By Sandeep Kasalkar
Scammers have successfully effected rugpull over the blockchain to lure investors into buying a token and leaving them high and dry over the period. It’s basically a fraudulent activity done through pump up the price and then pull as much value out of them as possible before abandoning them as their price drops to zero.
As we know, rugpulls are a type of exit scam and a decentralized finance (DeFi) exploit. There are three major ways of rugpulls: liquidity stealing, limiting sell orders and dumping. However, they happen broadly in two forms, which are: hard and soft. Malicious code and liquidity stealing are hard pulls, whereas soft pulls refer to dumping an asset. It pays to know more about the two broader types of rugpulls in order to avoid getting stuck in unwanted cryptocurrency.
Hard Rugpull
It happens when the team behind a project abruptly withdraws funding from it after receiving a considerable amount of support from the local community.
Often, a hard rugpull will be carried out via a malicious backdoor that was purposefully incorporated into the product from the start. The team will carry out the rugpull and leave through the backdoor once the price of a project’s token reaches a point where they are satisfied. The price chart that abruptly slides off a cliff is the most obvious indicator of a hard rugpull. The only thing left for investors to do at that moment is to calculate their losses. The elimination of official communication platforms such as a website, Twitter, or Telegram channels are other blatant signs of a rugpull.
Soft Rugpull
A soft rugpull is a less obvious, more covert manner for founders to defraud their community than a harsh rugpull. To keep the appearance to their community that they are still invested in and supporting the project, founders will merely dump their tokens in a gentle rugpull rather than all of the tokens in the project.
Soft rugpulls are both simple to do and challenging to catch. They are simple to implement and, in the absence of openness regarding the project’s creators, it is quite challenging for users and investors to understand what is happening. It’s actually quite easy; founders simply get up and leave a project, leaving their community to wait about in anticipation of grand promises and developments that never materialise. Despite being extremely evil, a soft rugpull is frustratingly not illegal in the same way as a hard rugpull is because the project is still in progress.
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