Rug Pull. A new scam and its “patrol”, the Rug Pull Finder.
One of the biggest threat to trust in cryptocurrency is the rug pull scam (otherwise known as “exit scam”) which put 2021 scam revenue close to all-time highs (see Crypto Crime Report 2022). This relatively new scam type is particularly common in the DeFi ecosystem, in which the developers of a cryptocurrency project – typically a new NFT collection – disappear unexpectedly, taking users’ funds with them. Although not all rug pulls start as DeFi projects. Recently, for example, the CEO of Thodex, a large Turkish centralized exchange, has disappeared soon after the exchange halted users’ ability to withdraw funds
One of the main characteristics of “fake” projects such these is that they do not commission a software code audit before releasing the tokens. The code audit is a comprehensive analysis of source code in a programming project with the intent of discovering bugs, security breaches or violations of programming conventions. It attempts to reduce errors before the software is released. On the other hand the pseudonymous nature of crypto means that it is sometimes difficult to distinguish a rug-pull from a bug exploitation by a third party hacker.
As it often happens in these cases, the solution – or at least a possible help in distinguishing whether a project is just a prelude of an exit scam or instead is something more serious in which to invest – arise from the same crypto community. Rug Pull Finder is a service described as “NFT community’s premier source of information” that investigates NFT projects searching, among others, for the so-called “red flags”: is the art the same as others or copycat/stolen?I Is the roadmap clear/clean with proper understanding of execution? Is the project too good to be true? Are there fake followers or fake bots? Are the developers paying a lot for marketing? Is the mint price too high? Through an accurate analysis of some of these parameters, this community of enthusiasts aims to ensure a market free from “rug pulls” projects.
