Rug Pulls: How Does It Work and How Does This Scam Work?


The cryptocurrency market has grown quickly, with incredible growth over the past 11 years. While the industry has brought many positive things to investors, as with every other business, however, it also has its downfalls. Many hacks, scams, and attacks have led to billions of dollars of cryptocurrency losses over the past few times, with one of the latest methods of fraud is rug pulls.

This is a common occurrence in the DeFi ecosystem that has become extremely popular in recent years. Unfortunately, DEXs (DEXs) suffer from these attacks due to their design which lets anyone access the platform with no restrictions.

What Are Rug Pulls?

Rug Pull is a scam committed within the crypto-asset market. A developer of crypto assets develops a fake venture and then smuggles away the money he received from investors.

The Defi platform is among the most susceptible to this kind of malicious intent and is so unregulated that it is vulnerable to attacks. As a retail investor, you could risk losing all the funds you have invested or collected through the Defi project. One of these risks could be one of them being the Rug Pull.

This Crypto universe is home to a variety of Smart Contracts, DEFI, DEX, DApps, Blockchain-based Smart Contract projects, which provide new tools to everyday people to invest and expand. The desire for financial freedom has never seemed as real before. The amazing world of crypto is bringing new hope, a new power in the hands of humankind to change their fate.

However, these real promises come risks that could even ruin the dreams of those who don’t be accountable for cryptocurrency investing decisions. Certain bad actors would like to cause you to suffer by pursuing their selfish goals of making quick money. They are unwilling to use this insecure cryptocurrency market to gain an advantage.

How Do Rug Pulls Work?

The DeFi ecosystem allows developers to create their tokens using Ethereum and then put their tokens on DEX. However, certain developers use this privilege to fool customers by creating tokens that have zero or little value and then listing their tokens for sale on the DEX platform.

If they plan to put tokens up in exchange, the team will trade the tokens in exchange against ETH through an exchange. So, investors purchase ETH tokens hoping that they will appreciate them so that they can trade them to get more ETH. But, the team snatched their ETH, went missing, and left the investors with tokens with no worth.

Rug Pull occurs when a single person (or group) takes out the pool of liquidity. This means that traders cannot trade fake tokens.

Strategies to Avoid Traps from Rug Pulls

Pulling Monitor liquidity The most effective method to gain a quick review of the legitimacy of a token is to examine its liquidity. The most authentic projects contain billions or millions in liquidity. Also, check if there is a time limit for betting. Genuine projects will store huge quantities of their tokens over lengthy durations. The tokens locked up cannot be taken directly from liquidity pools, making the project less likely to be a scam.

Value skyrocketing When a project of a modest size increases in value suddenly and you’re worried about changing. The objective is to get the other buyers and you by FOMO. If you notice an item’s value skyrocketing, then find out why.

Do background research. Check the project’s objectives. Do you have a native usage case? Then, take a look at the team behind the project. Are they well-educated? Background? Check their social media profiles and find out what others have to say about the members of the team. Are they popular with their followers, or are they just posting random posts discussing prices? The legitimate projects don’t have anything to hide and need to interact with their customers to earn an excellent reputation and gain the community’s trust.


It is essential to know yourself thoroughly and stay clear of investing in the latest Defi projects without thinking. Do not just go after your passion for earning huge returns in a short amount of time, and you may even face losses on every asset you own.

These malicious hackers profit from your FOMO and get-rich-quick tendencies to trap you often. Finally, you’ll be able to protect your assets and rest comfortably.

Leave a Comment

Your email address will not be published.

You may also like


VR Founder Says Bitcoin Is Ponzi Scheme


The person who started the VR field stated that Bitcoin is merely a component of the Ponzi scheme, and not anything else since it’s lucrative for early investors, and less so for late Investors.

In an interview on The Lex Fridman podcast, the founder of Virtual Reality Field, Jaron Lanier, spoke about his negative opinion on bitcoin.

As per Jaron, Bitcoin is profitable for those who invested for a long time or early in the process. Early investors make massive profits, while other late investors made less money.

Jaron’s a Computer scientist, the way he approached it was from an engineering point perspective and stated that Bitcoin’s network with wealthy investors to investors with low income as well as gambling, is closely linked to it. He stated that Bitcoin is a major part of the market, but it’s…

View More Article

Psychology Relationships in Cryptocurrency Trading


Psychology Relationships in Cryptocurrency Trading – Each time you complete another Bitcoin transaction, you’ll be influenced by a strong inner belief system. When you click the button to buy or sell and confirm your goals and perception of your self-worth.

If you get a dose of news that is bullish (bearish) news your financial situation, as well as your self-esteem, could impact. You may overreact and cause you to trade excessively or hesitantly. A fundamental comprehension of the mentality behind Bitcoin trading can help you ensure that your investment and trading strategy is stable.

What is the Psychology In Trading Cryptocurrency?

The psychology of trading is an internal condition of self-awareness, determination, self-esteem and self-control, and a sense of accountability. It affects all aspects of your investment and trading activities and your decisions.

The psychology of…

View More Article

Elon Musk Urges Dogecoin Community To Run Own Nodes


In the past, a DogeCoin developer advised the community to upgrade the node to decrease Doge transaction fees, and also to expand the efficiency of the network.

On October 13, 2021, Shibetoshi Nakamoto ( Billy Markus) the developer of DogeCoin who has left the DogeCoin project, is no longer part of the DogeCoin project, took to Twitter to ask members of the DogeCoin community to help support the DogeCoin network with the latest update of nodes.

Shibetoshi Nakamoto ( Billy Markus)

Shibetoshi tweeted that he would like to maintain the transaction and data of the blockchain system, the running of nodes is a crucial aspect. And it would be better if DogeCoin community members upgrade their nodes to 1.14.4.

Shibetoshi stated that 1.14.4 nodes will be able…

View More Article

Russia Has No Intention To Ban Crypto Like China


The Deputy Finance Minister of Russia confirmed that they are not gonna ban Crypto and also they believe that Blockchain has better potential in the future of Russia.

In the past, many politicians of Russia trolled crypto and crypto related businesses and their statements were showing an indication that the Russian government may ban crypto permanently. But the latest statement by a Russian official gives a better vibe for the crypto community of Russia.

According to a local media report, The deputy finance minister of Russia, Alexey Moiseev, stated that they have no plans to ban crypto totally like China. further added

“At the same time, citizens can buy (cryptocurrencies) and use wallets outside the Russian Federation. So it will remain so, I think. There are no plans to change anything.”

So people have…

View More Article