The cryptocurrency market has grown quickly, with incredible growth over the last 11 years. While the industry has brought many positive things to investors, as with any other sector, however, it also has its downfalls. Numerous scams, hacks, and attacks have led to billions of dollars of cryptocurrency losses over the past few time, with one of the most recent types of fraud is carpet pulling. Let’s discuss further what is rug pull and other aspects.
This is very typical of the DeFi ecosystem, which has become quite popular in recent years. Unfortunately, the Decentralized Exchanges (DEXs) suffer from these attacks due to their design that lets anyone utilize the platform without limitations.
What Are Rug Pull?
Rug Pull is a scam committed in crypto-assets where a developer of crypto assets creates a fake business and then disappears with the money he received from investors.
It is the Defi platform is the one most susceptible to this type of malicious intent. It is so unregulated that it is vulnerable to attacks. As a retail investor, you areare at risk of losing all the funds you have invested or collected through the Defi project. One of these risks could be that of the Rug Pull.
This Crypto universe is home to a variety of Smart Contracts, DEFI, DEX, DApps, Blockchain-based Smart Contract projects, which have created new tools for everyday people to invest and expand. The desire for financial freedom has never seemed more real than now. This incredible world of cryptocurrency is bringing new hope, the new power in the hands of the human race to learn and alter their fate.
However, with these real promises, there is also a risk that could destroy the dreams of those who don’t be accountable for the investment decisions you make. Some people would like to ruin your life with their egocentric goals of making quick money. Therefore, they are unwilling to use this insecure cryptocurrency market to gain an advantage.
Therefore, they do not want to use this unsafe Cryptocurrency market to benefit. Because there are a lot of factors that confuse the price movement on the Crypto market, one of which is only by making news in the media can move psychologically the traders. That is what is meant by How can FOMO affect the market.
How Do Rug Pull Work?
The DeFi ecosystem grants developers the ability to create their random tokens on Ethereum and then post these on DEX. However, some developers take advantage of this opportunity to fool buyers by creating minimal or no value tokens and then listing them for sale on the DEX platform.
If they are planning to put tokens up in exchange, the team will trade the tokens in exchange for ETH during a token sale. So, investors purchase ETH tokens with the hopes that they will appreciate them to trade them in exchange to get more ETH. But, the team snatched their ETH and vanished and left the investors with tokens with no worth.
Rug Pull is when a particular person (or group) of persons take out a liquid pool. This means that traders cannot trade fake tokens.
Tips to Avoid Crash from Rug pull
Pulling Monitor liquidity The most effective method of getting a brief review of the legitimacy of a token is to check its liquidity. The most authentic projects have billions or even millions in liquidity. Also, look into whether there is a time limit for betting. Genuine projects will store massive quantities of their tokens over prolonged periods. In addition, the tokens locked up cannot be taken directly from liquidity pools, which makes the project less prone to being scammed.
A skyrocketing price If a simple project quickly increases in value, there’s a reason to be concerned about changing. The objective is to get the other buyers and you by FOMO. If you notice the value of a projected increase dramatically and you are not sure why to ask.
Do you know if there is any news regarding the listing on the stock exchange? If you can’t come up with a reason to doubt it, you need to be cautious to ensure that nothing bad transpires. Do background research. See the objectives of the project. Do you have a native usage case? Then, please take a look at the team that is working on it. Are they well-educated? Background?
Check their social media accounts and find out what others have to say about the members of the team. Are they popular with their followers, or is it just random posts discussing prices? The legitimate projects don’t have anything to hide, and they must interact with their communities to establish an excellent reputation and gain the community’s trust.
You must educate yourself and be careful not to invest in the latest Defi projects without thinking. Do not just go after your passion for earning huge returns within a short period of time, and you could even suffer losses on every asset you own.
These malicious hackers profit from your FOMO and get-rich-quick tendencies to trap you often. However, if you’re a shrewd and prudent investor who has a number of questions for senior citizens and then takes calculated risks.