Rug Pull Is A Scam, Here's Why It's Explained!

Rug pull is something that you have to understand first before entering the world of Crypto that is being hype at the moment. Investing using cryptocurrencies can actually generate huge profits in a short time.

However, this is certainly in line with the risk of fraud or property theft. Rug pull is one of the most common ways of cheating.

Knowing what rug pull is is one way to prevent this form of fraud. There are many ways to avoid the risk of being dragged into this. Come on, see the complete information about what rug pull is.

Rug Pull Is?

The definition of rug pull is a case of fraud that occurs when a developer or owner leaves a project by taking capital from investors. This act is a form of fraud involving the creation of fake crypto.

This is what happens when a group of developers takes all the liquidity. This results in lost opportunities for merchants to sell their tokens or tokens becoming worthless.

For example, a trader wants to sell Ethereum tokens. However, selling was not possible due to the lack of Ethereum in the liquidity pool.

Rug pull is the most common case of fraud in decentralized finance (DeFi) projects and decentralized exchanges (DEX).

In this ecosystem, anyone can create a token, list it on the DEX, and pair it with a number of well-known assets such as Ethereum.

In contrast to the DEX ecosystem, centralized exchanges are considered safer from the risk of loss pull. In a centralized ecosystem, each token owner must obtain prior authorization to prevent fraud.

Rug pull is basically a reminder for anyone looking to get into the world of cryptocurrencies. Risks and dangers are always present in the business world. Therefore, it is important for you to understand how to identify and understand this problem.

Sample case

Rug pull is a risk that can occur at any time in any opportunity that brings big profits. Here are some examples of cases that attract the attention of many traders.

Squid Game Tokens

As a connoisseur of the Netflix series, surely you know the name Squid Game, which is a popular series in 2021. In addition, one of the crypto assets named SQUID has managed to attract the attention of traders. Especially since the name's popularity on social media, there has been a huge price increase.

There was a 23 million percent increase from one cent to $2,861.80. However, it didn't take long for a sharp drop to $0.003 to follow. Many traders have realized that the SQUID token is a scam.

Amplyfi. quarta

Another example of rug pull is Amplyfi.money, which took 2,500 Ethereum from investors. A lot of information has surfaced about this, one of which is the identification of the development team of one of its members.

Information says that there is a risk of wallet vulnerability and the development team has received a number of threats. Therefore, they decided to stop the project.

How to Avoid Rug Pull

From the explanation of the many cases above, you definitely understand how rug pull is a fraud that brings a lot of losses to many people. So, you need to know how to avoid it.

Research

Avoiding rug pull is to stay away from areas that could be the target of irresponsible parties. Research is one way to avoid rug pull.

You have to be sure who the people who support the project are. Knowing the developers involved in the project will help to get some information. Regardless of the risk of fraud, knowing who is involved will help evaluate the system and project plans over the long term.

In fact, not everyone involved in the project crypto is an expert in his field. If the project is managed by knowledgeable people from the cryptocurrency world, this can bode well.

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Check the Liquidity Value of the Project

Also, tips on how to avoid it to check project liquidity. you need to see how much liquidity the developer has in the project. This can be done by checking who has the highest tokens.

You can conclude many things with this information. In general, project liquidity will be distributed among multiple users regardless of user identity. However, a potentially deceptive project is a liquidity spread that few people own. 

Take advantage of the Github Platform

Github is a platform for developing code-based DeFi projects. Through Github, you can check the project's existence and follow its development activity. If there is no active activity, this may be a sign of rug pull.

Basically, this issue is a blatant scam in which the developer is manipulative. Instead of being easy to spot, the rug pull is a tricky trick to spot. But that doesn't mean you can't prevent it.

If you follow a lot of advice and always be critical, it will help to avoid this case. So always make sure to do your research.

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