There is heightened anticipation and excitement in the crypto space. individuals who have invested or are still investing in crypto currencies are eagerly awaiting the commencement of the period where Alt coins make huge gains (termed mooning among crypto enthusiasts). This period is appropriately dubbed Alt season and investing in the 'right' coin in the prelude to this season could result in an appreciable or substantial return on investment. Conversely an investment in a 'wrong' or dubious coin or DeFi project could result in being 'rekt'.
We are unfortunately also witnessing a surge in fraudulent activities in the DeFi space with the occurrence of more cases of 'rug pulling'. The term Rug pulling is derived from the Phrase 'pull the rug ' (usually from underneath another's feet) which means to abruptly or suddenly withdraw support for an individual or thing. The result of the withdrawal is usually negative as either the individual or thing concerned usually falters or fails.
In the world of cryptocurrencies, rug pulling is the deliberate and malicious draining of liquidity from a protocol leaving those who invested stranded and unable to trade or in crypto lingo 'rekted'. According to data from Cipher Trace, from mid 2020, a vast majority of fraud In the DeFi space were rug pulls. The architects of these schemes are preying on one weakness of investors especially new entrants which is the fear of missing out (fomo) of highly lucrative investments.
A rug pull which is still quite fresh in memory is the one involving Meerkat finance where about $31 million worth of crypto assets were stolen due to an alteration in the Meerkat smart contract by a supposed hacker or hackers. However things get a little interesting or don't quite follow the official narrative from the Meerkat team when on-chain data is examined. The data showed that the hack was done using the original account of the Meerkat deployer which suggests that it was an inside job. This suspicion has further being heightened by the fact that the Meerkat website has been offline and its twitter account deleted.
To avoid stories that touch by being a victim of rug pull, always do your own research. Do not invest in any DeFi project or token simply because there's a lot of hype about it on social media or it is being promoted by popular social media influencers. Those promoting coins that eventually rug pulled may well have been in on the whole scheme from the onset and may well have a share from the proceeds from the pull.
In the end one has to take responsibility for one's investment choices as there was no compulsion involved even if deception was involved. A word of caution is to be wary of DeFi projects that promise ridiculously high returns on investment within a short period of time. Investing in crypto currencies is not a get rich scheme, endeavour to weigh and spread your risks appropriately when investing and do know that patience is indeed a virtue especially when it comes to crypto investments.
Finally it is also a good idea to avoid projects that haven't gone through a Proper security audit by a trusted auditing firm as such audits usually exposes loop holes or bugs that can be exploited by individuals with malicious intent. Being audited though isn't a guarantee of being rug pull proof as there have been cases of rug pulls involving audited projects.
Shukran
Danke
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for reading.
