Protect Yourself From Rug Pulls in NFT Space

How to Protect Yourself From Rug Pulls in NFT Space

Nowadays, a lot of people are becoming attracted towards NFT. NFT has cases that are full of adventure, enough to revolutionise the art world. As more and more people are moving towards it, the scams are also increasing. NFT does not support any type of fraud. The first important thing to know to avoid NFT fraud is how to protect yourself from the Rug pull Scam. Today we will discuss all these topics in this article: how to avoid these dangers and what the remedies are for them. Apart from this, we will also know what it is.

What is a Rug Pull Scam

Rug pulls are a type of scam that happens in cryptocurrency. Scammers lure people to their innovative projects and then rob them by trapping them.

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Why is it Named Rug Pull Scam?

The word “rug pull” is derived from “well”, which means “pulling the rug from below.” This word simply means to draw or take money or something from someone. In the era of 2014 to 2017, the term started being used for scams. And on seeing this word become very famous all over the world.

Steps to Protect Yourself with Rug Pull Scam

Those people who invest in cryptocurrency can protect themselves by choosing a good and established cryptocurrency project. But before selecting any project, you need to keep some things in mind that can help you avoid fraud.

Various types of pulls
Types of Rug Pull

Image Source: Cointelegraph

Choose Established and Reliable Products

Along with new projects, fraud is also increasing. New projects can have lots of vulnerabilities and troubles. If you want to avoid increasing fraud, then you should choose a project or product that is reliable and established.

Get to Know the Project Well

When you invest in crypto or choose a project, you should go through its plan once. Avoid these schemes in which investment potential is not guaranteed.

Learn About the Code

The luck of investing in cryptocurrency or any project will be completely dependent on the computer code. One way to check is whether the audit has been done with the help of a reputable professional association.

Research the Team Thoroughly

This is a very effective way to avoid the Rug Pull scam. Before investing in any project, the team should thoroughly investigate the scope of the project. Check them out on whatever social media platform the team is on, and check them out from people who have already invested in their help.

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Also, keep in mind whether he fulfills the promises made by him or not. Check their website to see if they are really professional. Behind a responsible team is the hand of good workers, and there is a record of good work by the team which you should also check.

Check Liquidity

If the NFT project has low liquidity, then it becomes a bit difficult for you to cash the crypto tokens. If you want to access liquidity, then you can use trading volume. Low liquidity increases the risk of rug pulls to buyers.

Background Research

The majority of rug pulls are run by anonymous teams, which means that those who participate in this scheme hide their identities from the police. Before selecting any project or team, be sure to check their website. You may have to be careful if the project website does not contain team information such as team name, address, number, email, cryptic record, etc. Because a responsible and good company wants their family to always be happy with them and they live up to their promises.

Evaluate the Team’s Road Map

The road map gives all the plans for development, their goals, objectives, etc., and all the information. If the road map is incorrect, it indicates that there is some problem in the team. Often, scammers make such road maps to make more people victims of fraud, which is very attractive to see, due to which more people are attracted towards them and become victims of fraud.

Anonymous Team

It is very important for you to consider. A team that is familiar or does not have a past record of its work is a matter of doubt. Scammers often remain anonymous, hiding their identity. In such a situation, you should choose a team that is well-known and responsible. There are many well-known developers in the crypto field, and they have a proven record too. Stay away from people who have no track record and who are completely anonymous.

How do Rug Pull Scams Work?

Rug pulls are extremely easy to execute and are therefore one of the more frequent scams in the crypto ecosystem. To carry out these scams, scammers will go to the blockchain to generate a token. This token will also be unlisted on the peer-to-peer marketplace for crypto traders. Most of the time, these tokens are open to outsiders without a code audit.

It is extremely important to conduct code audits for smart contract networks to assess code for quality and bugs. Unfortunately, smart contract networks like Ethereum allow developers to build these projects without going through a full code review process first. As a result, investors may find it difficult to understand the technical characteristics of the project. Sadly, the allure of quick rewards can often distract investors.

Also Check: Tips for Protecting Your FinTech Data Assets

Conclusion

New NFT projects in cryptocurrency are emerging every day. As the projects are progressing, the frauds are also increasing. This fraud is increasing so much that people doubt every team before investing in the project. These types of fraud are called “rug pull.” Today, with the help of this article, we have told you what a rug bridge is and what the ways are to avoid it. I hope you have liked all this information and articles, and now you must have known about it.

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