Less than 24 hours after PayPal’s announcement of its entry into the stablecoin space, the Ethereum network is being flooded by fake Paypal stablecoin token operators trying to ride on the hype.
The digital payments and fintech giant announced the official launch of its Ethereum-based stablecoin USD (PYUSD) yesterday. PYUSD is an ERC-20 token which will be pegged to the US dollar at a fixed rate of $1. It will be primarily used as a bridge between fiat currencies and web3, enabling conversion of any of the platform’s listed digital assets to and from PYUSD.
While the token is yet to be fully launched, some scammers are already trying to trap unsuspecting users. The bait is to issue a token, name it “PYUSD,” add liquidity with Ether or another token and offer it to users on decentralised exchanges like Uniswap.
This is possible as anyone can call a smart contract and issue tokens on Ethereum (or other blockchains) for a few bucks. Also, the presence of these decentralised exchanges means tokens can instantly be issued, supplied with liquidity and traded immediately.
Most of the supply of these tokens is likely purchased by their creators after issuance, giving the illusion of a trendy token while being a honeypot in reality. Honeypot is a crypto term which means a situation where an investor purchases a token they cannot sell and convert.
Also, some developers go the extra mile to pull all liquidity from the fake tokens hours after issuance, causing prices to drop 100% and leaving buyers in a loss.
Fake PayPal tokens
Per data from DEXTools, over 66 fake tokens have popped up on networks such as Ethereum, BNB Chain, Base, and others as at Tuesday morning. The majority of these have been floated on Ethereum, where the original PYUSD exists.
The largest imposter PYUSD token, minted on Ethereum, has gathered $2.6 million in trading volume since its inception, just minutes after PayPal announced the launch of its stablecoin. Despite surging more than 30,000% in the first eight hours, the token has since plummeted more than 66% from its all-time high.
Another token opted for the name “PepeYieldUnibotSatoshiDoge.” The imposter token reportedly gained over 3,000% in four hours.
How to detect fake PayPal tokens
This fake PayPal token craze is in part due to PayPal and Paxos’ own failure to include the official token address for PYUSD in their respective announcements.
But now, Paxos has released the official smart contract for PYUSD and the corresponding token address and GitHub repository. According to etherscan, the max total supply of PYUSD sits at 26.9 million.
Importantly, the real PayPal USD token can be verified at this contract address. Also, PayPal stated that PayPal USD could only be sent between verified PayPal and other compatible wallets, making it extremely unlikely that any of the tokens listed with the same ticker on UniSwap or any other decentralised exchange are the real thing.
Unless investors are capable of auditing smart contracts themselves, they often will not find out these fake PayPal tokens are a honeypot until they try to sell their holdings. In view of this, it is important to pay rapt attention and be cautious.
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