What does Rug Pull mean?
A type of scam in the cryptocurrency world
Detailed Explanation
A 'rug pull' is a malicious scam, primarily in the cryptocurrency and NFT space, where developers attract investment in a new project, and then abruptly abandon it, disappearing with all the investors' funds. This is done by removing liquidity from the project's trading pool, causing the token's value to plummet to zero. It's called a rug pull because the developers metaphorically pull the rug out from under the investors.
Usage Examples
“I lost all my money in that new crypto coin; it was a rug pull.”
“Be careful with new, unaudited projects, as the risk of a rug pull is high.”
“The developers deleted the website and social media accounts, confirming it was a rug pull.”
Origin & History
The term emerged from the decentralized finance (DeFi) and NFT communities around 2020 and 2021. The largely unregulated nature of this space allowed for this type of scam to become unfortunately common, necessitating a specific term to describe it.
Frequently Asked Questions
How can you spot a potential rug pull?
Warning signs include anonymous or non-transparent developer teams, a lack of a clear long-term plan (whitepaper), an unlocked liquidity pool, and overly aggressive marketing that promises unrealistic returns.