Have you encountered any rug pull projects in the past year? Have you suffered losses from buying at the peak due to hype from influential KOLs, or from increasingly rampant phishing attacks? Or perhaps you bought new tokens on top platforms only to see them continuously decline in value?

Many users likely resonate with these experiences, having fallen into at least one of these traps. This represents the investment journey and genuine feelings of most ordinary investors over the past period.

Both on-chain security issues and asset devaluation are difficult to guard against for users. Many common pitfalls have even become industrialized, almost uprooting even the smallest investors.

This article will take stock of the increasingly varied pitfalls in the crypto world and discuss whether there are still profitable opportunities for ordinary users in the crypto industry.

01 The “Fancy Ways To Lose Money” For Ordinary Users

1) The Trend of Industrialized Rug Pulls

First, the schemes for rug pulls are becoming increasingly sophisticated, with the most outrageous case being ZKasino:

On April 20, community users compared historical pages on Wayback Machine and found that ZKasino had deleted the phrase “Ethereum will be returned and can be bridged back at this point” from the Bridge funds section of their website. At the same time, community users were unable to withdraw funds, ZKasino’s official Telegram was muted by admins, and social media updates stopped. The total amount scammed exceeded $20 million.

But interestingly, just a month earlier in March, ZKasino had announced the completion of a Series A funding round at a valuation of $350 million, though the exact amount was undisclosed. Multiple exchanges and venture capital firms participated in this round.

In addition, the zkSync ecosystem, often mockingly referred to as the “Rug chain,” has not only seen frequent security incidents but also a clear trend towards industrialized schemes that capitalize on hype and quickly execute scams. A recent example is the zkSync ecosystem DEX Merlin, which experienced a rug pull involving millions of dollars.

It’s worth reiterating that the quality of projects within the zkSync ecosystem varies greatly. While participating in zkSync projects, users should remain vigilant and be cautious of the various risks involved.

2) Increasingly Rampant Hacker/Phishing Attacks

One of the most notable cases in the realm of on-chain security recently is the now familiar “same-prefix-and-suffix phishing attack.” In this incident, a whale address fell victim to a phishing attack from an address with the same prefix and suffix, losing 1,155 WBTC, worth over 400 million yuan! Although the hacker eventually returned the funds due to various pressures, the incident highlighted the high risk-to-reward ratio of such phishing attacks, where one successful attempt can provide a lifetime of gains.

Similar phishing attacks have become industrialized over the past six months. Hackers generate a massive number of on-chain addresses with matching prefixes and suffixes as a preparatory seed pool. Once an address is involved in a transaction, they quickly find a matching address from the seed pool and execute a related transfer via a contract, casting a wide net in hopes of catching a victim.

Some users fall for this because they copy the target address directly from transaction records and only verify the first and last few characters. According to SlowMist founder Yu Jian, phishing attacks targeting the same-prefix-and-suffix addresses are “a probability game where hackers cast a wide net, waiting for someone to take the bait.”

This is just a glimpse of the increasingly rampant hacker attacks. For ordinary users, the vibrant on-chain world is fraught with both visible and invisible risks that are growing exponentially, while their awareness of risk prevention struggles to keep pace.

Overall, attacks on the blockchain, wallets, and DeFi platforms are becoming more diverse, with social engineering attacks also on the rise. This makes DeFi security risks resemble an asymmetrical one-way hunt: a bottomless ATM for technical geniuses, but a Damocles sword for most ordinary users, who can only stay vigilant and avoid casual authorizations, relying heavily on luck.

So far, phishing and social engineering attacks pose the most common risks for ordinary users losing funds in Web3, exacerbated by additional vulnerabilities in smart contracts. Each successful scam results in one less Web3 user, and without new users, the Web3 ecosystem cannot thrive. This is one of the greatest harms to the crypto industry.

3) KOL Shilling

For most ordinary users, following the shilling from various crypto KOLs (Key Opinion Leaders) on social media is a major source of alpha information. This has led to the concept of “KOL Rounds,” where KOLs, who wield significant influence over retail investors, can sometimes secure better terms than institutional VCs, such as shorter lock-up periods and deeper valuation discounts.

For example, Monad Labs recently completed a new funding round with a valuation of $3 billion. Insiders revealed that some industry KOLs were allowed to invest at one-fifth of Paradigm’s valuation cap.

Does following KOL shilling guarantee profits? According to a study by researchers from Harvard and other institutions, which analyzed approximately 36,000 tweets from 180 of the most famous crypto influencers mentioning over 1,600 tokens, the results were less than promising:

When a KOL tweets about a token, the average return after one day (two days) is 1.83% (1.57%). For crypto projects outside the top 100 by market cap, the return one day after shilling is 3.86%. However, the gains begin to significantly decline starting on the fifth day after the tweet. The average return from the second to the fifth day is -1.02%, indicating that over half of the initial gains are wiped out within five trading days.

4) Continuous Decline of VC Tokens

Faced with a high FDV (fully diluted valuation), low circulating supply VC token, or a completely “degen” memecoin with a high risk-reward profile, which would you choose?

Recently, the market sentiment has started to shift, with the memecoin craze gaining significant traction. This has led to a surge in transactions on chains like Solana and Base. Memecoins like PEPE, which have firmly established their status, have reached historical highs. In the current market environment, beyond short-term speculation, the popularity of memecoins reflects a growing demand for fairness among the masses, with funds effectively voting with their feet.

In contrast, several high FDV tokens from major platforms have experienced continuous declines. Examples include AEVO, REZ, and even the first project from Binance Megadrop, BounceBit’s token BB, which have seen almost daily losses since their listings, trapping investors in significant losses.

This stark contrast has reignited discussions and debates within the community about the merits of memecoins versus VC-backed tokens. Memecoins benefit from sustained inflows of capital and attention due to their user-driven popularity. Conversely, new projects with valuations in the tens of billions of dollars often rely on grand narratives or outdated concepts, which are increasingly rejected by the community. This serves as a wake-up call for VCs and project teams accustomed to traditional paths, highlighting the need to adapt to evolving market dynamics and community expectations.

02 Where Should Ordinary Players Go?

In the previous article “Web3 Never Sleeps, Will the ‘Golden Age’ of the Crypto World Ever End?“ it was mentioned, “What we love isn’t the ‘golden age,’ but the era of abundant opportunities.” Many in the crypto industry have pondered how they would participate in this wave if they could go back ten years.

Should they hoard BTC? Become miners? Establish another Bitmain? Or join as early employees of BN? The best choices seem limitless. The past decade in the crypto world truly exceeded imagination, birthing legends and magnates within the industry time and time again.

However, the perennial topic in the Web3 world remains profitability, which is crucial for its development. When exchanges, market makers, VCs, project teams, and KOLs are all making money while most ordinary users continue to lose, it highlights deep structural issues within the market that are unsustainable in the long term.

Behind every “fancy way to lose money,” there might be users who stop using Web3 products, move away from VC tokens, and opt for memecoins that emphasize fairness and grassroots characteristics. This shift is a form of rebellion where funds vote with their feet.

Until certain Web3 ecosystem applications successfully establish value cycles, ordinary users may feel they have “nowhere to go.” Perhaps this turbulence is an inevitable part of Web3 development, as the crypto industry continues to forge ahead amidst exploration and discovery.

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