“Pulling the rug out” means that a developer tries to get investors interested in a new cryptocurrency project, but then quits the project before it’s finished, leaving the investors with worthless currency. This is where the scam gets its name. It has been around for a long time and has to do with different investment plans. Looking for a secure Crypto trading platform check bitcoin up app.
Cryptography is the most modern way to do this.” Adam Blumberg, a licensed financial planner in Houston who specializes in the field, says, “Digital assets are where it’s at.” But because cryptocurrencies are decentralized and have loose rules about how they raise money, they come with their own risks.
“Smart contracts” are agreements that are handled by software instead of the law. These are often used in projects involving cryptocurrencies. This arrangement could be helpful if it lowers transaction costs, but there’s not much you can do if things don’t go as planned.
Decentralized finance, or DeFi, projects have used rug pulls a lot to try to change industries like banking and insurance. NFTs, which stand for “non-fungible tokens” and are used to give digital ownership of works of art and other things, have also been used with rug pulls.
Investors can protect themselves by choosing cryptocurrency projects that have been around for a while, making sure that the source code of any new projects has been checked, and making sure that the names of the project’s creators are real.
Rug pulls happen most often with new projects that haven’t been looked at as closely as other, better-known cryptocurrencies. Bitcoin has some problems, but many people all over the world use it, and anyone can look at how it works on the internet.
Because more recent projects don’t have a track record like this, this suggests that there may be flaws that let the people behind them steal money from investors and keep it for themselves.
If you’re having trouble sorting through all the hype, you could look at centralized exchanges like Binance, Coinbase, and FTX to find projects that are already well-known on the market. Even though a cryptocurrency’s presence on a big exchange doesn’t tell you anything about its value or investment potential, big exchanges often do research on assets before putting them on their marketplaces.
“It’s kind of interesting. A lot of people have done well with their money. This has been proven, As a result, criminal groups plan and carry out these “rug pulls” in a consistent way.”
Know the code
The security of the computer code behind a blockchain or cryptocurrency project is the single most important thing that determines the success or failure of an investment in these kinds of projects. Even if you don’t know how to code, you should know how something works before you buy it.
One way to judge an investment without getting your hands dirty with the details is to see if it has been audited by a reputable professional group. When projects are audited and the results are good, the projects themselves often talk about how great the results are.
Research the people
People who work in the bitcoin industry sometimes use fake names, but professional developers usually have websites and references that prove they are who they say they are.
But even if you do all your homework, it’s not a guarantee that you’ll do well. For example, the person who made Rugdoc.io, a website that rates new projects, says she was scammed using an NFT that was supposed to be a ticket to an event but was actually something else.
It’s important to spread out your money in general, and cryptocurrency is no different. Even if no one plans for a project to fail, it can still fail because of technical problems or business mistakes.
Rugdoc.io was started by Leah, who says, “Assume that anything you invest in will have a problem.” Leah asked that her full name not be given out so that con artists who wanted to hurt her wouldn’t be able to find her. She thinks that investors should “expect problems with every investment they make.” “If you think something might not work out, you’ll be surprised and happy when it does. Even if the marriage doesn’t work out, it probably won’t be the end of the world.”