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
Pump and Dump Scheme
A market manipulation method to drive up the price of an asset before profiting by driving it back down.
Lightning Network
It is the "second layer" or an off-chain of payment protocol that operates on top of a blockchain. Payments on this network do not need block confirmation and it will be instant.
Pay-Per-Share (PPS)
You are compensated for each valid share that you contribute. Each share is worth a set amount of cryptocurrency that may be mined.
Proof of Stake (PoS)
A consensus algorthm that assigns block validation queue based on the coins/token locked in by the validator.
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