Rug Pull
DeFi Risk, Scam Type
Rug Pull is a type of scam or malicious exit in decentralized finance (DeFi), where project creators or insiders suddenly withdraw all user-deposited funds from a protocol, liquidity pool, or token, leaving investors with worthless or inaccessible assets. Rug pulls can occur in unaudited smart contracts, fake DeFi projects, or pump-and-dump tokens, and are especially common in new or anonymous launches with little oversight.
Use Case: An anonymous team launches a new token with a high-yield farm. After attracting millions in liquidity, they remove all funds from the pool overnight, causing the token’s value to crash to zero and leaving investors empty-handed.
Key Concepts:
- DeFi Risk — Rug pulls are a major threat unique to the DeFi ecosystem.
- Liquidity Pool — Often targeted, as removing pool liquidity can instantly drain user funds.
- Yield Farming — High yields may attract users to risky, unvetted farms susceptible to rug pulls.
- Smart Contract — Flawed or unaudited contracts may include hidden withdrawal functions or exploits.
Summary: Rug pulls are a notorious DeFi scam—reminding users to verify code, team reputation, and protocol security before depositing funds. Extreme yields, anonymous devs, or unaudited contracts are red flags in this high-risk space.