How to Prevent Getting Rug-Pulled in Crypto Investment?
Recently we heard the news, that there are some coins and games that are being rug-pulled. So, the investors have become more alert and cautious now, especially with the many games and NFT applications coming out.
But what exactly does “Rug Pull” mean? When is this likely to happen? What are the signs of rug pull? What should one do to prevent getting scammed?
More and more questions running on your mind right now but, let me answer that a little bit and let me explain to you so that you will be aware.
What is a rug pull? How does it happen?
A rug pull is a malicious act where crypto developers abandon a project and remove using project funds or market their pre-mined assets. Rug pull frauds are typically made to drain all funds from the financiers. As soon as prices hit a certain high, these fraudulent developers will divert funds from the community.
We’ll cover a number of the red flags in crypto projects and the way to avoid them, so you will survive on the next release of the new NFT game or app that will pull your capital and dignity in full force.
Below are the main types of rug pulls:
1. Stealing Liquidity scam
To create a cryptocurrency tradable, Developers need to create liquidity pools that hold the amount of money to make it possible for investors to buy and sell. In most well-known rug pulls, the developer created a liquidity pool using his newly created scam token and a legitimate cryptocurrency.
As people take on the value proposition of the crypto scam, they start buying it in exchange for their “Digital Token”, which remains confined to the liquidity pool for a specific period. As more and more investors buy fake tokens and it starts to rise in value, more and more “Digital Tokens” are being poured into the liquidity pool.
At the chosen time, the malicious developer will take “Digital Token” from the liquidity pool, leaving only the worthless token. Investors cannot trade their tokens for no value. For that reason, the developer takes his money to the legit “Digital Token” and runs it.
2. Developers cashing out scam
At first glance, you would think the game or app they made was legit and good but, it qualifies as one of the projects is made for this sole purpose. This is similar to the first-mentioned scam but, the malicious developer is doing a project with an excessive proposition value. The pledge usually includes a token feature or platform that is in development and will be released soon.
3. Unable to sell token scam
This scam is the same as the previous two mentioned, but its process used a different approach. All investors can purchase a fake token or coin, but because of the fraudster’s program, only the fraudster can sell the token in the market. This modus operandi is not immediately noticeable but, when it gets to the point where people start selling, then they realize that they can no longer transact their investment and the developer promises them until it disappears and can no longer be in contact.
Hopefully, this information I’ve shared will help you so don’t get into a rug-pull game or app. Remember always analyze the game or app. Check the offers specially many today are so good and tempting to join but, it can be a scam. Also, find some video or legit websites that will review the game or app you want to join and you can have an idea and learn it well.
This content will have a 2nd part, while waiting for the new update, try reading this article: How to spot a scam, fraudulent or fake websites?
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