What Is a Rug Pull? 7 Warning Signs to Check
What is a rug pull? It is when the people behind a token take the value out and leave buyers holding a token that cannot be sold for much. They do it by removing the liquidity, dumping a large share of supply, or using contract powers to block sales. Most cases show warning signs on-chain before it happens. How does a rug pull work? A new token on a decentralised exchange trades against a liquidity pool. The creator adds the token and a paired coin, such as BNB or ETH, to the pool. Buyers then swap their coins for the token, and the paired coin they pay builds up inside the pool. That pool is where the money sits. Whoever controls it, or controls a large part of the token supply, can take that money out. A rug pull is the moment someone does exactly that, usually after enough buyers have joined to make it worth it. The term comes from pulling a rug out from under someone's feet. For the buyer, the result looks the same in every version: the price chart drops to almost nothing in a ...