A #RugPull is a common scam in the cryptocurrency industry, especially in projects related to decentralized finance (#DeFi) . It occurs when the developers of a project suddenly abandon the project, taking investors’ funds with them. The term “rug pull” can literally be translated as “pulling the rug from under one’s feet”, which illustrates the surprise and losses suffered by investors.

*Types of rug pulls:

1- Liquidity withdrawal

Developers create a token, list it on a decentralized exchange (DEX) such as Uniswap or PancakeSwap, and attract investors with promises of high returns. Once enough money has been raised, they withdraw all liquidity from the pool, making it impossible for investors to resell the tokens.

2- Token dumping

Developers hold on to a large amount of the project’s tokens. Once their value has artificially increased thanks to to speculation or misleading marketing campaigns, they sell their tokens en masse. This causes a sudden collapse in the price, leaving investors with tokens that have become virtually worthless.

*Warning signs of a rug pull*:

-Anonymous or unidentifiable team: If the project’s creators do not reveal their identity or qualifications, this is a red flag.

-Lack of technical transparency: A contract that is intelligible or audited by little-known firms may contain intentional flaws.

-Exaggerated promotions: If a project promises unrealistic returns or attracts investors with overly aggressive marketing, caution should be exercised.

-Sales restrictions: Some projects integrate features that prevent or limit investors from selling their tokens.

-Suspicious growth: A rapid and unexplained increase in the token’s price may be a sign of manipulation.

How to avoid a rug pull?

-Depth Research (DYOR): Analyze the team, documentation...