CyralystHello everyone,
During my time on this platform, I've noticed a few misunderstandings regarding the tracking of token holdings. Many projects have been mistakenly called out for having their tokens held by insiders when they shouldn't. Here are a few tips.
Here are the most common mistakes and how you can avoid them.
Common Mistakes in Tracking Token Holdings
- Mistaking the Token Releaser for a Holder
- Mistaking an Exchange Hot Wallet for a Holder
- Mistaking a Liquidity Pool for a Holder
So how do we check these things?
1. Mistaking the Token Releaser Contract for a Holder Sometimes people check holders and see one "wallet" holding the majority of tokens, and it can quickly be labeled as one wallet controlling the token supply.
There are normally two ways that a token releaser contract is set up for a project: a) By having one smart contract holding all tokens with all vesting schedules coded into this one contract. b) By having multiple smart contracts holding each part of the tokenomics, with each vesting schedule coded into each contract.
How to spot this? Using a traditional EVM explorer, which is standardized across most explorers, you can identify this.
On the left side of the "wallet" address, you'll see a document symbol compared to the actual wallets below (please see picture). This indicates that it is a smart contract and not just a wallet. If you'd like to investigate further, you can click on the contract address. Next to the "transfers" button, you'll find a "contract" button where you can read the contract itself to figure out its purpose.
2. Mistaking an Exchange Hot Wallet for a Holder This one is usually easier to catch as most exchange hot wallets are labeled on most explorers. But when in doubt, use Arkham, Debank, or any other tracking tool to double-check.
If there is an abnormal number of transfers and millions of dollars spread across a vast amount of tokens, it is likely to be an exchange hot wallet. This wallet is the custodial wallet holding the exchange's users' funds when kept on an exchange. This is why we say "not your keys, not your coins," as you put your faith in the security of that exchange.
3. Mistaking a Liquidity Pool for a Holder Similar to the previous point, most explorers will have the DEX's name visible for these. In the event this isn't the case, just search for the wallet address using tools like Arkham or Debank.
A liquidity Pool and a CEX can look very similar so how to easily tell the difference?
Transactions into the exchange typically come through a smart contract, which essentially serves as your "deposit address." You don't deposit to the exchange's custodial wallet directly. Exchanges also like to move their tokens between different hot wallets.
I hope this text may be helpful and somewhat worthy of posting here. Please let me know if you like this kind of content or not. Show Less
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