Editing Honeypot

**Honeypot** is a scam token that lets buyers purchase it but blocks or prevents them from selling, so the money paid in stays with the creator.[^1] Unlike a [[Rug pull]], in which creators abandon a token after taking its liquidity, a honeypot's price and balances can look normal while sales fail.[^1]

## How it works
### Freeze authority
On [[Solana]], a token's mint can keep a freeze authority. Only a mint that still has one can freeze token accounts, and a frozen account cannot send, receive or burn tokens until it is thawed.[^3] Helius notes the freeze authority can be used maliciously to make a honeypot in which buyers are locked out of selling because their accounts are frozen.[^2] Once the freeze authority is set to none it is removed permanently and the mint's accounts can no longer be frozen.[^7][^3] See [[Mint authority]].
### Token extensions
Solana's Token-2022 program adds optional extensions chosen at mint creation, among them transfer hooks, which let the issuer run a program on every transfer, transfer fees set in basis points with a maximum, and a permanent delegate.[^4] In September 2024 a [[Jupiter]] contributor reported that a token called RED, which had a permanent delegate, burned a buyer's tokens seven seconds after the swap; PeckShield said the feature lets a designated party burn or move tokens held by any account of that mint.[^5]
### Sell restrictions in the contract
On other chains the restriction is written into the token contract. SQUID, a 2021 BNB Chain token themed on *Squid Game*, used what an analyst called an unusual "anti-dump" mechanism that stopped many holders from selling; sales were allowed only when buyers outnumbered sellers two to one.[^6]

## Detection
Explorers show a Solana token's authorities; on Helius's Orb explorer the absence of a freeze authority row means the token has none.[^2] Launchpads such as [[pump.fun]] and [[LetsBonk]] set the mint authority to null for every token they create.[^2] Cointelegraph advises testing a small sale before buying in size.[^1]

## Examples
- SQUID: buyers reported they could not sell; the creators appeared to cash out more than $3 million before the token collapsed on 1 November 2021.[^6]
- RED (Solana): tokens burned from a buyer's wallet via a permanent delegate, reported on 3 September 2024.[^5]

## Timeline
- 2021-11-01: SQUID collapses after holders find they cannot sell[^6]
- 2024-09-03: RED permanent-delegate burn reported by a Jupiter contributor[^5]

## See also
- [[Pump and dump]]
- [[Wash trading]]
- [[Bundling]]
- [[Sniping]]
- [[Memecoin presale]]
- [[KOL]]

## References
1. [What is a honeypot crypto scam and how to spot it?](https://cointelegraph.com/news/what-is-a-honeypot-crypto-scam-and-how-to-spot-it), Cointelegraph, n.d.
2. [How to Find Solana Mint, Freeze, and Update Authority](https://www.helius.dev/docs/orb/explore-authorities), Helius, n.d.
3. [Freeze account](https://solana.com/docs/tokens/basics/freeze-account), Solana documentation, n.d.
4. [A Developer's Guide to Token Extensions on Solana](https://solana.com/news/token-extensions-developer-guide), Solana Foundation, 2024-01-24
5. [Scammers have found a way to burn tokens from inside Solana wallets](https://cointelegraph.com/news/new-solana-scam-burn-tokens-from-inside-sol-wallets), Cointelegraph, 2024-09-04
6. [Investors call scam after collapse of new cryptocurrency Squid](https://www.nbcnews.com/tech/tech-news/squid-game-crypto-collapse-pushes-investors-cry-scam-rcna4399), NBC News, 2021-11-02
7. [Set authority](https://solana.com/docs/tokens/basics/set-authority), Solana documentation, n.d.