Practice Safe DEX

We both know you're gonna buy memecoins, so do it safely.

It’s bull season again on the blockchain. Green candles are in the air, hype is on the timeline, and the screams of dying short sellers make sweet music in your ears.

This post is for those who are participating in the festivities by purchasing memecoins. For the unaware, a memecoin is a class of token with no intrinsic purpose other than to be speculated upon, powered by some sort of meme or cultural phenomenon. This is distinct from shitcoins (which also have no reason to exist, but lack the community/meme and are often preyed upon by bots and other PVP actors), and actual investments (which have a value proposition).

I’m not ChatGPT, so I’m not going to have some lengthy disclaimer about how you should consult an investment professional and yada yada. I will restrict my admonishment to the following points:

• Only put in what you are absolutely, certainly, willing to lose. If you can’t envision yourself literally setting that money on fire, it’s too much size.

• Don’t gamble with your rent money.

• Take profit at some point, this stuff is usually rather illiquid and you don’t want to be late to the exit.

• Don’t gamble-trade from the same wallet that holds your main token stack. Make a separate wallet for your degen trading.

With that out of the way, let’s talk how to buy coins and technical safety.

Spoiler: If you don’t care about checking for safety and just want the easiest way to ape, go to the bottom of the post.

For those who like to look before they leap, here we go.

First stop is confirming the token address and making sure you’re on the right blockchain. You should cross-check it between a few sources to be sure you have the right one. Anyone can make a token with the same symbol/ticker, don’t get fooled because the name matches. Some memecoins are deployed by the same team on multiple chains, be aware of that also.

Once you have the token address, we’re gonna check a few things. You need to make sure that:

• The token itself is not malicious

• The LP in the liquidity pool is not going to be pulled

• There isn’t a huge mass of tokens about to be dumped on you

Punch the address into rug.ai (currently in closed beta, my invite code will get a few of you in) and/or rugdoc.io. Rugdoc is more for sidechains, BSC shitcoins, etc, but is a great resource if it meets your needs. Failing either of those tools, look at it on Etherscan.

I’m going to walk through a demo analysis of ZynCoin ($ZYN) to show you the basics.

Rug.ai gives you a nice holders overview. Other tools like Parsec might do similar analysis, although I don’t know if they do cluster analysis.

What you’re concerned with here is making sure there’s not one or two addresses which hold tons of unlocked supply that’s going to get dumped on your head. Etherscan Holders tab of a token will show you similar info.

Devs hold a decent chunk of supply, but nothing too concerning from first glance.

Next let’s glance at the contract. We can see ZynCoin appears to have been deployed using Metadrop, a token-as-a-service platform. There’s always the chance that they snuck a modification into it, so let’s check similar contracts. This will compare the contract code to detect similar ones.

Change the match type to “Similar” then search. Since we got hits, compare the diff.

The diff shows us there’s no difference between the two other than the ID hash put in by Metadrop. The contract itself is probably good to go.

Now, if we’re satisfied, let’s go to the last step - figuring out where this thing lives. You only need to check this explicitly if you want to examine the liquidity in detail.

If so you’re probably best searching through the top token holders until you find the pool. The metadrop token has its own attached Uniswap V2 pair, but not all tokens will have this. Looking at the pool, we see it has good liquidity for a memecoin, so you won’t get stuck in the position. You can also look it up on v2.info.uniswap.org to see more details.

The last thing to be concerned with, related to liquidity, is price impact.

DO NOT SET HIGH SLIPPAGE WHEN TRADING ILLIQUID COINS.

If you up your slippage, you’re going to get blasted by MEV bots unless you’re using a private relay like Flashbots Protect, or an MEV-protected protocol like CowSwap. A well-capitalized bot could swing one of these pools massively without even having to use flash loans.

Let me repeat myself - if you see high price impact, do not automatically jack up your slippage! Use an MEV protection method, and review the liquidity carefully so you can be sure you’re sized appropriately for the token. If you’re not using an aggregator be sure you’re swapping on the right platform and through the right pool. Liquidity for these tokens usually only lives in one spot.

Finally, if everything looks good and you’re ready to buy, I recommend using swap.defillama.com.

LlamaSwap is an aggregator of aggregators, so you can always get the best price no matter where the tokens live or the optimal path. Punch in the token address, select the best price or your favorite protocol, and let her rip.

Sometimes the token project or the rug protector tool will provide links to a DEX, which you can follow at your leisure. I would advise against using swap widgets built into the project’s site itself, though, since those would be a good target for malicious behavior. It’s safer to use a trustworthy third party.

And with that, you’re weapons free. Ape away, and may the odds be in your favor.

Stay safe out there, anon.