What Is Rug Pull?
A rug pull is a crypto scam pattern where developers launch a token with marketing and liquidity, attract investor capital, then drain the liquidity pool and disappear with the funds. The token's price collapses to zero and investors are left holding worthless coins.
Common rug-pull mechanics: hidden 'mint' functions in token contracts (devs can print unlimited tokens), one-way liquidity (devs can withdraw, others can't), backdoor admin keys, and hidden taxes that prevent selling. Most rug pulls occur on DEXs in low-cap tokens with no audit.
Defenses: only invest in audited projects with verified contracts, check liquidity-pool ownership (is liquidity locked or burned?), watch for unusual mint functions, be skeptical of unrealistic returns, never invest more than you can afford to lose. The crypto rug-pull rate is high enough that defaulting to 'this might be a scam' is rational.
Related terms
- AMM (Automated Market Maker) — Smart contract that lets users trade against a pool of assets without counterparties.
- DEX (Decentralized Exchange) — Cryptocurrency exchange that runs on smart contracts without a central operator.
- Smart Contract — Self-executing program on a blockchain that runs when predetermined conditions are met.
- Tokenomics — The economic design of a crypto token: supply, distribution, utility, and incentives.