Rug Pull
By CoinGecko | Updated on Aug 12, 2021
In the English lexicon, to pull the rug out (from under someone) means to to suddenly take away important support (from someone). In the context of crypto and Decentralized Finance (DeFi), having been rug pulled means to have liquidity removed from a Decentralized Exchange (DEX) liquidity pool. This results in a sell death spiral as other liquidity provider, holder and traders panic at the loss of available liquidity for trading. Once liquidity has been drained, token holders are usually left with illiquid assets which may not be tradeable anywhere else. It is worth noting that many projects have taken measures to alleviate rug pulling risks by committing certain level of liquidity in a way that can't be removed (ie, LP Token Burn, Liquidity Locking contract..etc). However, it does not fully eliminate rug pulling risks and market participants should conduct due diligence prior to trading.
Related Terms
Decentralized
A system where there are no centralized points of failure or organization with no central authority figure.
Stale Block
Double mined blocks that are not included in the blockchain.
Dead Cat Bounce
Price rally that is short lived after a prolonged decline. Price charts will show a recovery in anticipation of a market turnaround only to decline further.
Ring Signature
A type of digital signature performed in a group where it becomes impossible to determine which member's key in the group were used for the digital signature.
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