A crypto investor recently discovered an unfamiliar token labeled “ETHG”

A crypto investor recently discovered an unfamiliar token labeled “ETHG”

A crypto investor was left baffled after logging into his Uniswap-linked wallet to find an unfamiliar token, labeled "ETHG" for Ethereum Games, in his balance with a valuation exceeding $420,000.

The investor, who preferred to remain anonymous, confirmed that he had never purchased or interacted with this token, leading him to suspect a scam.

According to Blockaid, an on-chain security platform, the token was flagged as malicious. The token price, displayed at $0.211 per unit with a balance of 2 million ETHG, might appear substantial at first glance. However, this displayed value is essentially meaningless since the token lacks any real liquidity.

The price is calculated by multiplying the last recorded trade price by the token balance. This can be easily manipulated by scammers through wash trades or artificial price setting on illiquid tokens to create staggeringly large but ultimately useless token valuations.

The investor reached out to Vet (@Vet_X0), a validator on the XRP Ledger (XRPL), for an explanation.

"This is unfortunately the downside to blockchains that handle everything with smart contracts like ETH. Do NOT, under any circumstances, interact with these tokens or the sites linked with it," explained Vet.

"You're risking dangerous approval exploits to empty your whole wallet (infinite token approval). Interacting with these kinds of tokens on Ethereum opens the door to dangerous exploits."

He further highlighted the difference in architecture between the XRPL and Ethereum. While both handle tokens, the XRPL has native support for issued tokens without relying on smart contracts.

"On the XRPL, you must explicitly trust a token issuer through a trustline before receiving any token. Additionally, users can easily zero out or remove trustlines at will without granting token-level approvals or exposing their wallet to contract calls."

This stands in contrast to Ethereum, where tokens are automatically sent to wallets without permission and users might be tricked into engaging with a malicious smart contract upon attempting to swap the token, potentially leading to the drainage of their entire wallet.

"This is something the creators of XRP had the foresight to mitigate with the trustline system," added Vet.

"It's a small but crucial difference that can have enormous consequences, especially in the face of scams."