How to Avoid Rug Pulls in 5 Simple Steps

Rug pulls like the Squid Game, OneCoin, and Luna Yield are arguably an investors’ biggest fear. Many fraudsters and unscrupulous players have targeted decentralized finance (DeFi) and cryptocurrency spaces, as they are two currently booming markets.

“Do your own research” (DYOR) is a well-known phrase among crypto enthusiasts. However, there’s a lack of information about precisely what this means, as one needs to ask how one can do research when one is not sure of what information is a scam and what is not. Other questions that need to be asked are: What are the rug pull symptoms, and how can you identify their supporters?

As part of this discussion, we’ll go through some of the most typical red flags in crypto projects, so you can avoid falling into the trap of the next scam.

Understanding how rug pulls operate

In simple words: once investors have allocated sufficient funds towards the project, developers cash out and disappear. In most cases, they are low-effort enterprises planned by an anonymous individual with malicious intentions. In other cases, they are exact clones of other cryptocurrencies or ICOs with slight differences in Telegram’s community name. Then, they link you to a different contract address, and you can say goodbye to your funds. Nevertheless, we can divide rug pulls according to their modus operandi:

1. Stealing Liquidity
2. Disabling people from selling tokens
3. Developers cashing out

Steps to #MakeCryptoSafe

Explore Different Tools

Several websites compile lists of the most recent hacks and pump-and-dump schemes. Market Move, for example, automates token’s auditing, analyzes smart contracts and liquidity.

Use the Right Platforms

CrypTalk, for instance, will help discover legit projects, verify teams, encrypt chats, check out reports and market cap. Projects and developers should coexist in a safe atmosphere. The CrypTalk app fills an essential market vacuum and recovers the faith in the market with numerous levels of protection.

Blockchain explorer

A blockchain explorer such as Etherscan or Binance Smart Chain is necessary for fraud identification. When you search a cryptocurrency’s token address, you can find the token tracker page, the entire supply, the total number of holders, the total number of transactions, and which wallets own the most tokens.

Do Your Own Research

Take a look at the whitepaper, review the smart contract, and learn about the team and developer’s background. Evaluate the roadmap and exchange your opinions with others. We can’t stress DYOR enough, it’s a good practice, and you should never abandon it.

Spot Red Flags

1. The project appeared overnight
2. Anonymous Developers
3. Low Liquidity
4. Unlocked Liquidity
5. Low Total Value Locked
6. Disproportionate Token Distribution
7. Low Effort Website
8. Lack of Social Media Presence
9. No Audits