In English, "rug pull" means "to pull the rug out from under someone's feet" - to deprive of important support. In the cryptocurrency world, it refers to a scam or fraud in the decentralized finance sphere. The cause of this phenomenon often lies in the actions of the development team.

Let's examine this concept in more detail.

Detailed Description of Rug Pull

When the token price is high, developers carry out the following manipulations:

• simply sell tokens at a high price;
• steal buyers' funds through loopholes in smart contracts.

Decentralized exchanges lack strict protection systems, so anonymous projects can drain a coin's liquidity without risk of punishment.

How Investors Can Avoid Losses

Investors should avoid tokens whose prices skyrocket unreasonably in a short period of time. Additionally, any purchase should be preceded by studying the 👉 White paper of the cryptocurrency project. Unrealistic activity in the project's Twitter and Telegram profiles can also indicate fraud.

It's also worth examining the composition of the development team, the number of coins and their value, and the presence of liquidity. One should avoid buying new and little-known coins whose creators haven't offered any significant innovations.

The final stage of verification is to check for the presence of liquidity pool locking. Honest projects lock liquidity for a certain period, taking responsibility before the exchange and investors.