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
Fiat-Pegged Cryptocurrency
Cryptocurrencies are pegged to an underlying asset.
Permissioned Blockchain
It is a private blockchain where the nodes must be previously authorized by a central entity.
Zero Knowledge Proof
Cryptographic proof for 2 parties to verify a value without revealing what the value is.
Metaverse
The Metaverse is a virtual space where users are able to interact with each other in a computer generated environment.
Interested to stay up-to-date with cryptocurrencies?
Get the latest crypto news, updates, and reports by subscribing to our free newsletter.
Or check it out in the app stores
