One of the benefits to DeFi and trading onchain is the instantaneous availability of new tokens. With Slingshot 2.0, you can trade tokens on launch day, as soon as less than 1 minute after launch. Newly launched tokens can offer high returns and innovation, however they may also carry risks. This guide will help you trade safely.
Risks to Look Out For
Honeypot Tokens: You can buy but cannot sell the token, trapping investors and siphoning investor funds.
Editable Contracts: Some scam tokens’ smart contracts can be modified by developers to freeze funds, stop withdrawals, or add other malicious rules.
High Tax Tokens: Hidden transaction fees (also known as taxes) that drain your balance with every trade.
Concentrated Ownership: The creator holds a significant portion (as high as 99%) of the supply. This setup allows them to sell their entire position after luring investors, leaving others with a worthless token.
Verification Limitations: “Verified” tokens on Slingshot are vetted by the community, not by an authoritative source, and can still pose risks.
Best Practices for Safely Buying Tokens
Like with all investments, you should do your own research before buying any crypto token, especially those that are new and unfamiliar. Research the token’s contract, website, liquidity, trade volume, developer team, and audit information. Look out for the risks listed above. Not all upgradeable tokens or those with taxes are scams, but these features are often used by scammers. Avoid tokens that seem too good to be true or lack information.
Trading Illiquid Tokens: Understanding Slippage and Price Impact
New tokens often have limited liquidity relative to more established tokens. Tokens with low liquidity can experience significant price changes when traded, resulting in a trade executing at a significantly different price than the current market rate. When this price change is caused by broader market movements, it is known as slippage. When caused by your own trade, it is known as price impact.
Before buying a token, check its total liquidity (found under the Stats section of the token’s page) and avoid low liquidity tokens if you are not comfortable with the risks of slippage and price impact. Trading smaller amounts can help minimize price impact.
Slingshot sets a default slippage tolerance setting which limits the acceptable price change for a trade. If the final amount falls above or below the limit, the transaction will fail. When trading tokens with low liquidity, the slippage tolerance may need to be adjusted higher for trades to go through. Keep in mind that this also expands the range of output amount you are accepting.
I’ve Been Airdropped a Token: Is It Legit?
It’s common to receive unsolicited tokens in your wallet. While these may look legitimate and valuable, they are often scams.
If you are unsure whether a token is legitimate, research it thoroughly. It is possible, although unlikely, that you received a real airdrop unexpectedly.
You can spam or unwanted tokens cluttering your wallet so you can focus on tokens that matter and avoid accidental interactions with scams. Hiding tokens removes them from your account balance and PNL calculations, giving a more accurate picture of your portfolio.
Open your wallet and navigate to your token list.
Long-press the token you wish to hide.
Select “Hide from balance” to remove it from your visible balances.
For additional tips and guides, explore our Help Center or reach out to our support team.