burnt, it ensures that there will always be liquidity in the pool for traders of the new Sui ecosystem memecoin.
If the LP is not burnt, there will always be the danger that the Dev or other people can withdraw their funds from the pool, and if you hold the “New memecoin”, you won’t be able to sell it. So if the initial LP is not burned, there’s a non-zero chance the Dev team could “Rug” the memecoin at anytime.
The bottom line is that you should only buy Sui memecoins if the initial LP has been burnt. Again, use free tools like Dex Screener and insiDeX to quickly identify whether or not the initial LP has been burnt.
Other Key Safety Checks to Consider when Analyzing Memecoins on Sui
- Coin Dev Wallet Address: Copy the address of the coin developer and search for it in an explorer for the blockchain that it’s on to look for suspicious activity. For example, if it’s a Sui meme token, I would copy the Coin Dev wallet address and search for it on SuiVision explorer.
- Total Supply: The total number of meme tokens that have been minted by the coin’s developer.
- Is the Treasury Cap Burnt? A burnt treasury cap means that the dev cannot mint any new coins, and the supply is fixed. Do not buy meme coins if the Treasury Cap has not been burnt.
- Total Supply Burnt: Depending on the strategy of the specific memecoin project, the developer might decide to burn some of the coins in circulation. Typically, the higher the percentage of the total supply burnt, the better.
- Coin Created Date: Take into consideration the age of the memecoin and factor that into your strategy.
Memecoins are a great way to grow a small initial investment quickly. Just make sure to due your research and go through the safety checks mentioned above before buying on Sui DEX aggregators like 7K and Hop. It’s clear that memecoins on Sui and all other blockchains are here to stay. Now that you know what to look for, you’re in much better position to succeed over the long-term. Good luck and happy memecoin trading!
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.
