How to spot a rug pull in DeFi, 6 tips by Cointelegraph
Cointelegraph shares six tips on how to safely invest in Defi projects in our latest in-depth video.
In our latest in-depth video, Cointelegraph shares six key tips on how to increase your safety when investing in DeFi by identifying rug pulls — One of the most widespread types of crypto scams.
Booming growth coupled with a lack of oversight by traditional authorities has attracted an influx of fraudsters to the DeFi ecosystem. According to a recent report by Ciphertrace, while overall fraudulent activity in crypto is decreasing, rug pull scams in DeFi have been on the rise in 2021.
In the typical rug pull, bad actors create a worthless token and list it on a decentralized exchange, where it starts trading in a liquidity pool. The scammer convinces investors to provide liquidity by staking a valuable token, such as Eth, which pushes the new token’s price up. At a certain point, the scammers “pull the rug”: they take all the Ethereum from the pool and leave investors holding the worthless token.
With the help of two DeFi experts, we pointed out 6 practical tips to spot a rug pull and minimize the risk of getting scammed while investing in DeFi.