HomeCrypto blogWhat is a RUG PULL in Crypto? | Rug Pull Explained

What is a RUG PULL in Crypto? | Rug Pull Explained

Have you ever invested in crypto and lost everything because the value just went from you 0 up to 500 and maybe just came back down to 0? Rug pull is typically carried out by ruthless con artists who create hype around their coins before abandoning the project and scurrying off with the money. The majority of these cryptocurrencies operate on reputable utility blockchains like Ethereum or Binance Chain.

Have you listened to a lot of the news and heard a lot of FOMO people talking about a particular coin and how it’s gonna go up a thousand times ten thousand in the next couple of days you buy into it and it goes to absolutely 0 after like 15 minutes on the market. Well, then you’ve been the victim of a rag pull.

In this article, we’re going to discuss rug pull. Now unfortunately it has become very common in the crypto space for people to be victims of a rag pull.

What is a Rag Pull?

Think about it this way you’re standing on a carpet mat rug whatever it is and you have that pulled out from under you then what’s gonna happen you’re gonna fall probably face down, get hurt that type of thing in the crypto space what that means is that you’ve bought into a particular cryptocurrency and the people who were the developers they’ve actually taken that initial investment as you’ve bought those coins. They’ve basically taken what was there to stop anyone from withdrawing and disappearing. 

It is theft by the owners of the cryptocurrency what do they do they abandon the project and steal the investor’s money. So for a lot of these projects to actually gain momentum they need a lot of people to buy into them. 

Crypto Faucet
What are Faucets in crypto?

They create a lot of hype around a particular coin and people then buy into it. When it launches people go and they buy like ten thousand or a hundred thousand or a billion coins with the hope that this will move up ten times in value they can quickly sell and they can get up but what usually happens is that within the first 10 to 15 minutes the value will shoot up because of everybody buying into the coin and then these guys what do they do they’ll close the telegram groups they’ll close the WhatsApp groups that they have everything disappears and then you’ll find that the value of the coin within like five minutes it just drops down completely and no one hears from them and these guys who you’ve actually bought the coins from they’re gone.

Now you’ll predominantly find drug pools on dexes or decentralized exchanges and it’s very simple because these types of exchanges allow users to list tokens for free without any ordered process or anything like that. So if I want to create a cryptocurrency I can go to dex and list my coin and then go and create a telegram group and a Twitter account and create a lot of hype around this coin. I will make great promises for all this type of thing so with all of that we have to then ask the question well how do we keep ourselves safe when it comes to these rug pulls and how do we actually identify a rug pull?

How to identify a Rag Pull?

I’m going to give you a couple of tips on how to identify a rag pull, it’s going to have a similar layout in terms of its coin in terms of what it does to many other cryptos out there the next thing you want to check is the liquidity, in other words, the amount of value in tokens that can actually be traded. You also need to go and check proof of social authority in other words good pro projects will always advertise themselves, they don’t need hype to sell the project. 

Remember every crypto that’s out there what should it do it should be solving a problem that currently exists in the space and that’s what makes it valuable. Check out the white paper this is very important because this is the document that provides you with all the info that you are going to need regarding the project. Now if this white paper is less than 15 to 20 pages then you need to say listen there’s a red flag we need to stay away here is not right and then you can also use a website like rug.io where you can pop this project in there and actually have them inspect the project for you. Now, this is important because sometimes a lot of these projects have not been identified as a rug pull but when someone becomes a victim of that they can always send that info and it gets listed on their site. What you can also do is check out a site called tokensniffer.com this can help you find if two tokens are very similar and if the two tokens are almost identical to one another because if that’s the case again here’s another sign that it could be a rug pull. You also want to check the wallets via block explorer. 

Now this is important because tell me when I say this if more than 20 of the tokens are held by one wallet right or the top 10 wallets hold more than 20 of the tokens then that’s a problem. Why is it a problem because the whole idea behind the rad pool is that one person can sell all their tokens and crash the price? Remember these guys are here to make money and make quick money from you unfortunately total value is locked this relates to the total dollar amount of coins and tokens invested into the project. So folks that’s what a rug pull is that is how you can identify a rug pull and stay safe. If you use these guidelines it’s gonna help you just differentiate between a coin that has a valuable future and one you can invest in as opposed to one that’s just gonna cost you money.

Rug pull is typically carried out by ruthless con artists who create hype around their coins before abandoning the project

Consider these 5 things when buying a new token:

1- There aren’t many token holders, and it’s only listed on DEX.
2- Poor liquidity.
3- Background information is lacking.
4- A lot of promotions.
5- Stick with what you know.

YES, using insider information to create securities is illegal in both stock trading and cryptocurrency trading. This practice is known as front-running.

There is no difference between rug pulls and pumps and dumps these two refe Rug pulls and pumps and dumps refer to the same thing.

OneCoin: a Ponzi scheme that stole $4 billion, attracted investors in 2014 by promising high return rates with little to no risk.

Africrypt: $3.6 billion was stolen in April 2021, and the $3.6 billion worth of Africrypt’s BTC pool vanished.



Please enter your comment!
Please enter your name here

Most Popular