In 2021, “Rug Pull” has become one of the most “annual sales” fraud types in the entire DeFi field.
Just go to the media to search for keywords, and you can get a news report:
Information source: Golden Finance
In layman’s terms, “Rug Pull” means that the project team runs away.
New Year’s Eve was coming soon, and Zhang San, who was worried that he had no money to go home for the New Year, thought of a good way.
He developed a token himself, put a line on a certain exchange, and doubled the price of the currency wildly by means of pulling the market, and then hired some navy runners to promote the development prospects of the coin in the community (recall , It is estimated that you have met several times).
The crowds of leeks who were unidentified came off the market one after another, and after further raising the price of the coin, Zhang San quickly sold the original tokens he held-this amount was often very large. After Zhang San made a lot of money, he disappeared, and then this token quickly collapsed because of this blow.
The project team is deliberately trying to defraud you of your money. Compared with being attacked by hackers, the loss method of running away is simply impossible to prevent.
SQUID runaway event
The core of fraud is to use the unique mechanism of decentralized exchanges.
Let’s take the SQUID (Squid Coin) runaway incident as an example, and let’s take a look at the specific “runaway” routine?
①The squid project party first develops the SQUID token, and at this time the project party has a considerable amount of SQUID in its hands.
②The squid project party puts SQUID online on an exchange, so that SQUID has liquidity.
③ With the help of the hot spot of the squid game, the squid project publicized SQUID.
④ More and more people have purchased SQUID, and its price has soared at an extremely fast rate, from 0.006 US dollars to 3,100 US dollars, which has appreciated by 46,559,900% in less than a week.
⑤The project team felt that it was almost done, so they sold the large amount of SQUID they held and exchanged them for real assets, and then quickly ran away.
⑥SQUID’s price plummeted under such a blow, and the SQUID in the hands of investors became worthless.
How to identify whether the project has a risk of running off the road?
As such scams become more common, investors will also lose confidence in the crypto market.
So how to distinguish whether the project is risky?
- The rate of return is too high
Although it is not a myth to get rich overnight in the crypto world, and the rate of return of one hundred times and one thousand times is not unheard of, under normal circumstances, this crazy increase usually only occurs when the project is just launched, and it ends after one or two days.
If this surge continues for a long time, then…
- The founding team remains anonymous
After all, Satoshi Nakamoto is an example. Generally, an anonymous development project team will have two questions in their minds: how to cut leeks and how to evade supervision.
- Currency price skyrocketing
In the example of SQUID mentioned above, the price of SQUID skyrocketed without warning. This is the legendary “anti-dumping mechanism”. In this way, the project party cut the leeks of innocent investors.
- Substantial promotion and marketing
If the project team swipes the screen significantly on platforms such as Twitter and Telegram, then you can be prepared to slip. Malicious project parties often choose to gain popularity as quickly as possible, so that they can quickly cash out.
- No liquidity lock-in
Some high-quality projects are “self-certified innocence” and will adopt some methods and mechanisms to restrain themselves.
One of these mechanisms is the time lock that CertiK explained to you before.
It is like a promise from the founding team that the tokens stored in the smart contract cannot be accessed or sold within a predetermined period of time.
This means that before the time lock expires, the project team cannot sell the native tokens they hold.
Time locks cannot prevent 100% of fraud by the project party, but if the project you invest in is unwilling to set a time lock, then you’d better run quickly.
What can I do to avoid falling into a scam?
CertiK has published two articles about fraud by the project party. Welcome everyone to click to read:
Dry goods sharing | Avoid fraud by the project party? 10 hardcore guidelines, no thanks!
Dry goods sharing | How to accurately identify the background of the project to avoid fraud by the project party
Regarding the 10 hard-core guidelines for avoiding fraud by the project party, CertiK has integrated most of its security verification functions into the CertiK Skynet dynamic scanning system-a dynamic scanning system that can help users identify and mark vulnerabilities before malicious vulnerabilities occur.
- Check liquidity
We can identify the risks of the project party by checking the liquidity of the project.
The picture below is the Insights part of CertiK Skynet scanning system.
Take SHIB’s liquidity index as an example
As shown in the figure above, SHIB/WETH is the largest trading pair of SHIB, and the number one address (0xa677…c87097) occupies nearly a quarter of the liquidity of the SHIB/WETH pair.
Long-term SHIB holders should pay more attention to this information.
- Review Github, white papers and social media
A quality project?
① The white paper must contain the various problems faced by the project and how to solve them.
②Recently, it has been updated on Github.
③Social media promotes the project truthfully, rather than vigorously advocating the price of tokens.
- Confirm team credibility
Checking whether the project party is anonymous is an important way to evaluate its credibility.
Some people may ask if the founder of Bitcoin is also anonymous? But Bitcoin is a decentralized original cryptocurrency in the true sense. Are other projects?
Another principle is similar to “star endorsements.”
With the continuous development of the encryption world and the further establishment of security and credibility, more and more leading figures have invested in this field, including the pioneers of Web 2 and related computer science professors, such as Avalanche’s Emin Gün Sirer and The two co-founders of CertiK.
If the founding team of the project party itself is a leader in a certain industry with a high degree of credibility, it is highly likely that he will not make those behaviors that affect his credibility.
So in order to go home for a good year, you must remember “do your own research”!
At present, CertiK has provided blockchain security services to more than 1,800 enterprise-level customers, unearthed more than 31,000 code vulnerabilities, and protected more than 300 billion U.S. dollars in digital asset security.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/first-release-cover-your-wallet-at-the-end-of-the-year-the-project-party-run-tide-is-arriving/
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