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Why you need to know 'Rug Pull' before investing in Liquidity pools.

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Sandeep
@sandeep126
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3 min read

Are you crypto investor? Do you like to invest in low market cap coins? Do you believe in long term investment? Do you love making money through Liquidity pools provided by many DefI crypto projects?

Then, literally you need to learn about 'Rug pull' which could be taken seriously for investors. Let's say, I am investor who invested 50k USD in newly launched cryptocurrency token .i found my investment grew to 10x in a month and 100X in year But one day i wake up and saw my portfolio and put me shocked as the value of token went to Zero in just 1 day.
This is called 'Rug Pull'. it can be done in many ways :

Rug Pull is simply a way to steal your invested fiat or valuable token either by developer or crypto creator and run away forever .
Rug pull is somehow can be known as yanking liquidity too.

There are many ways to implement Rug Pull :

  1. In example, i have bought worthless strawberry token with the valuable token called BNB binance in the project called fruit.finance( DeFi) . in the liquidity pools , i bought 1000 strwaberry token with my 1 bnb binance token but the dev of the project started pulling out valuable token and left the pools with worthless strawberry tokens or somehow you are blocked trading in the liquidity pools.

2 . In Example, A big company started selling their company share by creating worthless token which was promoted with hype of gaining thousand times profit in the near future as company will start paying dividend for just holding the tokens. after few months, company collected all the valuable tokens like ETH ,BNB,BTC in the exchange of worthless company token and suddenly stopped the investor for not trading their worthless token and Dump all its worthless token on the exchanges.

Common Sign of Rug Pull project

  1. Liquidity is not Locked : Many Finance project safely locked their liquidity with third party wallet . its depends also whether it locked for 2 months or 5 years etc. if such project has not have this locking strategy then you should avoid investing your valuable funds.

  2. WHALE Manupulation: If we noticed either on Ether scan or Binance scan about the following project, having many big token holders which can directly impact the price value of the token by dumping on the market .

  3. No Audit: Recently we see trend about Audit the project with trustful and well know company about the project .like Certik which i believe set a great example of audit the smart contract project. if such project where you think to invest has no audit sign then better you should exit.

  4. No Social Media or website: Some lucrative project wants to make quick money by just creating token on ethereum ,binance or many other blockchain but when we investigate little then we found there are no social media or website link or when we click the link then it shows error. avoid such project.

  5. No MultiSig wallet: If the developers owns single wallet for all valuable tokens then chances are high to steal your fund.

In short, Cryptocurrency and DeFi is still not regulated by top countries where if you are the victims of Rug Pull has no support from government and your valuable got lost forever.
Do not believe on making quick decision by just following Elon Musk tweets or Mark Cuban or others .
Their tweets is not about held the responsibility of your investment but about creating hype to make the market bullish and make quick money after sudden dumps.

Posted Using LeoFinance Beta