What is a rug pull? Biggest rug pulls & how to avoid them
If there’s a bright side to these events, it’s that they’ve informed people on how to identify and avoid NFT scams more effectively. In most cases, this occurs when founders and their teams dump their assets rapidly, ultimately devaluing the token and exploiting the profit created from investors buying the cryptocurrency itself. An example being where a crypto project that promises to donate funds, but chooses instead to keep the funds. Generally, once the prices hit a certain ceiling, the developers will quickly transfer the funds out of the ecosystem and disappear entirely. Those who invested in the project weren’t able to reach the developers and were never given anything they were promised. You only have to check for the signs before investing in a project.
Another way to pull the rug is by disabling buyers’ ability to sell. Malicious actors can add code to their token’s smart contract, which doesn’t allow users to sell back their tokens on DEXs. Knowing the signs of a potential rug pull can save you a lot of financial dilemmas. Unless you’re an experienced trader who’s spent years in the game, avoid venturing too deep into the DEX space.
Not surprisingly, the scammer ends up with more ETH tokens which he transferred to other accounts and left the pile of useless TMPL tokens remaining in his account. Scam token creator adds liquidity of the newly hyped up TMPL token to a DeFi platform such as Uniswap . This month we highlight podcasts about a get-rich-quick scam, a fraudulent charity, and a hijacked social media account from AARP's The Perfect Scam podcast.
OlympusDAO is a decentralized financial currency that is backed by bond sales and fees from liquidity providers. More than €4 billion was spent in dozens by investors from different countries between August 2014 and March 2017. Some of the investors were from Hong Kong, Palestine, Norway, Yemen, Pakistan, and Canada, among others.
Investing anywhere, whether you're using regular stock exchanges or crypto, is risky. ONLY invest money that you can afford to lose, and invest safely, starting with this article on learning how to invest. It is a tactic mainly applied to cryptocurrencies or tokens with a low market capitalization and low liquidity. The rates of these cryptocurrencies or tokens are easier to manipulate. For many people, the mad rush into cryptocurrencies has evoked feelings of the Wild West.
In either case, this is done to siphon all the funds from the community that bought into the project. Rug pulls have been particularly common in decentralized finance, or DeFi, projects that aim to disrupt services such as banking and insurance. NFTs, or non-fungible tokens, that provide digital ownership of art and other content, have also been involved in rug pulls.
If the white paper is written in an ambiguous and unclear manner, it is often a red flag that it might potentially be an SquidGame exit scam. An external audit is an indicator of the smart contract soundness, but not necessarily of the project’s soundness. A rug pull happens when a developer creates a cryptocurrency token with the intent to run away with investors' funds. Within the context of the cryptocurrency industry, phishing scams target information pertaining to online wallets. Specifically, scammers are interested in crypto wallet private keys, which are the keys required to access cryptocurrency.
DEXs, as opposed to centralized cryptocurrency exchanges, allow users to publish tokens for free and without audit. Token creation on open-source blockchains such as Ethereum is also straightforward and free. The developer gives themselves a bigger portion of the project.