What is rug pull?

It involves malicious project developers withdrawing all funds invested in the project, leaving them illiquid. As a result, people and institutions investing in the project also suffer. Although rug pull is frequently seen in the cryptocurrency world, it is actually a fraud technique that can be encountered almost everywhere. How to apply rug pull? Malicious project developers launch a new token into the market, make it popular with various promises, and ensure that it gains a rise. Then, it attracts investors, and after a while, the price of the token declines as the fund of the project, whose price rises, is transferred to the developers' own wallets.

Malicious developers often target investors who may be willing to invest in high-risk projects to earn high returns. Therefore, investors should be careful before making an investment decision.

What are the types of rug pulls?

There are three types of rug pull: liquidity reset, block sell order, and dump. Liquidity reset; The value transferred by investors to the project disappears as a result of project developers withdrawing all liquidity from the liquidity pool. After this, the price of the token is reset and a grievance occurs. Liquidity reset is the most common rug pull method. Blocking the sales order; It is done with malicious code written into the project's smart contract. Malicious developers can prevent investors from selling their tokens by writing code to be the only party selling tokens. The investor who wants to sell TP (take profit), that is, profit, cannot carry out the transaction due to blocking when he wants to make the sale. Dump; is to rapidly reduce the price of the token. The price drops quickly as developers sell off the large supply of the token they created at a sharp pace. Dumping cases may occur after intense campaigns on social media. This is also known as pump and dump scam.

What can be done to prevent rug pull?

Investors can apply the following methods to protect themselves from rug pull: Research and examine the project in detail Pay attention to concepts such as unlocked liquidity and suspiciously high yield Checking that the project has been audited Checking whether there is a restriction on the sales order In addition to all these, researching developers and choosing projects whose codes have been reviewed are also moves that will protect investors.